Question 1

What is the purpose of my investment?

Accepted Answer

Before you can assess which is the best lifestyle investment for you, you need to establish why you are buying the property in the first place. This will give you clarity to your search process but also greatly assist your agent in refining your search and coming back to you with qualified options.

Primarily, what are your key motivations?  If a straight investment then you need to focus on ROI and potential for medium to long term capital gain.

If you are more motivated by visiting and staying in your investment property then you want to find the property that is right for you.

Often it is a combination of lifestyle and investment – so then it is about finding the right balance between the two.

• So you need to ask questions such as:
 • What do we need / want in our property?
 • Do we want a stand alone property or part of a complex?
 • Do we want to manage ourselves or have someone manage on our behalf?
 • How often will we be coming to stay – and how much flexibility do we need?
 • How long do we intend to hold the property?

Question 2

Services and Amenities

Accepted Answer

If you are considering a managed apartment in a major complex, what services are offered by the management company for guests / owners such as concierge service, room service, bar, restaurant, café, breakfast room, meeting room(s)?, business suite, security, pantry stocking, shuttle service, gymnasium, spa pool, sauna, drying room, laundry, rubbish collection, car parking, etc.

While the cost of delivery for services and amenities is typically absorbed by the management company, the service offering, common area infrastructure and calibre of services provided can impact on the level of management fees charged.

However, they also improve the appeal of the complex to prospective guests, increasing overall occupancy, average room rates and as a consequence, the value of your apartment.

Question 3

What am I buying?

Accepted Answer

Make sure you know and understand exactly what you are buying.
Your agent should be able to tell you:

• What is the size of the property – internal / common / balcony?
 • What is the configuration – 1 key / dual key
 • Is there garaging? Can I leave a vehicle onsite while not in residence?
 • Do I get storage?
 • What is the heating system – gas, electric, under floor (if under floor, where?)?
 • Is the furniture package included?
 • Is there anything in the apartment not included (i.e linen)?
 • What is the sky/streaming Package provided?
 • Do I have a DDI phone number and physical address?
 • If I take it out of management do I still have use of services and amenities provided by Management Company – Rubbish Collection, Gymnasium, etc?

Question 4

Revenue and costs

Accepted Answer

If you are buying into a managed apartment complex then it is important to know:

• Is revenue apportioned to each apartment or pooled?
 • Are operating costs apportioned to each apartment or pooled?
 • What are the operating costs/expenses for the apartment?
 • What are the occupancy levels monthly/annually?
 • What are the average rates for the apartment / configurations?
 • Which apartments/configurations in the complex generate the best returns?
 • What are the returns for the Apartment over the past 5 years?
 • Is there a repairs and maintenance sinking fund and if so, what is the current balance for the apartment?
 • What repairs, maintenance and/or upgrades works are scheduled/likely for the next 18-24 months and are the funds currently available or will owners be expected to pay?

Question 5

Buying off the plans

Accepted Answer

Buying “off-plan” means agreeing to purchase a property from a developer either before or during the process of being built.

Benefits include locked-in prices, a deposit on confirmation then balance on settlement (no progress payments), lower loan-to-value (LVR) mortgages (increased lending), and often off-plan prices can be cheaper than prices for existing properties due to economies of scale.

In a rising market off-plan purchases can also result in buyers benefiting from capital gains during the construction process. However, the same can apply if the market turns during the construction process and property values weaken.

Other risks include security of finance as banks wont necessarily hold loan approvals for the period of time required for construction – so buyers need to be aware that finance may become harder to obtain when its time to settle.

Buyers must also be wary of expected completion dates provided by the developer, that these are realistic. These is a risk that if the developer does not complete the project on time that sunset clauses can come into affect which can allow the developer to cancel the agreement.

Be wary of ‘Guaranteed Returns’ as these can set a false expectation and do not last forever.

If the complex has multiple blocks where one may sit in front of another relative to your views, always ask for a schedule documenting relative heights.

Clarify what the floor area quoted encompasses – balconies and outdoor areas are sometimes included. Check surrounding areas for future developments that may affect your purchase. The City Council will provide relevant information.

Ask for information regarding the Developer, Architect, Construction company – their track records and any warranties that may be associated with the building.

Know exactly what you are getting – ensure the developer includes specifications for interior and exterior finishing along with final furniture packages (including wherever possible actual product/brand specifications).

Ask what the body corporate fees will be, who the Body Corporate is going to be and what other buildings they currently manage.

