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Investing in apartments

Posted by Angelique Jurd on 17/11/2014
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Are you looking for a sound investment that will generate some reasonable income while growing your property portfolio at the same time? Why not consider buying an apartment for rental. Auckland has a growing population, many of whom are looking for good quality, stable rental accommodation with central city convenience.

As with any investment, you need to be sure to do your research before committing and the Apartment Experts team is here to help you do exactly that. To help you on your way, here are the most important things you need to consider:

  1. Cash Flow

Cash flow is obviously the most important consideration when investing in property. Will this apartment generate sufficient cash flow to meet your financial obligations? In other words – if you have raised finance in order to purchase the apartment – will the rental cover the finance payments? Will they cover body corp costs and any other incidental costs you may have to pay?

Some of the things you need to consider when looking at cash flow are:

–          The local rental market: what are similar apartments in the building and/or area posting as rent? What is the average tenancy turnover?

–          Your equity: how much of your own money is already invested in the apartment?

–          Interest rates: are they floating or fixed? When are they likely to change?

  1. Equity

We mentioned equity as part of cash flow but it’s also a very important consideration in and of itself. Some things to look for here include:

–          Aside from the initial deposit, how much of your own money will you be investing?

–          How much work – if any – will need to be done on the apartment and how will you pay for this? Will the improvements improve the value of the apartment – or will the cost outweigh it?

–          Are values in the building/area likely to increase or decrease? This could have an impact on your equity and you need to be certain it’s the right kind of impact.

  1. Risk

That old adage ‘expect the best but prepare for the worst’ should be your mantra in this case. Are you prepared for:

–          Losing a tenant?

–          A change in interest rates that is higher than you expected?

–          Council changes that could have an impact on the building?

Investing in an apartment as a rental property should be a positive experience, but for that to happen you need to be prepared for anything and everything. The Apartment Experts understand all of the issues you may have to consider – and some you may not have thought of – and can help you get to know the market.

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