Investing

How much can I borrow to fund my investment? Ideally, you should arrange your finances before you start searching for an investment property. This will let you kn...
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Looking to invest?

The following advice is of a general nature only and intended as a broad guide. The advice should not be regarded as legal, financial or real estate advice. You should make your own inquiries and obtain independent professional advice tailored to your specific circumstances before making any legal, financial or real estate decisions. Click here for full Terms of Use.

What is a timeshare property investment?

When you invest in a timeshare property, you purchase the rights to use a unit in that property, often a hotel or resort facility, for a set period of time each year.  You pay a set administration fee each year for this service. You can usually trade these rights with other timeshare owners, enabling you to purchase the rights to holiday at a different time of year, or to purchase accommodation in a different location or resort.

Note that you never actually own the property, just rights to use the facilities.  New Zealand timeshare sales are covered by law through the Securities Act. This requires the promoter of the timeshare to register a prospectus and distribute an investment statement to potential purchasers.  You are paying up front for the rights to use the property for many years to come, so it's important that the company which owns the actual property is financially stable.

Timeshare resorts and exchanges associated with the New Zealand Holiday Ownership Council will need to abide by that body’s code of ethics.

What options do I have for financing my commercial property investment?

Most major New Zealand banks and specialist lending institutions are willing to provide loans for commercial real estate investment. Typically they will lend up to 75% of the purchase price, based on Loan to Asset Value ratios (and the debt servicing abilities of the buyer).

These lenders will consider a number of things when approving finance, including a review of the quality and length of existing (and upcoming) commercial leases.  This review will confirm the amount of rent you are likely to receive and local market factors such as property vacancy rates and property yields.  Lenders will also consider personal factors, such as other sources of income you might have to help you service the loan.

First National Real Estate has affiliations and relationships with many major New Zealand banks and lending institutions.  Contact your nearest First National branch for assistance with finding a commercial property, and the finance to buy it.

I’m planning to buy. What rules should I follow to ensure I make a good investment?

When you're buying real estate for investment purposes, the location is really important.  It's often said that you should buy the "worst house in the best street", rather than the "best house in the worst street", because good (or up and coming) housing areas tend to hold their value better than neighbourhoods on the decline.
Buying your home in a well-connected and popular location that has the potential for further improvement is a logical approach.  When buying, look for:
  • Houses that are close to shops, parks, good schools and transport hubs.
  • Houses or apartments that can be renovated or freshened up relatively cheaply. If buying in an apartment block, be aware of the standard of other apartments in the block, tenancy profiles (and likely noise), and amenities.
  • Real estate that is close to recreational facilities, sports clubs or other amenities that are likely to be popular with the general public.
  • Housing that is positioned for energy efficiency (north facing).
  • Homes that are well insulated, in the floors, walls and ceilings.
  • Real estate in suburbs which are likely to see significant development.  
Real Estate New Zealand provides a helpful property inspection checklist

​Where can I get help?

At First National Real Estate, we're here to help you. Contact a First National Real Estate agent prior to moving into their area, and get chatting. They are well placed to give you general information and advice about your upcoming move.   They can also add you to our database of potential property buyers or renters, and can send you updates when properties that suit your needs and preferences become available.

Can I negatively gear commercial property?

Negative gearing occurs when an investor borrows money and buys commercial property, but the rental income from the property does not cover the interest charged on the loan. Whilst this sounds a little crazy at first, there can be some positive tax benefits for the buyer due to the ability to claim losses against taxed income.

As the property is owned, it can benefit from the passive rental income generated, and any capital gains the property may make during the period of ownership.

Negative gearing is a risky investment strategy, because commercial property values are not guaranteed to increase. Unexpected interruptions in the flow of rental income, or interest rate increases, can put negatively geared investors under extreme financial pressure. For these reasons, negative gearing should only be undertaken by buyers who have the ability to absorb losses in the event of adverse financial conditions.

Consult your Accountant or financial advisor for more advice on whether negative gearing is a suitable investment strategy for you.

Is buying into a timeshare property a good investment?

