The recent historical performance of the New Zealand property market seems to indicate that it’s a great time to open rentals. With the number of new housing and office space projects falling short of current demand, most estimates predict that rentals are set to remain profitable for the near future.
However, things are not exactly rosy for all landlords at the moment. Though the market is heavily in favour of property holders, most renters are not above seeking different arrangements if they don’t get what they’re promised. This leaves would-be rental owners who are banking on market sentiment in a very precarious position.
Fortunately, the formula for a well-liked and profitable rental property isn’t all that complicated. With some planning, you can offer rental options that tenants would be happy to pay for. If you haven’t yet built your home or commercial rentals, consider these points before moving forward with construction:
The Neighbourhood’s Overall Character
The neighbourhood you set up your rentals in partly determines the types of renters you get and the typical vacancy rates you can charge. For instance, an establishment next to a university will experience very strong seasonality, which you will have to account for when formulating your business plan. Some places like Dunedin may also have unique aspects to it, such as various historical sites. It’s best to consult with an experienced Dunedin builder for your design to make sure you don’t come across issues with city council approvals, permits, and the like.
The Kinds of Renters You Want to Draw
Some types of rental arrangements can be more profitable than others. For instance, a luxury property that draws wealthy vacationers may not even need to be occupied on most days to be profitable. On the other hand, a property for low-income tenants can be occupied 365 days a year, offering a more consistent cash flow buta smaller profit. In any case, you’ll want to design your rental property to attract the types of tenants who will help you meet your business goals.
Crime Rates
Low crime rates attract tenants and also contribute to property value and tenant retention. Unfortunately, not every property is in a good neighbourhood. If you have land in a high-crime area but cannot divest yourself of it, consider developing your property so that it incorporates key security features. High walls, CCTV cameras, and other similar features can serve to reassure potential renters and prevent serious incidents.
The Mix and Quality of Available Amenities
Nearby schools, parks, public transportation, shopping centres, and healthcare facilities all help boost a rental’s appeal. However, these features don’t all have equal value in all situations. For instance, schools and healthcare facilities may not be that important if you’re focussed on transient renters; on the other hand, they can be extremely important to those looking for more long-term arrangements.
The Area’s Potential for Future Development
Even in a favourable market, rental properties can be very difficult to sell. This means that you need to be reasonably sure that your property can recoup your investment.
If the area is economically stagnant, it may not make sense to invest a lot of cash into a large rental building. However, if the overall outlook is good and there are multiple infrastructure projects in the area, it may be a great idea to invest a bit more so you can more easily meet future demand.
The Local Rental Market
Many property owners make the mistake of assuming that larger national trends apply to their specific location. To avoid over or underinvestment in your building, take the time to make a fully localised assessment of the area’s rental market. This should help you create a right-sized property from the get-go and ensure that your rental rates are immediately competitive.
Development Costs
The cost of developing rental properties can vary widely, even within the same city. Something that’s built on a hill, for example, may cost significantly more than one on flatter land. Getting a handle on these costs can help you prepare an appropriate budget and prevent funding issues that delay your property’s completion.
Location-Specific Design
A house built in Hastings would have to be built to very different design standards from one in Dunedin, due to the much colder climate of the latter. Likewise, special types of rentals like mountain ski cabins and beachfront homes have special considerations that may significantly add to the final cost.
Property Management Options
Before you’re even done building your rental, you’ll have to decide whether you’ll manage the property yourself or enlist the services of a professional property management company. Unfortunately, good help can be hard to find, particularly for properties that are particularly remote. In these cases, you may have to pay a premium for property management if you’re not willing to relocate.
Managing Expectations in New Zealand’s Booming Rentals Market
Even in such a favourable market, building a rental property requires careful planning and managing your expectations. Even if you manage to do everything right, owning your first rental property is probably not going to be exactly what you thought it would be. Regardless, by looking at the bigger picture and avoiding over-exuberance, your future rental can become a profitable asset in your portfolio.
