When looking to invest in property, most people look straight to the main centres. This is typically where there is demand, and higher income potential. But of course, this is also where house prices are at the top end of the market, and with LVR rules requiring a 40 per cent deposit for investment, buying a property in the city is basically out of reach for entry level landlords.  

However there are plenty of regional towns around New Zealand which are doing significantly well when it comes to demand for houses to rent. And as long as you thoroughly research all your options, it could provide the perfect opportunity to get on the ‘property investment ladder’.

Study your geography

Firstly, get to know New Zealand well. From top to bottom. East to West. You need to do thorough research to understand which regions have seen population growth for quite a few years, and find out what developments will bring more people to the area in the future.

Look at property trends - both capital growth and value increase - and also whether there are certain times of the year when there is more demand for rentals. Find out what the current rental market looks like, i.e. is there a short supply, and if so, why? Is a short term peak that is likely to resolve itself, or will there be ongoing demand? Investigate vacancy rates too - are they high, and how long to the typically last for. You should be able to get this kind of information from local property management companies.

It is critical to clearly interpret all the information available about a regional town or city, in order to narrow down your options when it comes to choosing an investment property to buy.

Know your rental yield from your capital gains

There is plenty of jargon to learn when it comes to buying a rental investment and two of the main ones are rental yield and capital gains. Rental yield is a measure of how much cash an income generating asset produces each year as a percentage of that asset’s value and for real estate it is the rental income as a percentage of the property’s value. There are also two types of yield - gross and net - and here is a helpful guide explaining the difference between them both, as well as how to calculate them.

And here’s a quick tip - head to the QV website to get median rental yield information for different regions in New Zealand.

But there is also another option and that is buying for capital gains. This means looking at suburbs that are going to show strong growth over a number of years. Typically, you'll buy around the current median price (hopefully), and sell down the track when the median price has increased. The result? The higher the increase, the better your profits. This means you usually have to wait to realise the success of your investment.

Holiday rental or long term lease?

Depending on where you look in New Zealand, some locations have significant opportunities for providing short term accommodation to holidaymakers and tourists.

This could prove beneficial if you do your due diligence on the appropriate marketplace. Just be aware of the different requirements when it comes to short term renting for guests, and long term lease for tenants. There will quite separate rules around insurance, legal conditions, and the work that will need to be considered for either option (for example - short and long term maintenance, cleaning, providing all the essentials for tourist accommodation).  

Read more: Short term stay or long term lease? Which is best for your property investment

Know what people are looking for

Once you get an understanding of where to buy a property, make sure you know the kind of rental that people want to live in. If it is predominantly a family location, then a large home with ample storage and multiple bathrooms is going to be in demand more-so than a small house suited to a retiree couple. Do they want gardens, or a low maintenance property? Is it important to be close to local amenities, or travel routes?

Take your time finding out all the different lifestyle aspects that relate to the current residents of the location.

Consider using a local property manager

If you are going to be buying an investment property away from where you currently live, it is advisable to use a local property manager to take care of your rental. They can liaise directly with the tenant, do regular inspections, and organise any repairs or maintenance with local tradespeople. These are all aspects that are very difficult to manage from a distance.

Read more: What can a good property manager do for you and your investment?

Got your rental property but worried about letting it to the wrong people? Check out our guide on how to avoid risky tenants.