Let’s have a look, then, at what makes a great residential investment property.

Firstly, what are the main objectives of property investors? The most common objective is something like this:

“To create a passive income stream to enable me to stop working if I wanted to… to enable me to retire comfortably so I can spend my time doing what I want.”

An ancillary to this primary objective would be to accomplish this without demanding massive risk or huge effort / stress in managing the properties.

Assuming that these are the objectives, then the following are qualities to look for in a superior investment property:

1. High income

• If your property covers all costs of ownership (the main ones being mortgage interest, rates, insurance and maintenance), it is not going to place great financial strain on your existing cashflow.
• If you want to grow a substantial portfolio, you can not have properties that place a strain on your cashflow, because that limits how many you can own.
• Over time, when rents increase, a property that covers its costs today, will produce a positive cashflow in the future, hence helping to grow your passive income stream.

2. High Tenant Demand Location:

• If the rent looks high compared to the price of the property, but it is located in an area that is unappealing to tenants, you will have periods of vacancy, which equates to periods of sleepless nights, which equates to “I’ve had enough of this property investment game – I’m out!!”…
• These frustrations are not what you need if you want to be successful!! If the property is in an area that is always appealing to tenants, you will easily be able to replace tenants when they leave… this amounts to sleeping at night, which we like!!

3. Fee Simple Title:

• A fee simple title is the best legal tenure you can get. With this type of property, you are in control of your asset. For example, you can improve it, extend it or alter it, as you please, without consulting with neighbours, Body Corporates (as with apartments) or common leaseholders (as with cross-lease titles), subject to conforming with the local council rules, of course.
• This is important because people (including us Kiwis) LOVE control. The more control and flexibility you have, the more control you have over your future and your choices, the more appealing the property is to LOTS of people.
• Therefore it will be easier to sell, and more likely to sell at a premium price, when it comes time to sell (including if you need to sell in a hurry, heaven forbid!). And there almost ALWAYS comes a time when you will want to sell.

4. Traditional Construction:

• People do not like things they do not understand. Investors especially like the tried and tested… they don’t want to experiment.
• Therefore, to make sure your property will appeal to the broadest range of potential tenants and purchasers in the future, make sure it is built in the traditional way… weatherboards, iron or tiled rooves, bricks… this is what us kiwis feel confortable with.
• If it has a 1990s-style monolithic style cladding system, many people will simply not consider it… don’t give yourself this disadvantage when it comes time to sell!!

5. Difficult to Replace / In Short Supply:

• If you are going to own an asset for a long time, you might as well own one that is most likely to increase in value faster than most… and this comes down to good old supply and demand.
• In a decent sized city, with an increasing population, demand for housing is increasing over the medium to long term. But it is much easier to increase the supply of some kinds of housing, than others, in order to meet this increasing demand.
• For example, in central or city fringe locations, the supply of apartments and townhouses is likely to increase dramatically in order to satisfy the demand for additional housing in these locations. This eases pressure on price increases (supply increasing to meet demand).
• On the other hand, the supply of free-standing houses in these locations, is really not increasing by much – IF AT ALL!! When you have demand increasing, and supply largely static, this tends to produce strong increases in prices.
• Therefore I recommend buying free-standing houses, rather than apartments or townhouses.

IN SUMMARY

If you can buy a free-standing property, with a fee simple title, in a high demand location, built using time-tested construction methods, with a strong cashflow (say 7.5-8.0% gross yield or even more if possible), then you are in PROPERTY INVESTMENT HEAVEN!!

Now don’t get me wrong – I never said it was EASY to find these types of properties… and you may have to compromise one or more of these criteria, but if it was easy, EVERYONE WOULD BE RICH!!! And last time I checked, not everyone is rich…

So now for my shameless plug for a GREAT investment property that I happen to be selling!!!

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While gaining success as the only wholesale building company in New Zealand, Investor Homes has also drawn recognition from its minor dwellings.
Minor dwellings are secondary units which can be built on already existing titles.

Once called ‘granny flats’ and built for extended family or aging parents, minor dwellings today are a modern and cost-effective alternative to pricey subdivisions while providing an excellent investment opportunity.

Whereas subdivisions can easily cost $70 000 per lot, minor dwellings provide a way around this.

Stuart Shutt, director of Investor Homes, has seen the ‘two-house return for the price of one-and-a-half’ on numerous projects, such as a recently completed minor dwelling on the rear site of a rental home in Henderson, West Auckland.

