Investment/rental property
Investing in rental property can be a good way to generate passive income and build wealth over time. However, it is important to carefully consider the risks that might be involved in being a landlord and seek professional advice from a financial adviser.
Here are some benefits and risks of investing in rental property:
Benefits
Passive income
Rental properties generate regular rental income, providing a source of passive income for the owner.
Capital growth
Property values in New Zealand have historically increased over time, providing potential capital growth for the owner.
Diversification
Owning a rental property provides diversification for an investment portfolio, reducing risk by spreading investments across different asset classes.
Tangible asset
Unlike shares or bonds, rental property is a tangible asset that the owner can physically see and touch.
Long-term investment
Owning a rental property can provide a long-term investment that can provide financial security in retirement.
Risks
Vacancy
The risk of the property being vacant and not generating rental income. This can occur if the property is not in a desirable location or if the rent is too high compared to other properties in the area.
Tenant issues
Dealing with unreliable or problematic tenants can be time-consuming and costly, and can include damage to the property, non-payment of rent or legal disputes.
Maintenance and repair costs
Regular repairs and maintenance are necessary to keep the property in good condition, and unexpected repairs or maintenance can be expensive and add to the cost of owning a rental property.
Market fluctuations
Changes in the real estate market, such as changes in interest rates or changes in demand for rental properties, can affect the value of the property and the rental income it generates.
Regulatory compliance
Owners of rental properties in New Zealand must comply with a range of regulations, such as health and safety regulations and tenancy laws. Failing to comply with these regulations can result in fines or legal disputes.
Financial burden
Owning a rental property can be a significant financial burden, especially if the property is not generating enough rental income to cover its expenses.
Depreciation and wear and tear
Over time, the value of a rental property may depreciate, and wear and tear on the property can reduce its value.
Important information and disclaimer
- Any advice on this publication is of a general nature only and has not been tailored to your specific circumstances. Before taking action on this information, please seek your personal advice. Past performance is not a reliable guide for future returns. The information on this page reflects our understanding of the existing legislation, standards, etc.
In some cases, the information has been provided to us by third parties. While the information is believed to be accurate and reliable, but this is not guaranteed in any way. - Neither AIFP nor its responsible persons or employees give any warranty of accuracy, nor accept any responsibility for errors or omissions in the information provided on this page.