Auckland Uni student housing, a good buy?

[Kyle]

Hi, I'm pretty new to Real Estate investing, and am looking for input on buying student housing.

From what I've seen, student apartments (specifically in the Auckland railway campus) offer rental returns that by far beat rental returns on houses. Are there any pitfalls to this? Is there a catch? The returns seem too good to be true.

I wouldn't expect capital gains to be on par with the rest of the real estate market, but at the same time I would think student apartments would still see some gains, and coupled with great rental returns it seems like a no risk proposition. Any input would be greatly appreciated!

[captaincrab]

imho the railway campus project is a dog. Run like hell.
How much do you want to spend?

[pipple21]

I concur, railway campus project is scary. What have they told you about it? or more importantly what have they not told you?

[The_Dog]

Can you please be a bit more specific about "run like hell"?

I'm currently looking at this one. Does it fall into the same category?

The Dog

http://www.allrealestate.co.nz/cgi-bin/rsearch?a=o&id=102861674&f=90&p=30&t=res&ty=&fmt=&header=&c=68033146&s=nzni&snf=ras&tm=1162994447

[pipple21]

Different investment I think, is that the same one pajiison listed under 'caveat emptor'
RE send you lots and lots of info on the lease?
We had a look at that one but decided not to go ahead.
The railway campus ones are advertised with what I took to be an inflated rental, they are apparently hard to fill during the off seasons. Body Corp is also quite high.

[artemis]

Hearsay only but apparently some purpose built student accom in Welly is showing major signs of wear after 3 years. Combination of cheaply built and tenants who don't care or don't know how to look after a place.

[Gerrard]

I looked into one of these in Welly at one stage. Looked great on the surface with quite a high yeild (12% + maybe), but that was based on full price for during the study year. There'd be bugger all income around the Christmas period and generally body corp fees are high too.

Together that cut the yeild on the one I was look at to under 8%. Not good enough for a student apartment in my books.

Gerrard

[tricky]

From what I've seen, student apartments (specifically in the Auckland railway campus) offer rental returns that by far beat rental returns on houses. Are there any pitfalls to this? Is there a catch? The returns seem too good to be true.

I think I've seen some of these apartments selling for under $50k. What price are you looking at?

I read an article recently where the author was commenting on the American residential property market and negative/positive gearing: He stated that you couldn't buy positively geared property with the dismissive ".. afterall, why would anyone sell one?"
He's wrong of course but he makes a valid point that, under normal circumstances, why would a vendor sell a property to you that is positively geared on 100% finance?
If you know what you're doing then get stuck in.
But always have a Plan B and maybe a Plan C in place in case it goes pear shaped.

[captaincrab]

Dog, is that for real? Five bedrooms in a 98 sqm house? That aside I have concerns about the cladding used and the lack of eaves. Dare I say leaky building?
The best Student accommadation in Auckland is that done by Charta around Symonds street and the two Unilodge buildings in Anzac and Beach rd. They seem to have the quality of construction needed to withstand the wear and tear. I heard the Unilodge one has averaged a nett return of 7% since opening. Many here would say a greater return could be acheived elsewhere but it does suit passive investors. The problem with buying student accom, especially where it is managaed and has a guaranteed return and are small in size is the bank funding. Usually a 35% deposit is required. As a rule of thumb you should never buy refurbished stock like the railway campus one.

[Kyle]

I think I've seen some of these apartments selling for under $50k. What price are you looking at?

The ones I saw were 65K, after all the feedback here (thanks!) thats not looking like such a good deal anymore. As for how much I am willing to spend, 65K was a pretty comfortable figure for me, I am not too keen on buying expensive properties yet, seems like putting all your eggs in one basket, and the rental returns just don't seem to be there on pricier properties.

Once again thanks for all the advice, it helped quite a bit!

[artemis]

The other thing is - you have to deal with a body corporate which costs big and does not (necessarily) have your interests at heart. Usually a single owner has no option but to pay up, unless s/he is willing to put in a lot of time and effort to lobby the other owners.

I have had a tricky time with a body corporate personally, and will never buy into one again.

This might be worth a thread of its own ....

[The_Dog]

Leaky was my first thought, however the report says it's sound. So there you go.

The Dog

[captaincrab]

ahh, smart little puppy getting a report

[CJ]

Dog, is that for real? Five bedrooms in a 98 sqm house?

Student accomodation is more like student dorms rather than an apartment. Student hall are normally only 10-15sqm per room but then they do have large communal areas (ie TV rooms and table tennis etc...)

[Monid]

And as such living in this sort of accomidation suits a certain sort of person, they have to be able to put up with the close proximity of those who may be very loud, drunk and boisterious. I lived in one of these for six months in 2004, and I would have to say never again.

So the tenants aren't just likely to be students, they are likely to be a self selected bunch of students who can handle communal living with people who may well be described as yobbos...

Personally I'd avoid these investments like the plague.