Don't Buy It Just Because It's a Cheap Property
- Ryan Smith
- Aug 22, 2022
- 4 min read
Updated: Aug 5
Buying a cheap property might seem like a good idea on paper, but there is more to it than meets the eye when it comes to sound investment decision-making.
"You get what you pay for."
It’s an old saying, but it rings true, especially in the property game. While it's often used to warn against low-quality budget buys, it applies just as much to property investment.
When it comes to real estate, cheap doesn’t always mean good. In fact, if a deal seems too good to be true… it probably is.
Yes, there are properties listed at bargain prices across the country. But before you start celebrating your “cheap buy,” remember: a low price tag doesn’t equal a good investment.
Cheap Isn’t Always Cheerful: What Makes a “Good” Property Investment?
The definition of a “good investment” varies, but two critical metrics investors should always consider are:
Yield
Capital gains potential
Yield is how much cashflow a property generates relative to its purchase price. While it’s tempting to assume cheaper properties produce higher yields, the reality is more complex.
In lower-cost regions, rents are usually low too, meaning your actual cashflow could be underwhelming. Yield isn’t just about how cheap the property is. It’s also about demand, rental income, and stability.
Some of the best yields come from mid-tier areas where rents are strong relative to purchase price. Take Dunedin, for example, property prices are similar to Christchurch, but higher rental demand means better yields.
Capital gains are the other half of the investment story.
Buying in a low-growth area might give you a nice yield on paper, but if the property's value doesn’t increase over time, you’re capping your wealth potential.
Areas like Auckland have historically outperformed due to population growth, employment opportunities, and infrastructure investment.
Smart investors aim for locations with growth potential, not just low prices. Christchurch is a great case study; it’s long been seen as undervalued compared to other major cities, and savvy investors are jumping in while that gap still exists.
The Trap of “Too Good to Be True” Deals
Now and then, developments hit the market priced well below the norm. Naturally, they attract a wave of interest.
But here’s the catch: some of these properties never get built.
Why? Because the developer underestimated their build costs, or worse, intentionally priced too low to sell quickly and build a reputation. If their cost model breaks, the whole project can collapse, and buyers are left holding the legal and emotional baggage.
Margins are tight in development. If materials spike in price or timelines blow out, that “cheap” deal can turn into an unfinished site and wasted time.
Reputable Developers Price for Success
Good developers price according to land cost, materials, and the margin they need to stay solvent. They’re not trying to be the cheapest on the market; they’re trying to deliver quality, on time, without cutting corners.
So, if a property is dramatically under market value, ask why.
Has the site been properly surveyed?
Are the specs unusually low?
Is the developer new and taking on risky margins?
Price alone should never be your only decision-making factor.
Due Diligence is Non-Negotiable
Regardless of the price, every property investment requires solid due diligence. That means:
Researching the developer’s track record
Understanding the site and zoning
Reviewing specs and contract conditions
Checking rental demand in the area
Looking into historical and forecasted capital growth
Getting expert eyes on the deal, especially from a specialist property advisor, isn’t just smart. It’s essential.
The Bottom Line
Cheap properties often come with hidden costs, whether it’s lower-than-expected rental income, no capital growth, or a project that never gets off the ground.
And when it comes to building long-term wealth through property, cutting corners on quality, research, or developer credibility can cost far more than you save upfront.
How Can We Help You?
We help Kiwis build wealth through property investment. Our advisors will take the time to understand your individual needs and recommend suitable investment properties to help you build wealth and set up your retirement.
What Does This Look Like?
We use a 3-step process:
We start with a Discovery Meeting where we learn about you, your goals, etc., and you learn more about us.
This is followed by a Strategy Meeting where we model your retirement plan, understand key investment concepts, and briefly touch on some investment choices.
Finally, an Asset Selection Meeting where we discuss investment options in more detail and make any recommended adjustments based on what we now know about you.
Who Are We Right For?
We help people make smart investment choices and set up their futures. From first-time investors to experienced investors, we can cater to a wide range of people and help set up their futures through research-based property investment.
How Much Does It Cost?
Our advice is free to you! If you choose to invest, we’re paid by the property developer. This developer-paid model allows us to provide no-obligation property investment advice in New Zealand, without charging clients directly.
What Do We Do, And What Don't We Do?
What We Do
We offer end-to-end New Zealand property investment advice, helping Kiwi investors grow wealth through smart, data-led decisions. Our focus is on quality new builds in strong locations, tailored to your goals, guided by a team that knows the NZ market inside out.What We Don’t Do
We don’t do KiwiSaver, shares, cryptocurrency, or broad financial planning. Thrive is not a generalist firm. We specialise in property investment in New Zealand because that’s where we deliver the most value. By staying focused, we cut through the noise and help our clients make confident, well-informed property investment decisions.
How Do I Start?
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