Plan for next move | Auckland Lifestyle News | Health, Fashion, Food and Wine in Auckland

From a lender's perspective, someone wanting to buy a second home is no different to their buying a first house, says Alex Tulloch of the Wairarapa Building Society (WBS).

"We look at the same fundamental criteria."

The lender will require a deposit, and evidence of income.

In the case of a second house, the deposit can be the equity in the first home - its market value minus the outstanding mortgage.

Conventional wisdom once held that a 20 per cent deposit was necessary, a condition to which many lenders are returning.

For WBS, the deposit requirement for a first or a second house is still 20 per cent - whether cash or equity.

Although the deposit offers some security to the lender, the buyer's income is the all-important factor. "Otherwise the only way we're going to get paid back is to sell the house.

"Most fundamental is the ability to service the loan."

As in the case of a first home, a lender will look at the whole financial picture.

"You can get someone who comes along and it's, 'Okay, you've got a house but you've also got $100,000 debts in car, hire purchase and credit cards'."

In considering a rental, income will include the rent, and Tulloch likes to assume that only 80 per cent of the rent will actually be collected.

This is to factor in time between tenants as well as allowing for a potential worldwide financial downturn.

The building society, Tulloch says, "never had all the bad loans" experienced by some members, including major banks.

Investing in property is no longer about buying at a low price and selling at a high one, says Tulloch, who advocates putting the income from a rental into paying off its mortgage rather than treating it as cashflow.

"The best investment you can make is to pay off debt.

"The purpose of it is to pay off the mortgage so you end up with a freehold asset."

Since the global financial crisis, speculative buying has been on the wane.

In former days, investors "leveraged as much as they could and bought as much as they could, all because they thought houses would triple in price".

For a few people that happened, but others were burned and their properties went to mortgagee sales. "That doesn't really exist, now."

Practical matters of renting a house - including obligations of landlords and tenants - are covered in detail on the Department of Building and Housing website dbh.govt.nz

Some people manage their rental property themselves; others prefer the distance and security of having a property manager.

Some use property managers to find a tenant and then take it from there themselves.

Property manager Chrissy Osborne says maintaining a rental property comes down to common sense, providing a home that is "clean and tidy and in a liveable state".

"Warmth is a big thing," Osborne says, with forms of heating and insulation being part of that picture.

Small things like "all the elements on the stove" must be checked, and so must big things like the hot-water cylinder.

A few landlords have unrealistic expectations of their tenants.

There have been cases where a landlord will buy a "brand-new carpet and rent it [the house] out to mum, dad and the three kids", Osborne says.

"They're never going to have it back in the same condition, and courts will rule it's reasonable wear and tear."

Osborne says many people start off managing a property themselves and then turn to people such as her when things go wrong.

Many people do not like dealing with the court (Tenancy Tribunal) side of things, Osborne says.

Unpaid rent is the most frequent cause of problems and, as a property manager, Osborne likes to deal with tenants in person first, before starting a mail trail. "The personal approach is always the best approach," Osborne says.

"They always promise the Earth and after that, if nothing happens, I diary it and go through the letter process.

After 21 days of unpaid rent, a landlord can start proceedings through the Tenancy Tribunal, which may order an eviction and the former tenants then become debtors, still owing the unpaid rent. However, these problems are the exception rather than the rule, and Osborne has come to believe that "95 per cent of tenants are good tenants".