Renting out living space to tenants can be a very profitable business. After all, a rental is a tangible investment, regardless of any economic downturn or pandemic, people still need shelter and the demand for rentals won’t simply go down. There is only so much land and demand to live in New Zealand and Northland sees no end in sight.
Equity gains are just one of the advantages of purchasing an investment property in Whangarei. But what tops it all is the potential of a rental property to deliver consistent passive income.
When buying a Northland investment property, in order to reap its benefits, you need to consider several factors and maintain a strategy. Make sure to study the market trends when choosing an investment property. Understanding the general guidelines in real estate can also help you see whether your selected investment property will succeed before you put any serious cash on it.
Venturing into real estate can be overwhelming, particularly if you’re new to the world of rental investment properties. Before you dive deeper, it would be best to understand down payment differences and the most mentioned 1% rule.
Property Down Payment Differences
The down payment differences refer to the differences in down payment requirements between buying an investment property and buying a standard family home. You can pay as low as 1% to 10% as a down payment for a standard family home. But with an investment property, the typical down payment is between 15% to 20%.
Stricter approval requirements make it hard to finance investment properties.
In determining your down payment, your credit score, income, and debt-to-income (DTI) ratio are usually checked. To make sure your down payment is agreeable to you, prepare your financing even before looking for your investment property.
Have you heard of the 1% Rule in Real Estate Investing?
This figure is a gauge frequently tossed around by real estate investors when making quick judgment call on a potential property. It’s how a rental property can result in good returns and a monthly rent greater than or equal to the 1% of the full purchase price. Your costs include the purchase price plus any additional expenses, such as upgrades and renovations.
So how does the 1% rule used by investors determine if a chosen property is worth purchasing? If you buy an investment property for $500,000 and spend $50,000 on upgrades, your total investment would be $550,000. Therefore, you should make no less than $5,500 (1% of $550,000) every month. You can earn this through rent payments and other returns.
However, this rule may not apply in particular circumstances. For example, a million-dollar property or a property in a promising neighbourhood, might not rake in high returns in the short term. In these cases, you may disregard the 1% rule and look at the long-term gains instead. With this being said, you still need to be careful to keep monthly mortgage payments at 1% of your investment to keep your losses to a minimum.
The Ins & Outs of Rentals Whangarei
A big return on your rental investment is not always a guarantee, but you can bolster your chances by looking for properties in high rental demand areas and up and coming areas.
Once you make your purchase, there’s also the issue of upkeep. When you own a rental, always budget appropriately to anticipate any repairs and expenses. But more importantly, would you self-manage this property?
Real estate owners may choose to interact regularly with tenants personally overseeing any renter requests and repairs. This is ideal for some if they live within the area or the property itself. Others might have their hands full and can’t take tenant phone calls at odd hours. Property owners may choose to limit their personal involvement and keep things professional by hiring a property management company to oversee their Whangarei rental property.
Moreover, you can factor in the expense of a property management service as part of your operational cost at a set commission fee per rental property, it’s cost-effective and can often be offset as a taxable deduction.
All-in-all, an investment property can be a very fruitful purchase if you do enough research, you can make the best investment that’s right for you!
Rentals Property Management in Whangarei and Northland
Investors across Northland purchase rental properties for the cash flow. But securing and keeping tenants for the long term can be a hurdle for most property owners. Tenants often expect landlords to be attentive and prompt with their requests. This can be difficult when you own multiple properties or do not live in the area. Managing a rental property in Whangarei isn’t for everyone. But RentalsCo can do most of the heavy lifting when it comes to property management.
Let’s keep your rental income flowing – Call us RentalsCo at 09 459 7139 or email us at email@example.com to inquire about our professional property management services in Whangarei.