ALWAYS seek legal advice before signing contracts.

ALWAYS deal with a Licensed Real Estate Agent.

Question 6

Finance and Taxation

Accepted Answer

When considering the purchase of any property in New Zealand it is essential that you seek expert advice before entering into an agreement.

At IQ we work with a number of local experts and are happy to make recommendations to you for finance, taxation and legal representation.

Click here (https://iqnz.co.nz/finance-and-taxation/)for some quick advice on the key Finance, Taxation and Legal considerations you need to bear in mind when transacting property in New Zealand, but you will still need to engage the services of independent professionals to guide you through the transaction process.

Question 7

Dollars and Cents

Accepted Answer

It is important that you start your buying journey with a budget in mind.  You also need to establish whether you intend to finance your purchase with some bank lending or if the intention is fund the entire purchase yourself.

If you are borrowing:

• How much debt can you service yourself?
 • What level of return would you expect/require on your investment?
 • How can you gear your investment/borrowing against other income?

You also need to establish what the income and costs are going to be associated with the properties you are considering:

• What is historic income (gross and net)
 • What the fees associated with management?
 • What are the operating costs/utilities/cleaning/etc?
 • What are the Body Corporate Levies?
 • What are the Council Rates?
 • How much is Insurance?
 • What will my GST liability be, based on my estimated use?
 • Are there any other costs I need to be aware of?

What is the net net bottom line, add to that the costs you would otherwise incur if you were paying for your Queenstown accommodation when visiting and that will give you your net “Lifestyle Investment” ROI

Question 8

Testimonials

Accepted Answer

Read TripAdvisor
Ask your agent if there are other owners in the complex you may be able to speak with
Meet the Manager and ask them about their plans for the complex

Question 9

Management Agreements

Accepted Answer

If the property you are considering is currently available for short-term accommodation then chances are it is subject to some form of management agreement.  This could be the owner’s agreement with AirBnB, an agreement with an independent management company, or it could be part of a complex-wide management agreement.

All these agreements are different, have different fee structures, have different levels of performance, manage costs differently and have different terms around termination.

It is vital you know what you are buying into in terms of management as there may be no provision to exit if you are unhappy with the incumbent provider.

As such, you need to ask:

• Who is the management company?
 • Are they a credible operator?
 • Are they independent or part of a chain?
 • Is the property tied into an existing Management Agreement / is there an opportunity to exit / enter the Management Agreement?
 • What is the term of the Management Agreement?
 • What is the Management Fee?
 • What proportion of apartments in the complex are in management and what is the trend in this regard?
 • What services/amenities does the Management Company provide to owners/guests?
 • Is there a manager or staff onsite 24 hours per day?
 • What, if anything, does the Management Company own within the complex?

Ensure you are provided with and thoroughly read a copy of the Management Agreement and that you get professional advice on the agreement from your solicitor.

Question 10

Body Corporate

Accepted Answer

If you are buying into a multi-unit complex of any size then there will automatically become a member of the a body corporate.  The body corporate is made up of all the owners and has a range of responsibilities that you should be aware of as a potential owner.

It is important that you ascertain how well the body corporate has been run in the past, what level of maintenance has been and continues to be undertaken on the property, what are the annual levies, how comprehensive is the insurance policy and how strong is the body corporate’s financial position.

Your agent should be able to provide as part of their disclosure:

• 3 years AGM minutes
 • Long Term Maintenance Plan
 • Annual Budget
 • Annual Levy for the property in question
 • Statement of financial position
 • Insurance currency certificate

Question 11

Overseas Investors

Accepted Answer

The Overseas Investment Act Amendment Bill (2018) Bill restricts certain overseas people from buying residential land in New Zealand (other than New Zealanders, Australians and Singaporeans).

While restrictive, the new legislation is not prohibitive and provides for various pathways and exemptions depending on the nature of the property and  the current status and intentions of the parties concerned and we advise all overseas investors to seek legal advice in the first instance.
As an example:

“…overseas persons can purchase and continue to own any number of units in a 20 unit or more hotel development if the land is categorised as residential or lifestyle, provided they enter into a lease-back arrangement with the hotel’s developer or operator. The overseas owner cannot occupy the unit for more than 30 days in a year and the unit must be used for the general purposes of the hotel.”

Click here f(https://www.linz.govt.nz/guidance/overseas-investment)or further guidance on foreign ownership restrictions.

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