Don’t Forget the Basics

Don’t Forget the Basics
13-Apr-2018 Mark Honeybone

Recently I interviewed Andrew King, Executive Officer of the Property Investor Federation, for the NZ Property Podcast/Video series and it occurred to me that some of us forget about the fundamentals of property investing of buying well, buying to hold, adding value and other good things many talk about.

It seems too many people trade property and unless they are experienced, they don’t get the results they are after. I know I probably traded more properties than most people reading this article. If only I had used those old-fashioned strategies, I would have more property than I do right now, even if it’s 10 % of my trades, which would’ve been a good result.

So after the interview with Andrew King this month, I’d like to cover a couple of strategies on how to buy well and recycle the deposit.

 

Strategy #1: Add Rent

There are two ways to improve equity using this strategy.

If you buy an under-rented property and then rent it for the market rent, you would typically add value immediately. Some investors under-rent their properties due to various reasons one being they simply don’t run their portfolio like a business.

The other way is to add value to the property to increase the rent.
For example, by updating the kitchen, adding a room, insulating the property better or putting in a heat pump

By doing any of these, you may increase your rent by $40 ($2k pa) or $60 a week (3k pa), and that can pay for things like rates and insurance for the year and add value to the property’s price.

 

 

 

 

 

 

 

Strategy #2: Buy Well

You can use this strategy right now in Auckland and to my opinion in most of the country as well. If the rest of the country is not there yet, I feel it’s not far away.

It comes down to these three things:

  • Be patient
  • The market has slowed down, some areas have dropped ever so slightly, and some are still doing ok. Some vendors are unrealistic, so if you want a bargain, you must keep searching for a realistic or desperate vendor. Some of the worst purchases I made over the years was when I was impatient, and since then I’ve changed immensely. If you are reading this, you must be patient if your objective is to get a great buy.

  • Know the market
  • It is essential that you know the area you’re purchasing in to understand whether you are getting a great buy. Just because it's the best suburb or worst suburb, it doesn't mean you pay a lot or little. Every suburb has its goodstreets and not so good ones. Some streets have one side selling 10% higher than the other.
    You don't find this out unless you have done your research.

  • Be persistent

    You need to be persistent and sometimes do what others won’t. Be consistent and go to every auction and open home and check new listing as soon as they appear. Know the market and that deal will come up.



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    Last Sunday I went to an auction during the worst wind and rain that Auckland could throw at us. It was in one of the best up and coming areas in my opinion.

    I have waited for the last six months for a motivated vendor like this, and I bought the cheapest property in that area by 13% in the past year. Vendor knew what I was proposing and was fine with it which made everyone happy.