At the minute, the property purchasing landscape is a little all over the show. People are wondering should they buy now or wait? Until we find out where NZ is going with the lockdown and the plan coming out of it, it is difficult to predict. However, there is a saying I love which is – “time in the market is more important than timing the market” – or another one – “the best time to buy property is when you can afford it”.
My inkling is usually that owning the right property is the best thing to do in a generally stable market like Wellington. If you are looking at purchasing as a “do-up and flick”, sudden changes like the one we have just experienced could hurt your immediate return a little more than holding long term. A number of conversations I have had with those active in the real estate market at the moment have been centered around buying “sight unseen” due to the restrictions around viewing/appointments.
I thought it could be a prudent time to talk about my experience purchasing sight unseen. I own a property in another city hundreds of kilometers away that I not only didn’t view before purchasing, but I still have never seen. It treats me well and I have no regrets with my decision. Would I do it again? I would much rather set foot in the property, it makes a whole lot of sense, but if the right opportunity arises then yes.
I bought the property in question before the Coronavirus hit meaning the likes of a building inspector, rental manager could all have access, thus it was a much more manageable situation. As of writing this blog, access is currently not able to be granted to properties in New Zealand with the lockdown.
Following, I will outline some of my main considerations and some of the research completed before I bought. Remember, I had the ability to physically perform due diligence which is a luxury we don’t have right at this second. All the views are my own and I would always advise seeking your own trusted advice.
SOME OF THE MORE BASIC CONSIDERATIONS
Location
Don’t say it Kahn – don’t say it Kahn – location, location, location. There you go, it has been said, the three words real estate agents love to spout. There are two facets to this. The town/city itself and the location/suburb within the city. If you are going to invest in a city you want to make sure that it is economically robust and shows good potential for future growth.
But once the main location has been decided it is imperative the right suburb or street is chosen. We all know how quick areas can change from ‘good’ to ‘bad’. Almost street by street in some locations. Unless you have lived there or have undertaken a lot of research this can be tough to pick. Don’t think that you have to buy in the “go-to” suburb. There are often better deals and good future capital gain to be had in suburbs that haven’t quite risen to the lofty heights some have.
Topography
If I didn’t feel confident or comfortable about the way the property sat on the land this would be a deal-breaker from the get-go. Very different story if I could see the property in person. But mother nature is a tough one to fix and not someone I want to go into battle with voluntarily. The property sat on a flat section which was ideal for the fact that I wasn’t going to be able to view. I undertook research into the designation of land it was sitting on also.
Construction
The property purchased was a solid 1950’s weatherboard home sitting on concrete piles and configured over one level. For me, that was a comfortable start. Personally, I was happy with a verbal building from a good practicing builder, but some may like a more extensive written for peace of mind. Always take advice from your solicitor on this.
Rental market and rental return
This was something I actually got a little caught out on. I was acclimated to the rental market in Wellington and quickly found the demand wasn’t as strong with the new investment. It took a few weeks to find an ideal tenant meaning a little funding of the mortgage without any rent coming in. Not the end of the world as we know it but something that needs consideration, especially if you are looking to invest in towns largely driven by single industries as many tourist towns could be finding out right now.
In regard to the rental return. This has to be a number you are personally comfortable with. Some want a certain return and others are comfortable compromising return for benefits like location, ease of maintenance and future sale potential.
SOME OF THE TOOLS/PERSONNEL I USED TO ASSIST IN RESEARCH
Find an agent you trust familiar with the area
An experienced agent can be invaluable. They have immediate access to data you may not and more importantly, many years at the coal face which allows them to be aware of nuances pertaining to areas that you may not consider. If you build a relationship with a knowledgeable, friendly and helpful agent they will no doubt happily provide advice on any home. I talked to a recommendation of a friend who gave me some great local knowledge.
Council LIM report
A LIM, for want of a better term, is a history of the home. They are generally circa sixty plus pages long and contain a plethora of information including:
- Topographical information (any known history of erosion, subsidence, slippage etc)
- Heritage designations
- Resource consents
- Building permits and consents as well as if there is a certificate of acceptance issued for the property
- Wind and corrosion zones
- Any weathertightness issues attributed
- Drainage
- Flooding zones
- Water services
- Hazardous substances
- Encroachment licenses
In this case the owner had a LIM available which made the process more streamlined. It takes up to 10 working days (in Wellington) for this report to be prepared.