“After purchasing a four-bedroom house for $242K, my client spent $15K renovating it and rented it out for $400 a week.

At the same time he invested in building a three-bedroom minor dwelling on the property for $150K (turn-key including all council costs) which he rented for $340 a week.

In total $407K was spent on the property. The value of the property went up to $500K in six months with a build time of only ten to twelve weeks.” So a $93k capital gain and a positive income!

Building a minor dwelling on an already existing title significantly boosts the return of a property through both rental earnings and capital appreciation however an awareness of council regulations is essential.

Building a minor dwelling in a suburb of Manukau or North Shore City, for example, is possible as long as it only takes up 60m², or 65m² in West Auckland.
Investor Homes encourages people to act on potential investment based on numbers and sound advice that covers each aspect of minor dwelling projects, from location to products and plans.

Offering a huge range of minor dwelling plans and prices, some of which can be viewed on their website http://www.investorhomes.co.nz, Investor Homes also offers informed investment advice concerning minor dwelling projects.

“We recently worked with a woman living on a property with a sloping backyard that was hard to mow and difficult for the kids to play on,” says Stuart.
“We created a minor dwelling strategy that saw something which was costing her money turned into a goldmine.
“Minor dwellings a very safe form of development – you can sell it for a profit, or if for some reason you can’t sell, you’re left with a positive income.”

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1. Body corporate rules – a body corporate can either keep its existing Schedule 2/Schedule 3 rules or elect for the rules to be replaced with the operational rules under the UTA 2010 (awaited in Regulations) and section 138 (which contains the new repair and maintenance responsibilities). In making this choice a body corporate will need to consider:
   

   * the role of the secretary – under the UTA2010 now one of the service contractors to the body corporate
   * committee make-up, appointment and procedures – is the body corporate ready for the change?
   * AGM procedures – again, is the body corporate ready for the change?
   * existing body corporate rules – are the existing rules all covered in the UTA 2010 and new Regulations, do the existing rules remain appropriate of not, are there any ultra vires issues that need resolving in the rules? A review of the rules will be needed and consideration given to what, if any, additional rules should be put in place.
   * repair and maintenance – is the body corporate ready for the additional responsibilities under section 138 and has it been budgeted for?

2. Long term maintenance plan – a long term maintenance plan will be required at the end of the transitional period. The only decision therefore is when to start. A body corporate might consider delegating this to the committee to get it ready in time.
3. Long term maintenance fund – a body corporate has a choice whether to set up this fund or not. The UTA 2010 will require it at the end of the transition unless a body corporate has opted out by special resolution.

There are many other provisions that need to be considered when the UTA2010 is first passed. In following posts I’ll cover this, including what would be a useful agenda for a first AGM.

In terms of these transitional arrangements, watch the timing. A first AGM will need to be convened within 6 months of the UTA2010 being passed. The transitional arrangements above apply for 15 months from the first day of the month following the UTA2010 commencing. In general body corporate meetings are needed once every calender year and not later than 15 months after the previous one. If the decisions above are not covered in the first AGM then the following AGM might be too late and the default position will apply, or an extraordinary general meeting could be convened to get the necessary resolutions passed.

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Together with renowned public speaker and motivator, Tony Christiansen, Sean will reveal the secrets of his own success in property investment and show attendees how they can achieve the same results for themselves.

“I often ask people what they would do if money was no issue in their lives,” says Sean. “Because whatever that is, I believe I can show them that it’s possible to achieve that dream. You’ve just got to know how. And I certainly now how to make money from property.”

Sean is known as the $15 Million Man because he was able to amass a property portfolio of that amount from scratch in just three years.

Attendees of the Masters Event will learn how to create an income stream from property and be moved by Tony’s story of overcoming adversity, building successful businesses and taking up challenges that have put him well outside his comfort zone but rewarded him beyond his dreams.

Property Tutors Limited is offering 25 lucky attendees the opportunity to be mentored by Sean for a whole year – every week for 52 weeks. Sean will personally “hold their hand” and help them through their property investment process. This is an extraordinary opportunity to learn from a master.

Key areas covered during the Master’s Event:

• What’s happening in the property market right now?
• Actual and practical do-it-yourself strategies.
• The necessary attitudes and the required mindset.
• How to sniff out and negotiate the best deals.
• How to renovate at no cost.
• How to use the right financial structures to protect your wealth and minimise your tax (legally).
• What’s happening with the banks? Innovative ways to secure financing.

