Property investment NZ: Everything you need to know (2024)

First of all, it’s helpful to know why property can be such a powerful way to build wealth – there’s a good reason 130,000 Kiwis own property investments, after all. 

Leverage

When buying a property investment you’ll generally contribute a 20-35% deposit, but you’ll receive returns on the entire value of the house. In other words, you’re making a return on the bank's money. 

For example, let’s say you bought an investment property worth $500,000 with a $100,000 deposit. If the property were to increase in value by 10% you’d pocket that entire $50,000 gain. That’s a 50% increase on your original investment of $100,000. 

Bricks and mortar

It’s always a good idea to invest in what you understand, and the fact is, property is easy to understand for most Kiwis. We all live in a house and it feels good to invest in something physical that you can touch and see. 

Demand

Everybody needs a roof over their head and the number of renters in NZ is increasing so there’s always going to be demand for property in New Zealand. The trick is buying the right property in the right place. 

As soon as you’re sure you want to buy a property investment, it’s a good idea to speak to a lender right away. Here are your options:

Bank

You may already have a relationship with a bank and they might have all your information, which could make the application process easier. However, they can only provide advice on their products and services. 

If you decide to go with a bank, don’t choose your bank by default. Shop around to find the bank with the best rates and cashback deals. 

Non bank lender

If the bank says no, non bank lenders are your next option. These institutions don’t offer bank services like transaction accounts or credit cards, but they do offer investment property home loans. They are subject to less onerous requirements, meaning that they may have less stringent lending criteria (and be more likely to approve your application). 

Keep in mind that going with a non bank lender usually means higher interest rates. 

Mortgage broker

Mortgage brokers are intermediaries between you and other lenders. They’ll work to understand your needs and financial circumstances, provide advice, then help you prepare applications to several banks or non bank lenders. 

Keep in mind most mortgage brokers only work with a select group of lenders, and some lenders won’t work with brokers at all. That means your selection may be limited. It’s also worth remembering that brokers are paid via commission by the lender – meaning the service is free for you. 

Read more about banks VS mortgage brokers.

To buy an investment property In New Zealand you’ll usually need a minimum deposit of:

• 35% for an existing home. 

• 20% for a new build.

If you were to buy a property at the average Trade Me asking price in May 2024, you’d need just over $300,000 for a 35% deposit and $171,560 for a 20% deposit. 

Ways to get your deposit together

Generally there are two ways of getting a deposit together to buy an investment property:

1. Cash in the bank. 

2. Equity in a property you already own (equity = property value - home loan amount). 

Now most Kiwis don’t have $300,000 lying around, but many who own property have equity. You can generally borrow up to 80% of the value of your home, and use that borrowing as a deposit to buy an investment property. 

For example: let’s say you bought a property five years ago with a 20% deposit for $1 million. If it increased in value by just 3% every year you’d have almost $160,000 additional usable equity that could make up a deposit for an investment – plus whatever equity you’d gained by making home loan repayments. 

Read more about investment property home loans here. 

What if you can’t get a 20-35% deposit together?

If you don’t have the necessary cash or equity to make up a 20-35% deposit for an investment property, you may still be able to buy one. 

• One option is to speak to a mortgage broker about getting a bank to approve a high LVR loan – banks are able to make 5% of their lending to high LVR investors (investors who don’t have a full deposit). These loans are rare, but if your mortgage broker is well connected with your lender, and your application looks good you may be in luck. 

• Your other option is to go with a non-bank lender. They may lend to high LVR borrowers, but they will most likely charge you extra fees and a higher interest rate. 

Keep in mind that borrowing money against your home will cost you, so it’s important that you make sure you can afford the repayments. A low LVR loan will also cost more than a regular loan so you need to do your sums before committing to anything. 

Read more about investment property deposits. 

Buying and managing a property investment is hard work. You’ll need to put together a team of professionals to help you before you start property hunting:

Property lawyer

A good property lawyer will help you avoid lemons by finding out as much as they can about a property before you buy it. You’ll also need a lawyer to check your sale and purchase agreement, provide advice on adding conditions to your offer, and to help complete settlement. 

Read more about what property lawyers do.

Building inspector

A building inspector will check the property for issues, defects or required maintenance before you purchase it. This can help you either avoid a property with expensive problems, or negotiate the price down to account for issues the inspector finds. Getting a building inspection is particularly important if you’re buying an older property or one you suspect may be a leaky building. 

Read more about choosing a good building inspector. 

Real estate agents

The best way to make money as a property investor is to have access to property and information that others don’t. That’s why it’s a great idea to have relationships with a wide group of real estate agents and let them know you’re searching for an investment property. 

These connections may mean that you’re first to view and make an offer on a property fresh to the market, or that you get access to off market properties that others may not. 

Hot tip: if you’re buying property from out of town or you don’t have time to properly search, it could be a good idea to hire a buyer’s agent. They’ll perform the property search on your behalf and provide local knowledge that may be invaluable. 

Accountant

Make sure that you’re claiming all deductions available to you and paying the exact right amount of tax by hiring a good property accountant. 

Property manager

More and more landlords are choosing to use a property manager to look after their investment property. They’ll handle almost everything, from finding new tenants, to collecting rent, inspecting the property and arranging maintenance and repairs – but they’ll take a fee of up to 12% of rent. 

Read more about property manager fees

Insurance advisor

You’ll need to secure insurance before you settle on your property. If you’re not sure what insurance you need or how much, it’s a good idea to talk to an advisor to make sure you get it right. 

