Planning for future financial security is an issue that most people will wrestle with at some stage or other in their lives. Whilst there are a number of options open to us, for many it is a balancing act taking into account risk versus reward. Can we afford to take investment risks and how does this balance with the likely return we receive at the end of the investment period? Tommy’s has always advocated that residential investment is a viable investment option for most of us. Particularly so for those who are relatively unsophisticated when it comes to investment options. We have also stressed that we see real estate investment as a medium – to long-term investment option; not a short-term gamble for securing a quick capital gain.
In the 20 years that Tommy’s has been operating in the greater Wellington area, we have offered investment advice to a large number of clients. We have witnessed many people who have prospered from this advice and paved the way for a lifestyle and eventual retirement, free of financial worries or hardship. With house prices rising at an unprecedented rate in recent years there are vast numbers of homeowners who are asset rich simply by being a property owner through this period. We list below some reasons why we believe that the average homeowner should consider the purchase of an investment property.
• Whilst borrowers of mortgage finance are reaping the benefits of unprecedented low-interest rates, the reverse is the case for those dependent on receiving a worthwhile return on their cash reserves. With the banks now offering around 3%(or less) on term deposits, this savings vehicle is unattractive, to say the least, and is encouraging investors back to real estate.
• Those who have owned a property in recent years will, in many cases, have acquired significant equity in that property. This provides an ideal situation for a homeowner to leverage against that property and to create a deposit sufficient to purchase an investment property.
• Demand for rental accommodation in and around Wellington has never been stronger. This has resulted in Wellington’s rentals being more expensive than most other cities in New Zealand. With proper management this should ensure minimum periods of vacancies between tenancies and continuity of income.
• Gear your financing so that if possible, your tenant meets your mortgage and other holding costs. If you are in a position to periodically offset the outgoings with income from other sources then obviously that is a plus and will assist in growing the equity in your rental property.
• The icing on the cake is any capital gain that accrues to you. Whilst this cannot be guaranteed, assuming that past trends continue, you can watch your asset grow over the coming years.
Buyer activity from property investors appears to be on the rise, particularly since recent legislation regarding rental housing standards has been finalised and also since the threat of a capital gains tax has been put to rest. Tenants are entitled to a safe, secure and comfortable environment and most well-meaning landlords would not deny them this right. Treat your tenants fairly and in most instances, they will respect your property. As an investor, having ‘do-it-yourself’ skills and the patience to manage tenants is an advantage but is not necessary. There is a better option!
Managing your Investment Property:
Who better to manage your investment property than Tommy’s Real Estate Ltd! From small beginnings, our property management division has made terrific progress in the last two years since entering the management field. Our progress has been recognised in the latest industry awards with the Tommy’s Property Management team being awarded:
- Top Property Management Office in New Zealand – small office category.
- Innovation Award – for all Real Estate and Property Management offices New Zealand-wide.
If you are considering the purchase of an investment property we invite you to call any member of our sales team for advice, or if you have a new or existing property and require a professional and innovative management service then please call Tommy’s Property Management award winning team manager Harrison Vaughan on 027 777 2655.