Buying rental property in New Zealand

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Buying Rental Property in New Zealand

buying rental property in new zealandIn December 2011 I’ll be off to New Zealand in search if cashflow positive  real estate.

Along with like minded investors and coaches from Results Mentoring we’ll be visiting the regional cities of Wanganui, Rotorua and Tokoroa.

The plan when buying rental investment property is to look for residential homes that will appeal to a wide range of renters, making it fairly simple to let. Currently in regional NZ the yield on entry level residential properties can be in excess of 10%. This considered high in terms of average yield for the area. The long term strategy is to make the investment pay for itself with strong potential for capital growth when the market as a whole improves.

The average long term yield for these areas is around 7%, which is not too shabby as an potential investor, and means that in the next 5-10 years there is every chance that capital growth could add 30-40% to the value of my portfolio.

The second part of the strategy is to borrow up to 80% of the purchase price in local $NZ. The bank I’ll be working with is the BNZ. I’ve already made contact with the bank in Rotorua and been granted pre-approval for up to $200k worth of loans. This is key as it provides a natural hedge against and currency fluctuations.

At this time of writing the value of the New Zealand dollar is unseasonally low in relation to the Australian dollar. I can purchase in excess of $1.30 for each Aussie. Historically the Kiwi dollar has floated at around the $1.10 to $1.15 level. I’m hoping that in time it will retrace it’s level and I’ll increase the value of my investment in my local currency

My goal will be to purchase $250k worth of income producing property. The first years costs are likely to exceed total income, but each property should more than pay for itself after the initial bedding in period.

If you’re thinking of buying rental property in New Zealand come along with me (virtually that is!)

I’ll be back with an update when I’m on the ground.

Kia Ora.

buying rental property in new zealand

Dwight Veenman


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