Property ladder: Choose tenants carefully

Last updated 05:00 28/05/2013
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Fairfax NZ

CAREFUL RENT: Choosing your tenants carefully can have a big impact on your property investment.

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Our readers share their experiences in New Zealand's property market.

I started investing in property in Wellington more than 10 years ago. At the time I was working in IT in London and wanted to secure my financial future by investing in a medium I actually understood. I've never been a big fan of shares and having lived through the crash of 1987 I always saw property as a much safer option than the stock market.

I read as many books on property as I could and then ventured out to purchase my first property. Now many investors and "educators" often suggest a certain yield your investment property should achieve or a certain cash flow the property should generate. Although these are important factors to consider when purchasing, you also need to define your buying criteria and for me, one of the biggest factors was defining the type of tenant I wanted to rent my property to. For me, this was professional couples, or someone in a similar position to me (as I was still renting myself overseas).

The reason for targeting this type of tenant is that they have probably finished their partying days of university or first job (and we have all been there), have nice furniture they want to look after, prefer dinner parties to house parties, and basically will look after the place like it was their own. So the wear and tear on your property is less and also tenant turnover is lower as they tend to be less transient than others. They also have the financial means to pay their rent and this keeps your bank manager happy.

The tenant demographic, in turn, will define the type of property they want to live in and therefore the type of property you should look to invest. For instance, typically professional tenants prefer new or near new properties with modern conveniences, living in an inner city suburb so they are not too far away from the nice cafes and bars and with a garage so they can park their new or near-new car in. They also want a low maintenance backyard or outdoor living space so they don't have to spend time in the weekend maintaining it.

For me, this equated to inner city townhouses and this is what I have focused on for my property investments.

In summary, it's worthwhile reviewing the type of tenant you would like to have before kicking off your investment property journey.

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