Hamilton market for studio room rentals - advice please

[wildcat_lgf]

Well, I've had a search but couldn't find what I was looking for - so here goes:

We're looking at building a multi-unit development in Hamilton near the Hospital (between Hospital and town - so the "good" side). Land is zoned "residential high" so can take 6 units.
It seems that however I do the numbers, the only way it works is to build townhouses with "studio room" style units. i.e. where each unit has 4 bdm each with their own ensuite and kitchenette. Units have a common living/kitchen area + a garage. The rooms are typically rented out separately and similar developments are claiming high rent returns (9+ %) at ~$500k sale prices.

My main concern is whether the Hamilton market has reached saturation for these type of investments - I don't want to be catching the tail-end of the marekt and struggle to sell in 12months time (I couldn't afford to hold them all). There are a few of these in Hamilton East around the University (understandable), but fewer in my area between the Hospital and town...The location is great - close to supermarket, walk to the Hospital, walk to town, etc. Surrounded by nice properties. There is a similar multi-unit development around the corner which has apparantly sold well (to Auckland investors rumour has it)

In an ideal world I'd build upmarket townhouses, or even "normal" 2-3 bdm units - but the numbers just don't seem to work on my (perhaps conservative) build/sale figures...

Anyone, have experience with these type of investments? Are they still a desirable option for investors? Thoughts on the Hamilton market for these would be appreciated. I spoke with a couple of real estat agents - who were worse than useless.

Bank will likely require pre-sales before it all goes ahead...so if we all agree its a great idea and someone wants to invest off the plans let me know

[Rosco]

I would be careful. Many developers are trying to sell as rent by room, get a huge rent so that the return looks high. But I wonder if it is sustainable.

If an investor came to me trying to buy one of these, I would get them to check
- normal rent, if rented as whole house rather than room by room. From an independent property manager.
- get an independent valuation

I would be suggesting the investor doesn't rely on rent by room, and instead does there figures on normal rent as a full house.

Another option - if you have consent and plans, put a really high figure on the property and sell it as is. Sometimes you will find that some idiot will buy it for way too much, so you will make most of the profit without even doing the development.

Otherwise look for a builder as a JV partner to bring your cost down. But it can be hard to find a good one.

Ross

[wildcat_lgf]

Thanks Rosco,

Yes it certainly seems to be the latest trend for high density zones. I can understand why - if they are selling for the figures I've been told. It's interesting to note that GV figures don't always align with the sale prices they're achieving.
Building a normal development just doesn't seem viable with the current land/build/sale prices...

Plans underway at present - not consented yet. At due diligence phase I suppose.

[Beginner1]

Hospital area is crowded with these studios and agents are struggling to rent. Drive Normandy avenue which had quite a bit of these studio developments recently. Call these rental mangers. My feel is hospital area studios have become an another hillcrest studio scenario. I personally know people who are struggling to sell studio complexes in hillcrest and hospital area. I would go tiny AKL apartment size 2 bedroom units.