The 10-hour event takes place on 31 October 2010 in Auckland. Cost to attend is just $79.95 per person and Property Tutors Limited is offering a 100% Money-Back Guarantee. More information and booking details can be found here: www.propertytips.co.nz.

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Buying to renovate and then sell in a matter of months is quite a different ball game than a renovate and hold strategy. You’re not looking for growth areas necessarily – rather, properties you can sell quickly. You’re manufacturing your own value in the property and not waiting for Capital Growth to happen.

For this reason, I confidently say that almost anywhere is a good suburb to buy as long as you are sure about a few main factors:

1. Who is your target market?
2. What does your target market want?
3. How much does your target market earn?
4. There is not a saturation of property (like the one you’re renovating) on the market

Who is your target market? Before giving even one piece of advice to my clients about how to renovate their property, I like to know who their target market is. It’s important to really identify who these people are – and it’s not good enough to say ‘anyone’! The more specific you can be, the more you can tailor your renovation to suit them. A few of the real estate websites offer statistics about who lives in various suburbs, so check those out before beginning your renovation (or even better, work out whether the property you’re looking to purchase has the bones of a property suitable to your target audience) – before you buy it.

What does your target market want? Families will want a secure home with a bath possibly and reasonably low maintenance among other things. Professional couples will be looking for low maintenance, with good entertaining areas and something that will impress their peers. Retirees on the other hand, may want a smaller home but with extra storage for their lifetime of belongings, and a spare room for the children/grandchildren. Single mothers are a great target market because you can easily cater to their security wants by installing an alarm and security windows etc. Of course there are other things that your particular target market will want and it’s a good idea to figure this out before you start renovating.

What does your target market earn? Here’s a part of the ‘flipping’ strategy that is so often over-looked. Wouldn’t you like to know how much your potential buyer has to spend? There’s no point ending up with a property you need to sell for $600k to make a profit, if your target market can, on average, only afford $400k. The government statistics website www.stats.govt.nz/ is a place you can find out this information. If you know how much your target market earns, then you can quite easily figure out what they can afford in mortgage repayments – and therefore the total value of a property they would be likely to buy.

Now you know who your target market is, what type of dwelling they are generally looking to buy and how much they’ll be willing to spend, look around the market-place in your suburb and see what else is on offer. If there are 10 houses that already offer the things your target market wants at a price they are prepared to spend, then perhaps this is not the right deal to be making your fortune on. However, if there are none or only a few similar houses, then perhaps it is.

So there you have it – 4 quick things to consider when you are looking to buy and flip a property. You can generally buy anywhere as long as these things stack up. And make sure you get good advice on what changes to make to the property to maximise your return if you’ve not flipped property before.

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The facts

Property Ventures Investments Limited v Regalwood Holdings Limited concerned the sale and purchase of a commercial property in Christchurch for $1.5m. The standard form ADLS/REINZ agreement was used. The vendor had warranted that the building would have a warrant of fitness on settlement. There were problems and the warrant of fitness was not issued.

After lots of debate, the vendor insisted on settlement in full. When the purchaser failed to settle, the vendor issued a settlement notice, cancelled the contract and kept the deposit.

The purchaser had offered to settle at a discounted price. It became apparent that the cost to remedy the situation was likely in the region of $500,000.00.

The decision

The Supreme Court decided the purchaser was in the right. The vendor could not insist on settlement in full when in material breach of warranty.

What’s the significance?

• Vendors need to make sure warranties given are correct. If there is any doubt when signing contracts, the relevant warranties should be changed. If contracts are on foot a commercial solution should be explored.
• If purchasers discover a material breach of warranty by the vendor, they need to assess whether to offer to settle for less than the purchase price or use any rights of cancellation.
• The REINZ/ADLS agreement for sale and purchase is currently being updated to deal with this case.

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To be a successful investor we need to be 3 things

1. Positive
2. Responsible
3. Proactive.

If you think of the opposites to all the above and if you fall into any of those categories then you may have to start asking yourself a very important question – “Do I have the right mindset and approach to be an investor? Having said that I remember when my wife and I were just getting started and at social events I would be like a rooster in the hen house who just found something wonderful to eat. Id be crowing about how wonderful property investing was and telling everyone that they should get into it but was amazed of the negativity of some people as they would tell you every reason in the world why you shouldn’t get into property. (How many of you have had that experience eh)?

To make matters worse when beginning investors start out they may go to a conference or event of some kind and get heaps of great information then come home and get advice from their family and friends who are of course experts in the field…..well offer you so much advice about why you shouldn’t get into investing you’d think they were.

