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In the current New Zealand property market, investing can bear considerable financial fruit. However, it's essential that you're completely aware of all the costs and logistics involved before doing so. All investors will expect to pay their deposit, interest on a mortgage and even foot the bill for maintenance of the property. But fledgling investors could be surprised by other, less obvious costs.
What might these be? We've looked closer at the entire process of property investment to bring to you four of the most commonly unexpected expenses. Because we want you to profit from your property, not be caught off guard by the costs involved!
Body corporate fees
A body corporate is an organisation formed by the combined owners of strata property, who organise and fund all improvements and maintenance of common property.
This group might charge you fees for everyday costs such as maintenance, insurance premiums, administration. These could also include utility charges for common services such as lighting, according to the Citizens Advice Bureau.
There also may be one-off charges throughout the year for extra maintenance or replacements in common areas. Generally as the apartment's owner, you will pay these fees - which could number in the thousands.
Insulation
The Residential Tenancies Act requires that all landlords meet new standards for insulation by 1 July 2019. As of July 2016 landlords also must supply information on the type, extent and condition of insulation as part of the tenancy agreement. Owners of older homes should pay close attention to these requirements as it's likely that they will be affected.
Failure to comply with these new laws could incur a fine of up to $4,000 so it's recommended that landlords prioritise upgrading insulation. This could be a costly renovation, so it's essential that you check if your property requires work and include the cost in your budget if it does.
Disputes
The cost of actually lodging a dispute with the tenancy tribunal is negligible at just over $20. However, the costs of a dispute ending in your tenant's favour could be far larger, not to mention the time spent resolving it.
The best way to avoid any problems with your tenants is to be fully aware of your responsibilities as a landlord. If you're a beginner investor or don't have the time to ensure that your property is up to scratch, hiring a property manager will make this easier.
They can manage the tenants from start to finish, and make sure that you're meeting all legal requirements as a landlord.
Contamination
A recent ANZ survey found that 38 per cent of New Zealand property investors cite methamphetamine contamination as their biggest concern. This refers to the effects that the use or cooking of methamphetamine can have on your property. Contamination can have serious health implications for your tenants and prove costly to fix.
Your best protection against dealing with a contaminated property is to get it tested before you purchase and decide to buy or avoid based on those results. This is a relatively small cost that could save you thousands in the long run. In Auckland, this should cost you in the neighbourhood of $200-$400 for a baseline test (a fraction of the cost of fixing a contaminated home)
The main takeaway here should be that being informed is key when purchasing an investment property, no matter the state of the market.
Drawing on the vast experience of a real estate agent or property manager when buying and managing property in New Zealand will ensure that you know exactly what to expect. That way you can focus on making your property work for you to ensure a brighter and more secure financial future.