Once you’ve figured out a strategy and sorted your finances it’s time to start your property hunt. Here’s what you’ll need to look for:

Location

Location is the most important factor to consider when searching for a property investment. Generally it’s best to invest in areas that have the following:

High population growth

High population growth ensures that demand for property and rentals will increase. This means there’s a good chance that the value and rent of your property will also increase, as demand outweighs supply over time. 

A large enough population to ensure strong demand from good tenants

As well as high population growth, it’s a good idea to look for an investment in areas that have a large population. There’s no set minimum, but some investors advise avoiding towns with populations of less than 100,0000. This will ensure that at any given time there are enough tenants looking for a property to minimise vacancies. 

A growing and diverse economy

Investing in a town that’s heavily reliant on one industry can be bad news. Let’s say laws change and all of a sudden that industry isn’t so attractive any more - how would that affect your property value? Instead it's best to invest in areas with diverse, strong economies with lots of thriving industries like Auckland, Christchurch, Hamilton and Dunedin. 

High likelihood of future growth and improvement

When you buy a property investment in a certain location, what you’re actually investing in is the future of that area. So do your research and use your intuition to figure out which areas are most likely to improve the most in the future. Are there infrastructure projects planned nearby? Cafes starting to pop up on the main street? Is a planned transport link going to make the area easier to access?

Standalone homes - great for capital growth

Standalone houses can be great investments but they tend to be more expensive than apartments and townhouses. They have a high potential for capital gains and if you want to add value or renovate, there are usually lots of ways to do so with a standalone home. On the flipside, they may also have a low rental yield and high maintenance costs, making them more difficult to hold long term. 

• High potential for capital gains. 

• High potential to add value. 

• Easier to sell. 

• More expensive, with higher maintenance costs. 

• Lower rental yield makes them harder to own long term. 

Apartment - an affordable entry point to investing

Apartments are a more affordable way to start investing. They tend to be cheaper to buy and have high rental yields, which also makes them cheap to own. They may, however, have lower potential for capital gains and usually limited opportunity to add value beyond cosmetic renovations. Body corporate might also add extra costs and complexity. 

• Cheaper to buy so you may be able to afford a better location. 

• Higher rental yield than standalone houses. 

• Low maintenance. 

• Less opportunity to add value. 

• May be harder to sell

• Lower potential for capital gains. 

• Body corporate fees. 

Check out our NZ apartment buying guide. 

Townhouse - middle ground between apartments and stand alone

Townhouses are a bit of a happy medium between standalone houses and apartments. They are lower maintenance than standalone homes and cheaper to buy, but they still have high potential for capital growth if you buy well. They may also have a higher rental yield and be l;ocated close to city centres. With that said, there are body corporate fees to worry about and limited chances to add value or change the property’s exterior. 

• Cheaper to buy so you may be able to afford a better location. 

• Higher rental yield than standalone houses. 

• Potential for capital gains. 

• Less opportunity to add value. 

• Body corporate fees. 

• May be harder to sell. 

Read more about body corporates here. 

New builds VS existing homes

As well as the type of home, you’ll have to think about whether a new build or existing property is right for you. There are a few benefits and drawbacks of each that should help you make your decision.

New builds - Low maintenance, long term 

New builds are easier to purchase and they usually feature asking prices. They’re also extremely low maintenance and low hassle as investments, and tend to attract great tenants. However, if you’re looking to add value to your investment it’s often difficult or impossible to do as the developer would have already maximised the site’s value. A new build may also be harder to sell, especially if it's a part of a large complex of identical or similar properties. 

Read about what you need to know when buying a new build off the plan. 

Existing properties - More potential to add value

Existing homes can be a bit more difficult to buy and they’re often sold by auction. They may be higher maintenance and require more of your time as a landlord. With that said, they often have great potential to add value by building an extra room, painting or renovating a kitchen, for example. They also may be easier to sell when the time comes, as people tend to prefer standalone existing properties over new townhouses or apartments. 

Tip for experts – Buy below market

The quickest, best way to make money off property is to buy below market value. If you do this you’ll instantly create equity in your investment, improve your rental yield and increase the chances of selling for a capital gain in future. 

To buy below market price look out for poorly marketed properties and properties sold privately by their owners. Keep an eye for properties in good locations that can be easily improved with cosmetic renovations. And if you get a chance to buy a property off-market, seriously consider it – you’re far more likely to buy property for a good price if you’re not competing with other buyers. 

When you’re ready to start searching for an investment property the best place to look is Trademe Property. Here are a few tips to make your search easier:

• You can filter location right down to the suburb. 

• Set a maximum price limit to avoid wasting time on properties you can’t afford. 

• Filter by bedrooms, bathrooms and property type to find a place that ticks your boxes. 

• Tick new homes only if you’re only searching for new builds. 

• Use keywords to narrow down your search. For example, if you’re looking for a dual key apartment. 

• Jump into the map view to get an idea of exactly where the property is located before going out to inspect. 

When you find a property you’re interested in, scroll down to past sales and timeline. You’ll see the property’s capital value and the amount it’s been sold for in the past. Keep scrolling and you’ll also see nearby schools, and a handy tool to help you quickly work out what your mortgage repayments may be. 

Remember, buying an investment property should be a calculated, careful decision – not an emotional one. So when you find the right property, don’t get carried away. Do your sums before you make an offer to make sure that you can hold the property, and that it’ll be a good investment. Your mortgage broker should be able to help you with this.

Doing your sums

• Get a rental appraisal from a local real estate agent.

• Estimate all expenses including mortgage repayments, repairs and maintenance, insurance, property management fees and rates. 

• Minus expenses from your rental income to calculate your rental return. 

Once you’ve run the numbers, ask yourself – will you be able to hold the property? Will you need to top it off with your own money?