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Don't Forget The Basics

Mark Honeybone discusses how to buy well so you can recycle the deposit. DON’T FORGET

By: Mark Honeybone

1 March 2018

Recently I interviewed Andrew King, executive officer of the Property Investor Federation, for the NZ Property Podcast video series. It occurred to me that some of us forget about the fundamentals of property investing: of buying well, buying to hold, adding value and those other good things many talk about.

It seems too often people trade property and, unless they are experienced, they don’t get the results they are after. I know I have 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.

So, after the interview with Andrew King this month, I’d like to cover a couple of strategies on how to ”buy well” so you can 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 for 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.

‘If you buy an under-rented property and then rent it for the market rent, you would typically add value immediately’

By doing any of these, you may increase your rent by $40 a week ($2k per year) or $60 a week ($3k per year). This 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 because of where the market is, especially in Auckland, and in my opinion most of the country as well. Those areas of the country that are not quite there yet, I feel are 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 have made over the years were when I was impatient. 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 a little. Every suburb has its good streets 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, go to every auction and open home and check new listings as soon as they appear. Know the market and that deal will come up.

Last Sunday I went to an auction during the worst wind and rain that Auckland could throw at us. It was in none 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. The vendor knew what I was proposing and was fine with it which made everyone happy.

Property Ventures is a licensed Real Estate Agency that specialises in Investment property throughout New Zealand. They also have the NZ Property podcast/YouTube series where Mark interviews the property experts from around the country helping hundreds of thousands of investors. He can be contacted at [email protected] or 0800 NZPROPERTY (697767) Or watch the Podcast/YouTube video at www.propertyventures.co.nz/podcasts

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