Is this a good area to buy rentals?

Posted on Sunday, July 21 2013

A common question in property investing is “where is a good place to buy?” If you are buying rental property then when thinking locations, you need to know where people want to rent. A renter wants convenience and often that is why you will find a certain area has more rental properties than owner occupied. Rental properties can be found in most areas, however certain areas will rent very easily while others take longer as they are not truly renting areas.

LOCATION
The living habits of a New zealander changes during adulthood. When someone first leaves home, they go out flatting with a few mates. They choose areas such as close to other mates, walking distance to work and stumbling distance from the pubs. The cost of a taxi home is often a consideration and convenience is high on their list.

As time passes their priorities change. They will look for areas less noisy, with less social issues that come with rental areas such as drunk groups noisily arriving home at 3am and loud cars. By moving further out, the rent they save makes up for the additional travel costs etc. They will still rent in rental areas, just further out from their original choices. There will be conveniences that suit renters, public transport, shops and pubs close by and a relatively inexpensive taxi ride home from town. In some cities, the beach areas can fall into this category as leisure activities other than pub life is often considered when choosing an area to live.

Young families have different needs again and this group would usually compete with investors when purchasing their first home. Conveniences here include close to schools and parks. The neighbourhood would be quiet and the cost of getting home from the pub becomes less of a priority.

Owner occupiers, especially those without children, forgo many of the conveniences in order to have their own home. Often once they buy a house, their spending habits will be forced to change and funds will be tighter. They will not be going out as often in a bid to afford their new home. Owner occupied areas may be further out, cost more to get home in a taxi and be driving distance to the pub and shops. If they don’t have children, they may not think of the proximity to schools and public transport or how child friendly the property is. Their home and location will be perfect for them now but for resale may only suit similar purchasers to themselves. i.e. not young families or investors.

RE-SALE
Buying in a street which really only has rental properties may in times other than the height of a boom, hold the prices down. Investors are generally astute and want good yields when purchasing so they know the top dollar they are going to pay. Whole streets may be the victim of below average prices in the area simply due to all the sales being between investors and the sales price being based on the yield while a couple of streets over similar houses command higher sales prices. As long as the purchaser is aware of this then its not a problem. You purchase low, revaluations are low and you know if you are going to sell the price is likely to be low. The one exception to this is in the height of the market when buyers go a little crazy and seem to pay anything. That’s definitely when you want to sell in that street. Rental demand should be high as this is a renting street.

WHERE NOT TO BUY

As an investor, avoid areas that lack conveniences. You want the largest target market possible for your rental property so your house needs to tick a lot of the renters’ wish list.

Avoid streets that are part industrial. People do live there, however once again the popularity will be restricted.

Avoid streets with bad reputations. Visit the street more than just the times of the open homes. A real estate agent is not going to book the open home for times that show the street in its worse light but that’s exactly when you need to see it.

In essence “Do your homework”

Tania and Kyle Elmer
Directors
Mana Property Management Ltd

www.ManaProperty.co.nz

rental properties dunedin

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Expert's Bio

Tania & Kyle Elmer

Tania & Kyle Elmer are active investors with a large portfolio of properties in Dunedin and Central Otago and mentor investors in the techniques used to grow wealth through property investing. Kyle and Tania are Co-directors of the Leading Property Mangers of New Zealand (LPMNZ). Kyle is a past president of the Otago Property Investors Association (OPIA). They founded Mana Property Management Ltd to provide specialist management services to Discerning Landlords dealing in the quality end of the market. www.ManaProperty.co.nz | Find Kyle on Google+

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