Investing in property can be a smart move, but only if you know how to avoid common pitfalls. With interest rates coming down and bank test rates dropping, more investors are entering the market.

To help you get the best value, here are some of my top tips for finding a successful investment property in New Zealand, from choosing a high-yield location to understanding deposit requirements.

What is the minimum deposit for an investment property in NZ?

Investment property deposits are generally higher than for owner-occupiers, with requirements based on property type. Investors need a 20% deposit for new builds and 30% for existing properties. However, with changing lending rates and more options for investors, some lenders may offer flexibility.

Additionally, the deposit doesn’t always need to be cash; investors may have the option to borrow it instead. Always check the latest requirements to understand what’s possible for your budget.

Which real estate investment is best?

The best type of investment property depends on your goals and risk tolerance. In general, residential properties are popular for beginners due to their straightforward management and stable rental demand.

However, some investors prefer commercial properties, which may offer higher yields but come with unique challenges, such as higher upfront costs and longer vacancy periods. Knowing what fits your strategy—whether residential, commercial, or mixed-use—is key to making a sound investment— this is where a mortgage broker can offer invaluable advice.  

What is a good rental yield in NZ?

Rental yield is a vital metric for gauging investment performance, representing the return on your property based on rental income versus the property’s purchase price. If you’re aiming to earn returns on your investment property through renting, a key metric to evaluate is the area’s average rental yield. Typically calculated as an annual percentage of the property’s value, a gross rental yield above 5% is considered ideal, though this average can vary greatly by location.

Higher yields often mean better cash flow but could indicate higher property maintenance or less stable long-term appreciation. Assessing rental yield alongside growth potential will help ensure you get the best balance for your investment.

The top 5 highest yielding areas in New Zealand

Certain regions stand out for investors seeking high rental yields. Here are the current top five to keep in mind:

·      Kawerau District – 7.23%

·      Grey District – 7.16%

·      Rangitikei District – 6.95%

·      South Waikato District – 6.71%

·      Ruapehu District– 6.27%

These areas tend to have smaller populations (under 30,000) and lower average property prices (often below $400,000), making them attractive for investors focused on high yields.

In contrast, lower-yielding areas are generally more expensive and include:

·      Mackenzie District – 2.72%

·      Queenstown-Lakes District –2.97%

·      Thames-Coromandel District –3.09%

·      Central Otago District – 3.23%

·      Auckland – 3.25%

My personal tips for choosing a great investment property

Location is Key: High-growth areas with strong rental demand and infrastructure development are always a good bet. Look for regions with a stable economy and access to amenities like schools, transportation, and shopping centres.

Evaluate the Property Condition: Older properties can come with hidden repair costs. If you’re buying a fixer-upper, ensure the renovation expenses align with your expected returns.

Consider Tenant Demand: Aim for properties that meet the lifestyle of potential tenants in the area. For example, in family-oriented neighbourhoods, properties with multiple bedrooms and proximity to schools may attract more long-term renters.

Check the Local Vacancy Rates: High vacancy rates may signal low rental demand. Research the local rental market to ensure you invest in an area with consistent tenant interest.

Plan for Unexpected Costs: Maintenance, insurance, and property management fees can add up quickly! Set aside a budget for unexpected costs to protect your investment.

How we can help you make the best investment

Choosing the right investment property can be challenging, but it doesn’t have to be. At Benchmark Mortgages, we bring the expertise and tools to reach your property investment goals, help you navigate lending options, calculate yield, and strategies for long-term success.

Our experienced team will assess your financial position to determine how much you can leverage from existing properties, review suitable repayment strategies, and clarify the differences between borrowing power and leveraging power. We’ll also tailor loan structures to meet the specific needs of your owner-occupied and investment loans.

Whether you're purchasing your first investment property or your seventh, we’re here to guide you every step of the way and share our knowledge to help you succeed.

Reach out to us today to start your investment journey with confidence.

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