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Investment Property – Moving Into New Builds

This article written by Miriam Bell and posted on Landlords.co.nz is an excellent article for Landlords who have been put off by LVR restrictions recently introduced.  In the article Ms Bell explains why new builds are exempt from the restrictions and why they are a great option for investment property.

Image of house build for Why New Builds Are A Good Property Investment blog

“New build properties are exempt from the latest investor-directed LVRs and yet, to date, there has not been a big increase in investors taking up that option.

The Reserve Bank’s most recent round of lending restrictions mean that investors are required to have a 40% deposit in order to secure a loan for an investment property.

That requirement has stymied the goals of a lot of investors and, effectively, taken them out of the market.

However, there are still strategies investors can employ to continue building their portfolio in the face of the LVRs.

Perhaps the most straightforward of these requires a move away from investing in existing properties to investing in new build properties.

This is because lending for new builds is exempt from the latest LVRs for both investors and owner-occupiers – and that means investors only need a 10% deposit for a new build loan.

It sounds like a simple way to work around the LVRs and yet, to date, there does not seem to have been a significant groundswell of investors moving into new builds.

The Mortgage Supply Company’s David Windler said he has not seen a big increase of investor interest in new builds.

“This is a bit surprising as, purely from a lending point of view, new builds seem like a logical option because half the deposit is required.

“But maybe when investors start looking at what they can get for a sum of money, then the numbers just aren’t working for them.”

It was possible many investors are not that familiar with new builds and focused on reports of cost overruns and buildings delays, he said.

“I wonder if many investors are not confident enough with the product to move into new builds more.”

Windler’s observations are not isolated, with Property Institute chief executive Ashley Church also saying he is not hearing of big numbers of investors shifting into new builds at this stage.

He said that, given the current lending environment for investors, moving into new builds is counter-intuitive.

“Or you would think it would be. Relative to other options in the market, or other markets, at the moment you would think that new builds would be pretty attractive.”

Church said it was bizarre more investors weren’t taking up the new build option but possibly there was some, not immediately apparent barrier to it.

Traditionally, costs and time delays have been considered an impediment when it comes to investing in new builds.

But data released by homes.co.nz this week suggests that building a new property, rather than buying an existing one, can be more lucrative.

It found that, in hot markets like Auckland, Wellington and Queenstown, new properties typically sold for around $600,000 more than an empty section – which could equate to around $150,000 in capital gain on average.

Homes.co.nz spokesperson Jeremy O’Hanlon said the stresses of building new are not for everyone because of the additional variables including delays, unforeseen earthworks and the people involved in the build.

“But if you’re careful and do your diligence it looks like building new can be a financially smart approach.”

On the coalface, building companies indicate that factors like this, along with the LVRs, means there has been some increase in investor interest in new builds.

Keith Hay Homes’ national sales manager Barry Walker said they are seeing a reasonable number of investors buying new builds, particularly in the Auckland region.

But he thinks many investors don’t realise there is an LVR exemption for new builds, while others believe that the consent and building delays with new builds mean it’s easier to buy an existing house.

“Having said that, I think that we will see a big increase in investors buying new houses in the near future. That’s partly because more will become aware of the LVR exemption.

“Also, now that Auckland’s Unitary Plan is largely operative that will drive investors looking for opportunities to capitalise on their existing properties.

“People are learning what they can and can’t do and will start to move into the new build space increasingly.”

Signature Homes spokesperson Shaun Taylor agreed that investors’ interest in new builds is only likely to grow.

But he said they have already had significant interest from investors, particularly in Auckland, Hamilton, Christchurch and New Plymouth since the LVR’s were introduced.

“We are finding that once investors start the discussion with us they are keen to build when they realise how affordably they can build a new bespoke investment property to suit their needs.”

In his view, the current market and lending environment mean there has never been a better time to build.

He said investors find that building with building companies, which offer independent guarantees, eliminates the risk.

“It also enables investors to build in cities they don’t live in to diversify their portfolio geographically. Plus they get a brand new home which will have higher resale value and reduced maintenance costs.”

Landlords.co.nz

Blog image for Tauranga Property investment- Long Term tenants Vs Short term holiday renters

Tauranga Property Investment: Long Term Tenants Vs Short Term Holiday Renters

Blog image for Tauranga Property investment- Long Term tenants Vs Short term holiday renters

With summer arriving many investment property owners are weighing up the option of whether to rent their house to short term summer holiday makers or to long-term tenants.

While there are often quick gains to be made from short term holiday rentals there are also issues associated with this type of renting. For example the following are just some of the hidden problems with short term holiday rentals:

  • Cancellations are quite common, if short notice this can leave you with unoccupied days/weeks and out of pocket.
  • Damage to property. Short term holiday makers are less likely to care for your house and property. Whereas longer-term tenants have to sign tenancy agreements which legally protect you as a landlord.
  • Lack of control on numbers.  In the last few years there have been many reported cases of occupancy numbers in a holiday rental being greater than what was allowed/booked. Unfortunately this can go unchecked, and can result in greater wear and tear on your property.
  • Many online booking sites have ratings and reviews, which can sometimes be difficult for owners if a holiday guest is not happy about their stay.

On the other hand a long term rental requires more commitment from a tenant and stability for a property owner.  Advantages include:

  • Landlords know exactly how much rental income they will be receiving every week.
  • Tenants have to sign tenancy agreements which helps protect landlords rights.
  • A notice period is set so landlords are given plenty of time to organise new tenants should existing tenants wish to leave.
  • Long term tenants are less likely to damage property, and if they do landlords have bonds and/or landlord insurance as cover.

Also, given the current demand for rentals in the Tauranga region, property owners are able to rent their house for a premium to long term tenants.  These tenants are desperate for houses in the areas of Papamoa and Mt Maunganui, and anywhere near good schools.

In addition to the above advantages, landlords can also use the services of a property manager when they choose long term tenants for their property.  Our property management service includes a free market appraisal, REAL Landlord Insurance, set fees, up to the minute reporting and more.

So if you are looking at renting out your Tauranga investment property call Connect Realty today. We care about your investment and want to help you every step of the way.

Is Your Property Investment Safe Without Working Smoke Alarms?

Smoke Alarm

Smoke Alarm


They answer is a definite No!

Investment properties can be a high fire risk because of tenant behaviour, and many tenants may not even consider smoke alarms as necessary because they are not thinking about the real cost of a fire, this includes putting lives at risk and the value of YOUR investment.

Often the tenant is placing faith in you to provide a safe tenancy for them. Whereas some properties already have a legal requirement to have smoke alarms installed – we believe ALL properties should have smoke alarms installed.

In addition to safety, after a fire the tenant is gone but your bills and expenses will continue all the same. So you should not leave the protection of your asset to your tenant because they do not have to pay the bills or the bank!

For a relatively small price, a working smoke alarm can save your tenants life and protect your property and investment.

At Connect Realty we deal with a company called NSAS (National Smoke Alarm Services). NSAS will provide an annual maintenance service, free battery replacements, testing of all alarms, unlimited inspections and more.

Call us for more information