Grow Your Property Investment Portfolio Through Buying Off The Plan

Posted by Jack Vale on May 9, 2017 3:28:46 PM NZST
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Sooo as a property investor... you might be asking yourself the simple question...

Should I just build my investment properties or should we buy an existing property??

It’s not an easy question to answer...

Especially when you have hundreds of thousands of dollars at stake.

But you probably know other people that have gone through the same process and everything turned out OK for them.

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Especially when you have hundreds of thousands of dollars at stake.

But you probably know other people that have gone through the same process and everything turned out OK for them.

How do they do it? Do they know some property investment secrets that you don't?

Actually, yes, they do!

It may happen behind the scenes, but some people know a little more about the perks of building a new property than you.

And... we are going to share some of these with you below. 🙂

 

New Developments Coming To Market = Demand For New Build Investment Properties

 

As a rental agency attached to a real estate company, we are now seeing an increasing number of developments coming to the market.

Day in, day out we are privvy to new properties hitting the market and one thing that seems to be trending at the moment is the amount of new builds hitting the streets.

Whether it is the ever popular Elevate apartment building on Taranaki Street completed a few years ago, the Derwent Street townhouses in Island Bay, the Victoria Street Pinnacle building or Bombay Terraces in Ngaio, Wellington is not short of new developments.

 

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Especially with our newly crowned Wellington mayor @JustinLester encouraging developers to build to alleviate Wellington’s housing deficit, you can be certain that more and more developments will start to appear.

 

 

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So, What Does That Mean For Property Investors?

 

Are there any benefits to buying off the plan or is it better to buy pre-existing homes and rent them out?

When looking at the list of pros and cons for buying off the plan there is one conspicuously obvious benefit that keeps raring it head.

 

The deposit.

 

Thanks to LVR legislation set by the Reserve Bank of New Zealand, investors require 40% of the price of the home as a deposit when purchasing a property not set to be a principle residence.

As a property investor, this can mean a lengthy period between purchasing properties and can halt the growth of your portfolio substantially.

 

This LVR (loan to value ratio) video by Squirrel sums it up quiet nicely.

 

 

 

 

Buying off the plans as an investor however, means you need just a 20% deposit, massively reducing the sometimes extended periods of time between acquiring new property.

In a rapidly growing and expanding New Zealand, often time is money!!

You see, if you had the chance to double your leverage, a grab a second or third property in a bull market - that can equate to alot of earnings.

Now, we are not telling you to go out and buy every property you see... however we are pointing out the fact that leverage is sometimes the key to building alot more wealth...

Just ask Rich Dad, Poor Dad!

 

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As we know...

Growing the portfolio and increasing cash flow is often the biggest goal for investors.

 

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This reduced deposit not only allows the portfolio to grow faster, but also reduces the level of initial expenditure required.

Now let’s face it.

 

Maintenance issues are a landlord’s nightmare!

 

Getting a call at 1am to fix a leaky tap is not a call that anyone wants to receive, least of all when you know that it’s going to cost you money to repair and put a dent in your returns for the year.

The cost of being a modern-day landlord is increasing, with insulation and smoke alarm legislations being put in place, in the most recent instance.

 

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Buying off the plan leaves you with a new build.

 

That’s a good thing in many cases...

The property is completely up to code, built to high standards, and with insulation and double glazed windows included in the construction process.

You can also be sure that buildings are earthquake safe with examples such as the current Pinnacle development on Victoria Street exceeding 100% of the earthquake code.

With the use of new building materials and techniques, you can be sure that maintenance issues will be lower, or non-existent, for an extended period of time.

 

You Save On Property Maintenance

 

All of this results in less expense to keep the property fit for tenants, and can guarantee you peace of mind, for the most part at least.

Because of the higher building quality, and the fact that your property should be up to date with all legislation changes surrounding insulation and smoke alarms, tenants will be jumping at the chance to rent with you.

Now we know from experience…

 

Tenants want, and are happy to pay for quality.

 

The newer your home, the fewer maintenance issues that will arise; and the warmer, dryer and safer it is, the more tenants are willing to pay.

New builds often command a higher price on the rental market, as tenants are jumping for joy at the opportunity to live in something new, warm and dry.  

With tenants happy to pay more, returns on investment can be greater, and when you consider the lower cost of maintenance, the returns are made even larger.

 

Happy Tenants Look After Your Property

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Complementary to this, tenants who pay more, and have higher quality homes are more inclined to take better care of the property and be prompt with payments.

With greater prospects to invest in developments appearing, Tommy’s Real Estate Ltd and Tommy’s Property Management have seen investors make the most of this opportunity.

If you would like to know more about up and coming investment possibilities, be sure to keep an eye on the Tommy’s Property Management blog, and the Tommy’s Real Estate website.

 

 

Topics: property investment

 

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