Building inspection
I again spoke to a good friend who lived in the city. I was referred to a builder who could go through and give feedback in the form of a verbal report. This satisfied me personally. You may like to engage someone who will give you a full written report which would include photos. This wouldn’t be a bad idea if you haven’t seen the home. If a building inspection was provided it would have been very helpful. I may have still had someone through for a verbal report regardless. As mentioned always seek your own advice on this.
Solicitor
Obviously a solicitor is a given, you will need one. Look for someone who does a lot of conveyancing. I chose to work with someone that I had used for multiple property transactions in the past and often call to ask questions in my day to day job. He is Wellington based so didn’t live in the city I was purchasing the property in. If I didn’t trust his advice so much I would have looked for someone local to the property I was purchasing.
Google earth, google maps and google search
Street view is a great way to obtain some perspective on the area. I spent some time traversing up and down the street and surrounds getting a grasp for the type of construction in the neighbourhood, access to the property from the road and a general feel overall.
Google the suburb and street of interest also. It is amazing what presents itself during a search, good and bad. You may find a new supermarket is going to be built in a certain location. Clues like new supermarkets going up are excellent keys to future growth projections in an area. I spent hours doing this type of research and it solidified not only areas I didn’t want to purchase but also areas I did want to purchase.
Trademe insights/Oneroof.co.nz/homes.co.nz/qv.co.nz
These four websites provide some very relevant information. Most people use them to gauge price as they all give an estimate. If you are an absolute newbie to the area I guess it is a start but definitely take this estimate with a grain of salt. When appraising a home, I refrain from looking at these sites as I have historically often found them to be too far off market value. I see more value from some of the other info they give. This includes but is not limited to:
- Floor and land area estimates
- Past sale prices
- Schools in vicinity
- Calculation of commute times
- Market insights
- Recently sold properties in vicinity
- Agents active in the area (could help tracking down a local expert)
- Year built
- Type of construction
REINZ statistics website
Most won’t have access to this as you need to be an REINZ member. But I spend hours creating graphs and looking at stats for different towns/cities in New Zealand. Through doing this, an excellent feel for trends in different areas during different markets is obtained. Knowledge is key and although, as mentioned, I believe time in the market is better than timing the market it also doesn’t hurt to have a grasp on what areas may push forward next. If anyone would like information on their area or an area they are interested in feel free to contact me.
Property smarts
Again, most will not have immediate access to a site like this. I use it in the course of real estate to put together appraisals, see what has been selling in the vicinity of a certain property and generally get a feel for the immediate area. If you would ever like to take a deeper dive into any property you are looking at feel free to contact me.
Rental manager
I shopped around for a good rental manager. I connected with one who gave me 40 minutes on the phone and a lot of good advice. That was good enough for me. He was happy to visit the home for me and give me his take on what should be expected from a rental point of view. This included how much should be asked for rent and what would need to be done going forward to stay in line with new regulations coming into force.
Market rent section of tenancy.govt.nz
tenancy.govt.nz/rent-bond-and-bills/market-rent
This site is great. The data is supplied monthly and contains bond information from the last six months so is up to date. I often use this website to gauge the rent levels for the different sized properties in areas of interest.
What I wish I had access to upfront (apart from the aforementioned builders report)
Virtual open home and 2D floor plans
In this environment a 3D virtual open home and 2D floor plan should be a standard. This wasn’t available on this property but if it was the whole process would have been a lot more straightforward. A 3D virtual tour allows someone to take a tour of your home at their own pace. I would argue the closest thing to an open home we have without actually being there.
2D floor plans speak for themselves. They often have measurements included.
Rental appraisal
Although I found and employed a rental manager it would have been super helpful if I had been given a rental appraisal off the bat. It would have removed a barrier. I find when selling properties, having these reports (LIM, builder, rental appraisal etc) available removes barriers and makes the whole process more streamlined.
There were other tools used and a little more research done but for the sake of a little brevity in this blog I will stop there. Feel free to contact me if you have any questions and I am happy to answer them.
By the time my research was completed I was feeling fairly confident to press the go button. Nothing is without risk. A couple of months ago if you would have told me that we would all be locked up in our homes only allowed to go out for essentials I would have asked you how many drinks you had consumed. But here we are, doing just that, so you just can’t anticipate what is around the corner. But, I feel you can either suffer the pain of inaction or the pain of regret and I know which one I would rather.