Buying a timeshare property can be a low-cost way to initially invest in a holiday home, but there are often hidden costs that are not always immediately apparent. If you’re looking into a timeshare investment, make sure to consider the following:
  • There may be extra costs other than those associated with purchasing your timeshare rights. These might include hidden fees, levies that rise over time, and future obligations to fund repairs and maintenance. Make sure you understand all the costs involved before signing anything.
  • Do not expect to make money reselling your timeshare rights. While it is possible these will increase in value in some instances, it is not a common occurrence.  Many owners lose up to half of their investment when reselling.
  • Some timeshare purchasers end up even worse off, because the value of the property they have invested in depreciates drastically over time. Make sure you understand how long your investment will last, along with the obligations property owners have to reinvest in the property.
  • In an economic downturn, demand for your timeshare period may decrease, particularly outside of peak holiday weeks. As money gets tight, people tend to take less holidays, not more.
  • While timeshare sales people may try to sell you on the benefits of being able to swap your timeshare rights for those in different properties, make sure you investigate how active the exchange market really is. If the swapping process is difficult, inconvenient, or costly, or there are not enough participants willing to swap, then the promised benefits may never materialise.
  • Make sure to investigate the quality of any properties you wish to swap your rights to, and make sure they are of comparable quality and desirability to the one you are investing in.
A well run timeshare scheme can provide a low cost and flexible way for you to access a holiday home, especially in prime tourist locations.  If you're looking for an investment that offers a positive return or capital gains, consider other options. 

Should I be looking to invest in a new or existing home?

New homes are generally clean, fresh, modern and energy efficient.  Older homes are more established so any building problems are known, and they tend to be in areas with more services and facilities nearby.  There are advantages and disadvantages associated with each choice.   Here are some points to consider:

Buying an old home
  • Older properties are often cheaper than new ones, but this is not always the case.  House prices will largely depend upon the home location and condition.
  • Older homes sometimes have charming period features that modern homes don't have.  These features include higher ceilings, unique architectural features and quality New Zealand native timber floors.
  • Older properties may need upgrading of their heating and cooling systems, electrical wiring, plumbing and roofing.  Sometimes these improvements can lead to good capital gains, so the expenses are offset against resale values.
Building a new house
  • New homes are designed to suit modern lifestyles so will appeal to a wider range of tenants (and some owners).
  • There can be additional tax benefits from purchasing new properties, including the ability to claim depreciation.  Consult a taxation specialist or other financial specialist to discuss your individual situation.

Is it a good idea to buy a property 'Off the Plan'?

Buying a property before it has been built has advantages and disadvantages:

Advantages of buying off the plan
  • In a rising market, real estate purchased off the plan can end up being worth much more than what you paid for it by the time construction is complete and the settlement date has arrived.
  • Where this occurs, investors can realise a substantial capital gain just days after settlement, without having invested much more than an initial deposit.
Disadvantages of buying off the plan
  • As you’re buying something that doesn’t yet exist, you can’t be 100% confident it will end up exactly as you expected it to.
  • If you’ve speculated on a quick profit and the market moves in the wrong direction during the construction period, you could be left struggling to find a buyer.  As a result, you might have to accept a significant loss.
  • Often, architects plans are amended mid-construction due to the inevitable obstacles that arise during the construction period. This could result in the finished property being different to what you signed up for.
  • It’s difficult to gauge from looking at a plan whether the quality of eventual construction will be up to the standard you expect or not.  Some builders provide show homes or show apartments that you can visit before ordering.
  • Delays in construction can upset your financial plans, and may result in money being tied up for much longer than anticipated.   Many builders have insurance to cover this eventuality, but this is not always the case.
  • It isn't common for developers to go bankrupt during apartment or building construction, but it can happen, and is therefore a risk for investors.

Can I rent out my holiday home myself or should I use an agent?

When deciding whether to rent out your holiday home personally, or to entrust it to a real estate agent or property manager, consider the following:
  • What knowledge of the industry and rental market do you possess?
  • How much free time do you have to devote to marketing your property, dealing with renters and handling any unforeseen issues?
  • Do you have the ability to handle maintenance issues personally (or the time and contacts to arrange for tradespeople)?
  • How willing are you to involve yourself in your customers’ rental experience or to deal with possible complaints?
If you decide to manage the letting of the holiday property yourself, there are a number of tasks that you will need to undertake.  These tasks include preparing an inventory and condition report at the beginning and end of each rental period, cleaning the property after it has been vacated, laundering used linen, replacing any broken appliances, and transferring the keys to each new tenant.

Self-managing owners need to be highly organised to handle all of the tasks required.  It also helps to have all advertising and booking mechanisms streamlined.

First National Real Estate property managers can handle all aspects of holiday home property management for you, removing hassle and stress.  Our property management fees are inexpensive, and are normally a tax-deductible expense. Contact our property managers now and let us manage your holiday rental for you.

Will I need commercial property insurance?

It is always wise to take out commercial property insurance. Insurance packages are available that will typically cover:
  • Damage from natural disasters, fire, flooding and accidental damage.
  • Damage from break-ins and vandalism.
  • Loss of rental income (and protection against tenant rent defaults).
Contact your local First National Commercial real estate agent or insurance company for further information about commercial real estate insurance.
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