So how do we get started then? The majority of people don’t take this path till later in life when they have built enough equity in their family home. So what happens if I don’t have a home with heaps of equity you ask and you just want to get started now? Well of course this will depend on your current financial position but to get started you of course have to make a deposit for your property and it doesn’t really matter what stage of our lives we are at, we could all use some extra cash and one of the ways my wife and I did that was to investigate some of the many hundreds of ways to make money that a guy called Jamie Macintyre speaks about. In fact after we ordered his free $99 DVD (click here for a copy) – (oh and ask them for the free e-book too) – and later attended a conference, we actually bought this internet business.

There are many, many different ways to make money once you start educating yourself about how to do it. So wether you make money from your job, supplement your income and speed up the process using some of the different strategies mentioned in the free DVD or e-book or you already have a heap of equity in your current home to start out, you are going to need a deposit. Before the global financial crisis money was very easy to get hold of but things may have been tightened up a little bit since then but don’t despair, you just need to keep looking until you find the right lender.

So let’s say you want to go out and buy your first investment property for about $300,000 so you will need between 10-20% deposit – 30k to 60k. The next question I get asked is “what about all that debt and how can you afford it”? Well to start with its good debt or an asset….not a liability. In other words you are buying something that you know will go up in value over time provided you buy wisely and do your research and of course educate yourself about property investing. Don’t just go and buy the first thing you see or buy it because its close you where you live and you can drive past and admire it every day. Also don’t think that you will be a millionaire overnight because you will need to be committed to buying and holding your properties for as long as you can. You must buy in the right location, with the right amount of land content and at the right time of the building cycle (more about this later).

The main thing to remember is that you will not be paying your investment loan off completely out of your own pocket. You have three sources of income when buying investment properties in Australia (and other countries) and they are;

1. Rent
2. Tax deductions
3. Depreciation

We will start to break these down into more detail in future posts but remember before you start, it’s important that you seek proper financial advice from those who specialise in this area as everyone will have different circumstances. I am not a financial advisor and certainly don’t profess to know everything about property investing but I would love to share my knowledge, my experiences, my mistakes and journey with anyone who wants to learn and take or continue this journey for themselves……to be continued.

All the very best Anthony Shaw

PS – feel free to join our Facebook group here and add me as a friend.

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Of course, being a real estate agent the first thing I’m going to tell you is to talk to an agent in your area and get on therealestate.co.nz as most homebuyers are starting their search on the Internet and realestate.co.nz is the most trusted source for consumer Real Estate information.

However, if you simply can’t afford the commission or have your own reasons for not working with a Real Estate professional, there are some things you can do to make your house more attractive to buyers and to expose it to more of them.

THINK LIKE THE PRO’S – Don’t try to save money by taking photos with your digital camera or putting up a sign you created with a felt pen.

For about $200 you can get a professional photographer to take high quality photos and a good signboard should cost you a similar amount.

CLEAN YOUR HOUSE – Get it so clean your in-laws wouldn’t recognize it.

Polish all shiny surfaces, hardwood floors and granite are especially impressive when they sparkle.

Hardwood and granite polish can be purchased at any standard retail store like Mitre 10, Hammer hardware, Place Makers etc.

Bathrooms and kitchens need to be spotless, no dirty grout, no dirty dishes, no food sitting out, no dirty clothes or towels or dish rags in sight.

Vacuum and mop your floors, no dust bunnies or scuff marks should be visible. Dust displays and trinkets on shelves, a dusty house makes people sneeze and frown.

Rely on the fresh smell of a clean house, don’t over-perfume with candles, sprays or plug-ins. Many people are sensitive to perfumes and will wonder what you’re trying to cover up.

MOW THE LAWN – The first thing a potential buyer sees is the view from the street, make sure it’s a nice one.

Mow your grass, weed your flower beds, prune dead foliage and trim the hedges.

Do not leave toys, trash cans, tools or other distractions lying out.

DECORATE TO SELL – You want your potential buyers to see their future home, not your stuff.

Take personalised pictures and hangings off the walls, remove fake plants or sculptures and other personalized art, minimize furniture, get a storage unit if you have to.

Make sure an implied flow of traffic is present so that when potential buyers walk through the front door they feel compelled to make their way through the whole house.

This is achieved by arranging furniture and light in a way that is inviting.

From the 1973 Bloomingdale’s Book of Home Decorating (Source nadja.robot at Flickr)

PUT THE HOUSE IN THE PUBLIC EYE – Advertise your home for sale.

