Understanding the physical condition of a property before buying is essential, whether it's for your own home or an investment.


Understanding the physical condition of a property before buying is essential, whether it’s for your own home or an investment.

Belinda Moffat is the chief executive of the Real Estate Authority. She answers your questions about buying and selling a home.

Q: My partner and I are talking about buying our first investment property.

We have had previous experience in buying and selling property when buying a new home for our family, but a rental would be a first for us.

What should we know about buying an investment property that might differ from buying a house for ourselves?

* Can I sell my apartment building while a tenant lives there?
* Here’s what you need to know about renting your home to buy a new one
* How to find and manage a good rental property

A: As you have already bought and sold a property, you should have a good level of knowledge of how the real estate transaction process works.

From the outset, it is important to understand all the financial implications of a switch to real estate investing. This includes balancing income and overhead, understanding tax implications, and managing your financial flexibility and resilience to changes in the economy or your personal circumstances.

As this is not a financial advice column, I will focus on what to keep in mind when considering buying an investment property. I encourage you to speak with a specialized financial planner and/or your accountant and lawyer before making a financial commitment like this.

Once you’re sure what you can afford, it’s time to start researching. Search for rental properties in your preferred location; What types of properties are most in demand for rental? What type of tenants do you hope to attract?

College students, for example, will likely want to be close to where they study, while young families will appreciate things like fenced yards and nearby schools. Are you happy to accept pets?

In addition to its appeal to potential tenants, it’s a good idea to keep ongoing maintenance requirements in mind. For example, a detached property with a garden may require upkeep and upkeep of exterior surfaces, whereas for an apartment, although you won’t have to do any gardening, exterior upkeep will likely be covered by a fee. that you will pay to the legal entity. (Note that some corporations do not allow landlords to have tenants, so be sure to check all relevant terms.)

What should landlords do when renting a home?

Understanding the physical condition of a property before buying is essential, whether it’s for your own home or an investment. Some people may be less stringent about this if they don’t intend to live there themselves, but it’s still essential due diligence. Not only will you have a responsibility to be transparent with tenants about issues, but you want to avoid unexpected repair costs down the line, especially if they were to mean the property was unlivable (and therefore not generating revenue). ) while they are sorted.

Remember that sellers and licensed real estate professionals have an obligation to disclose significant issues with the condition of a property they are selling, but it can also be a good idea to proactively seek out additional information, such as a report from an accredited home inspector.

An inspector should also be able to advise you on the amount of work that may be required to ensure the property meets the Healthy Homes standard. If the house you are looking to buy is already a rental, the seller may have this compliance fully sorted, but checking it will be essential. If the property was owner-occupied and you are looking to make it a rental, meeting the Healthy Homes standard will be a key consideration before renting it out.

Another important consideration is whether the property is already rented. If so, you may just want to continue the existing tenancy. If you prefer the property to be empty when you take possession of it (for example, to undertake major repairs or redecoration), this should be stated in the sale and purchase agreement. It is the seller’s responsibility to notify existing tenants (and this must be done in accordance with the legal rights of tenants).

Gaining a thorough understanding of a property's condition before purchase is key, says REA's Belinda Moffat.


Gaining a thorough understanding of a property’s condition before purchase is key, says REA’s Belinda Moffat.

As you get closer to finding an investment property, you might start thinking about how you’re going to manage the property. If you prefer, you can hire a professional property manager to act on your behalf and deal directly with tenants. They should also have a good knowledge of tenant rights and other requirements, helping you become a successful landlord.

Ultimately, it’s essential to do as much research as possible and be clear about what type of investment property you want to buy and why. It is essential to fully understand the condition of a property before purchasing.

Reviewing the sale and purchase agreement with the help of a lawyer will help ensure a smooth sale, and knowing your obligations as a landlord will put you on the right foot. Good luck with your future as an owner.

For more information on the process of buying or selling a property – and what to expect when working with a real estate professional – visit settled.govt.nz. Have a question for Belinda? Email [email protected]