When buying an investment property – you’re generally buying to solve one of two needs – long-term capital growth, or passive income through rental yield.
When you buy for growth, you’re hoping to reap the value of the investment over the long term. You’ll likely have a higher cost to hold, as yields tend to be lower, but you’ll be rewarded with a high return when you sell the property.
Auckland is a good example of an area where you could buy for growth.
When you buy for yield, you tend to be looking to earn a passive income. Here, the rental yield is high relative to the purchase price meaning the property is positively geared either right for the start or will be in a relatively short time frame.
The downside is that these properties experience limited capital growth.
A region like Gisborne is an example of an area where you could buy for yield.
If you are buying one investment property, you’ll want to be clear on which one you’re buying for, but if you’re looking to build out a portfolio, it might be worth having a mix of both to meet both long-term and short-term financial needs.
While property investment may seem simple from the outside, there’s a lot that goes into buying the right property and making sure you can hold it through the fluctuations of a property cycle. In this guide, you’ll find everything that you need to know about what makes property such a powerful investment option, and how to make sure you buy the right investment property to meet your financial goals.
Click here to download the New Zealand Property Investor Handbook by Momentum Realty.