Is Buying a Tenanted Investment Property a Good Idea?

Is it a good idea to purchase a tenanted property? Does it create more or less stress for the investor? Here’s our advice on whether tenanted properties are a good investment in Wellington.

The Benefits


Instant Cash Flow

It’s a good at the bank when your investment already has an income.

Continuing the current tenancy shows you have instant means to begin paying off the mortgage, and have zero risk of losing weeks in rent while you advertise the property. Success from the get go is what the bank likes to see.



The Risks


Inheriting Bad Tenants

In our experience most tenants are considerate, reliable, and look after the property well. But because you haven’t reference checked and chosen the tenants yourself you do risk inheriting bad tenants from the previous landlord, which is something to keep in mind before purchasing the property.


Relevant Laws to Consider


When Informing the Tenant

Once you’ve taken possession of the property, you need to tell the tenant the name of the landlord (either yourself or your chosen Property Manager), plus contact details, and how the tenant will pay rent from now on.


In Regards to Bond

When the property is sold, the original landlord’s interest in the bond will pass to the new landlord. The original landlord can’t claim any bond after the settlement date. If the bond is held by the Ministry of Business, Innovation & Employment, both the original and new landlord must fill in a change of landlord/agent form.


When Ending the Lease After Purchasing the Property

If you’ve agreed to purchase a tenanted property and the current tenant is under a fixed term lease, the lease must continue until the end-date stated in the tenancy. You can’t give notice to end the fixed term tenancy early.


However if the tenancy is under a periodic agreement, then you can provide at least 90 days’ written notice to end the tenancy.


When Changing Property Managers

New owners have the right to change Property Managers if they wish, but the tenant must be informed and lease update with these details.


When Increasing Rent

As the new owner, you are entitled to raise the rent, provided the increase is not within 180 days of the last increase, and you give the tenant 60 days written notice.


When Increasing Bond

When increasing the rent, the landlord may ask the tenant to pay extra bond money if rent has increased since the tenancy was signed.

For example, if the rent goes up by $10 per week, and the tenant paid 3 weeks’ rent as bond money, the landlord can ask for an extra $30 to be added to the bond. Extra bond money needs to be lodged with the rest of the bond by completing a bond lodgement form.


Final Thoughts


Tenanted properties can be a great investment, especially if you’re just starting out in property investing and don’t want to be overwhelmed with tenant applications and selection.


Getting an instant income and guaranteed rent until the end of the fixed term tenancy gets the investment off to a good start, and helps it on its way to becoming a successful investment property. Knowing you have a good Wellington Property Manager will help make the process smoother for yourself and your tenants. Read on to Find out why Investors are increasingly using Property Management in Wellington.

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Quinovic Kent Terrace Wellington

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