Property is one of the most popular investment options in New Zealand, providing a solid return on investment through long-term capital growth and a consistent stream of rental income. Before diving into the property market as an investor though, it’s vital you’re prepared with the right knowledge and guidance. Find out 3 things to know before getting started, including understanding the benefits, finding the right property, and avoiding the pitfalls.

1. Understanding the benefits

Whether it’s a single property providing a supplemental income or a growing portfolio that expands every year, investing in property offers investors several benefits:

• Capital growth over time. Historical trends show that property values in New Zealand tend to increase over the long-term. Investing in property can lead to significant capital growth and substantial profits when it comes time to sell
• A steady stream of rental income. While most of your rental income will go towards paying down a mortgage initially, your cash flow will strengthen as more of your mortgage is paid down and you build up equity.
• Tax-deductible benefits. Many of the costs that come with owning and managing an investment property can be offset against income as tax deductible expenses, including rates and insurance, travel expenses, legal fees and mortgage insurance.
• Leverage existing equity to amplify returns. If you already own a property, you may be able to borrow against the equity in your current home to use as a deposit when buying an investment property.
• A viable path for building wealth and achieving financial stability. With the return of Mortgage Interest Deductibility, property investors can now continue deducting the interest costs of their property mortgages against their rental incomes. From 1 April 2024, you can claim 80% of the interest incurred on a mortgage borrowed for residential property, and from 1 April 2025 interest deductibility will be fully restored, and investors will be able to claim 100% of the interest incurred. 

2. Finding the right property

Location is one of the most important factors impacting a property’s value, rental demand, potential for capital growth and ultimately, overall success.

• Areas with strong economic growth and development tend to see higher demand and property price appreciation and greater capital gains.
• Properties near amenities like schools, shopping centres, and public transport are more attractive to tenants, ensuring consistent cash flow and higher rental income.
• Good access to roads, public transport, hospitals, and schools can increase a property's marketability and value.
• Regions with strong economies and diverse job markets attract population growth and housing demand.
• Properties near beaches, parks, and cultural attractions may appeal to specific demographics, so it’s important to understand your target market's preferences.
• Areas with planned infrastructure projects and government investments offer new opportunities for capital growth.

3. Avoiding the pitfalls

When done correctly, investing in property can set you up for a financially secure future, by providing a comfortable nest egg into retirement. But, just like any investment, there are risks and certain pitfalls that should be avoided to get the best return on investment.

• Set specific goals and have a plan. Determine a property investment strategy. Will you buy and hold which focuses on long-term capital growth, or buy and flip, making quick gains by re-selling after a year or two.
• Do your homework and thoroughly research the market to avoid making poor investment choices. Not making time to research first could mean you end up with a property that fails to give you the return you want.
• Get financial advice. Factor in all expenses, including maintenance, property management fees, and insurance, and avoid taking on too much debt as that can be risky if the market fluctuates, or interest rates rise.
• Think long-term. Relying solely on the market to increase property value and neglecting property maintenance will decrease its value and rental appeal and leave you scrambling to find decent tenants.

Get started on your property investment journey

Wherever you are on your property investment journey, get advice from an expert. Contact a Mortgage Express branded mortgage adviser for tailored advice to help you start and grow your property investment portfolio.

With access to a panel of lenders and expertise in finding lending solutions for property investors, our team of mortgage advisers can help you reach your property investment goals.