Property Investment

In my last blog I talked about the pros and cons of residential rental property as an investment. If you have the desire to invest in property but don’t want the hassles of tenants there are other types of property investment.

Commercial property is similar but aimed at the business market. Generally it’s a bigger investment as they’re more expensive buildings but the basic concept is the same. One of the advantages is that you can lock tenants in for a longer lease, and it’s usual to have a time to review the rent set in the lease. The tenants want the surety of both the time frame and the cost. However, it can take longer to find a tenant, especially if there’s plenty of property in the market or a down turn in the economy.

Commercial property is valued on the rental return, more so than residential property. Hence where a rent may be agreed, but an incentive offered to get a tenant in, rather than reducing the rent.

You also have to be clear who owns what, has the landlord provided the fit out, or has the tenant. Are you just charging rent, or do you get to pass on rates and insurance costs. Read More »

Residential Rental Property Investment

Residential rental properties are the classic Kiwi investment. We’re often accused of not diversifying our investments and being hung up on investing in bricks and mortar, which doesn’t really invest back into the money go round. There’s lots of media stories about the effects of this and the scourge of the middle aged mum & dad investors all competing to buy the housing stock, beating up the prices so the young can’t afford their first home.

There’s no question that the banks like people investing in them. They make money out of you owing them money and paying interest on that. So once you’ve paid off a reasonable amount of your home mortgage they’re keen to let you use the equity in your home to take on more mortgage to buy investment properties.

Investing in residential rental property is a long term proposition. The idea is that you use the income from the rental to pay off the mortgage. Effectively a forced form of saving. Read More »