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Colin Hill | 19 Sep 2018 | Property Investing

Building Your Investment Portfolio: What You Need to Look for

Colin Hill | 19 Sep 2018 | Property Investing

Building Your Investment Portfolio: What You Need to Look for

Building Your Investment Portfolio: What You Need to Look for

Building a profitable and manageable investment portfolio boils down to doing your due diligence and being fully prepared. Thus, regardless of whether you’re a seasoned property investor or you’re looking to take the first steps, it is important you take the time to get a full picture of what is viable for you.  

Below are several key areas to start your next investment journey on.

Do the numbers work?

Before you are able to jump in and start your property search, make sure you have a clear picture of whether you are in a favourable financial position to take on another mortgage.

First and foremost, make sure you have a good understanding of how much you are able to borrow. Shop around, go visit several lenders so you can find the best option for you. If you don’t know where to start, talk to us, we will do the legwork for you. Knowing how much you can borrow early in the process will help you form realistic expectations for what you will be able to purchase.

Once you know your borrowing abilities, take the time to work out the rental yield of a property. This is the amount of income the property will be producing and is comprised of rent, rates, insurance and mortgage. This will help you understand if the investment property will be able to produce the returns you desire.

What is the location like?

We all understand location plays a massive role in the attractiveness of a rental property. In fact, you are more likely to get a high rental yield if the house is located near a good school, transport routes and social amenities.

While, many people prefer to be located in popular suburbs, such as Ponsonby or Mt Eden, don’t shy away from up and coming suburbs. Particularly in Auckland, as a result of the cities rapid expansion, suburbs such as Onehunga and Mangere are becoming increasingly popular. As these suburbs start seeing an increase in development, don’t be surprised if they quickly become the ‘in’ suburbs.

Are you looking at a fixer-upper?

The appeal of purchasing a house that requires a little bit of love is one that is quite strong for a number of investors. So, depending on your ability behind the tools and willingness to play the long game, this could rule out a few options.

The big reason for purchasing a house that needs a bit of work is fairly obvious. The potential capital gains that may be generated, can be quite substantial. However, you need to weigh up the short-term losses compared to the large-term gains.

Are you compliant?

The condition that rental properties are in is a massive issue at the moment. And, it is an issue that isn’t reserved for student flats. As a landlord, you will be responsible for keeping the house up-to-date and compliant with all governmental regulations and bylaws.

Make sure you are proactive in trying to create a warm, dry and well-maintained living area for potential tenants. Not only will this make it easier to attract tenants, but they will also be more willing to stay on for longer. Which ultimately, guarantees you consistent revenue from the house.

What is your calendar like?

As you decide to expand your portfolio, be aware that the demand for your personal time will increase, drastically. Not only will you be responsible for getting the house ready for tenants, but there will also be the ongoing maintenance, collecting rent and bills, as well as being the point of contact for everything involved with the house.

If you are planning for your portfolio to be a side project, that is meant to fit around your current schedule, consider hiring a property manager to handle the day-to-day operations. Not only will a property manager save you time, but there are also several over benefits for getting a professional to manage your portfolio.

 

Building your investment portfolio is an excellent way to create a nice little nest egg that has the potential to blossom into a sizeable return on investment. However, before you dive head first, make sure you understand exactly what you are signing up for.

Contact one of our experienced and friendly advisers today and we can help you understand exactly what you need to do.

 

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