Low fixed-term deposit returns from banks and falling house prices might drive investors to consider becoming landlords.
Andrew King of the Auckland Property Investors Association said rental property was a realistic alternative to fixed-term deposits and other forms of investment but only if people were not looking for immediate capital gains.
Don't seek that for at least three years, he advises.
Investors appear to have more appetite for buying property now that property prices and mortgage interest rates are sliding, he said, and a number of landlords told him around Christmas that it was a good time to buy.
"Landlords are concerned about cash flow and with interest rates down, cash flow is much improved. Many of our members were cash-flow neutral but with falling interest rates, they will start to make money so potentially more people will buy," King said.
Buying wisely and setting an interest rate around an attractive 5.6 per cent is one thing, but finding the tenants to fill places is quite another.
King tracks websites like Trade Me to gauge the number of properties on the market and has found a plentiful rental supply in most areas for many months, particularly after vendors withdrew when they tasted unpalatable offers and rented their places instead of selling.
People thinking of buying a nice little renter should consider many factors, he said, probably the most crucial being choice of location.
"Buy in reasonably good areas, not really good areas which are expensive," King advises, citing three of Auckland's best rental investment suburbs as Avondale and Mt Roskill where median house sales prices are $411,000 and Waterview at $540,000.
These prices are for all types from flats to mansions so investors can expect to pay under those medians for a renter.
"These three areas of Auckland offer rental investment properties which are not too expensive, not too far from Auckland's central business district, in good areas in terms of socio-economic factors and with good facilities like shops, schools, proximity to motorways, doctors and community services. Plus Waterview and Mt Albert have Unitec so you've got a student population there too," he said.
Aim to buy the rental property 10 per cent beneath true market value to cover potential losses, King says.
Apartment hunters should join the Auckland Property Investors Association sub-group and get alongside seasoned investors because this sector of the rental market had many hooks and traps, King said.
The association has a group of young investors, many with dual roles of landlords and tenants. They prefer to live in fashionable but expensive areas like Ponsonby/Herne Bay but own rental properties in areas with solid return and good demand like Glenfield or Massey, King said.
This puts them on both sides of the fence. The rising number of these 20 to 30-something tenant/landlords was so steep that special groups had formed in Auckland, Wellington and Canterbury, King said.
Joining the association's 4000-plus members would provide assistance to help the new landlord avoid a Tenancy Tribunal hearing and help them become informed about the Residential Tenancy Act, King said.
The Department of Building and Housing is running free new landlord seminars nationally. More info is at www.dbh.govt.nz but the seminars in Auckland are on March 24 at 7pm at 40 Vermont St in Ponsonby and 7pm on April 29 at Manukau Institute of Technology. To book, email: email@example.com or call 0800-836262