The most effective ways are on well-known and frequently visited websites.

Be sure to emphasize important features like the floor area, number of bedrooms and bathrooms, size of the section the house is on, new additions and benefits (new kitchen appliances, new roof, recent bathroom remodels).

Refrain from wasting readers’ time with long narratives or overly-descriptive “flowery” words.

GET YOUR REPORTS DONE EARLY – Get a home inspection, Then advertise that the inspection has been done.

If any of your report notes a problem with a particular system in the house, get an additional inspection done by a specialist and fix whatever may be wrong (ie If the builder notes missing tiles on your roof or evidence of water damage in the attic, have a roof specialist assess the integrity of the roof and have it repaired or replaced if you can afford it).

Remember, if you have knowledge of any material facts affecting the property or its marketability, you MUST DISCLOSE THIS TO A BUYER.

A LIM report from your local council will be appreciated by prospective purchasers and may save you time in the negotiation and conditional contract periods.

A QV e-valuer (estimate of market value) valuation is an affordable way the may help you underpin your asking price.

I would like to wish you the best of success in your selling endeavors and hope to service you as a buyer when you finally sell.

If you ever need assistance please remember I have helped many private sellers in the past so feel free to contact me.

Good luck with your sale
*********************************************************************************************************
This post is based & adapted with permission from a post by Jessica Murr. Jessica Murr is a Realtor in Far Northern California specializing in luxury homes, ranch properties, real estate sales consulting, social media and networking, first time homebuyers, and real estate investment planning.

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..Finally, we’re priced right, our house looks so good we are considering keeping it and not selling after all, but we STILL don’t have any buyers looking at it!! What gives??….

I hate to say it, but maybe your agent isn’t using the right tools to market your home. Is your home on the agent’s website? Realestate.co.nz? Trademe.co.nz?

Are all the pretty new photos up there? (The more pictures the better!) Is the price correct?

Is your agent writing about your listing in his/her blog? Is your agent using online social media to share your listing with savvy buyers?

YouTube, Facebook, Twitter, Flickr, these are all places you should be able to find your listing. Pictures of it, links to it, descriptions of it, lots of info! Social media is not a trend that is going away.

It is not a “phase” and it’s not a thing the kids are doing.

It is the newest way to connect and communicate and share with the world.

Newspapers around the globe are going broke because people are going online to get their information and news.

Buyers want the newest, latest, greatest knowledge and they want it as fast as a click of a mouse.

They don’t want to search through a dozen magazines and as many newspapers to find their home. They want that information to be accessible and online media is the place they look for it.

So if your agent isn’t using social media to market your listing, he ought to be.

If neither of you is familiar with it and you would like some help, email me.

I’ll be glad to share my knowledge and give you some tips that will help move your property from “For Sale” to “SOLD”.

This has been adapted with permission from a post by Jessica Murr. Jessica Murr is a Realtor in Far Northern California specializing in luxury homes, ranch properties, real estate sales consulting, social media and networking, first time homebuyers, and real estate investment planning.

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Alright, we’ve gone over the comparable sales, we’ve priced our home competitively, we are ready to be fair and reasonable, but we STILL don’t have any buyers touring our house!

Why isn’t our house appealing to buyers?

Take a look at your photos first. Is there clutter? Are there bright distracting colors? Is there a dead lawn out front, broken or dirty windows, kids’ toys lying around? Those have got to go. Clean your house – I can’t stress that enough. If your version of clean is that everything is stacked in the corner or that the pile of papers is under the desk instead of on top of it, HIRE A CLEANING SERVICE. They’ll come to you; they will clean EVERYTHING (even the nasty crud growing behind the toilet); they get it done in one day; they bring their own supplies. Where’s the down side? For $100 it’s done and your home will now be more attractive to buyers.

But my house is clean! It’s spotless; the cleaning service said there was nothing to do here.
Okay, why else might your house not be appealing? Dated furniture? Questionable paint schemes? Is it just ugly? Maybe not to you, but you’ve been decorating this house and putting things in it that you like, not what a buyer is going to like. Use a critical eye, ask your agent, ask some friends and neighbours, and if no one can give you any helpful tips, call a professional stager.

Stagers will come to your house, take a tour, prepare a quote, work with you to see what you can afford, and get the most important things taken care of first.

To be continued.
This post has been adapted with permission from a post by Jessica Murr. Jessica Murr is a Realtor in Far Northern California specializing in luxury homes, ranch properties, real estate sales consulting, social media and networking, first time homebuyers, and real estate investment planning.

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