If you had 165k...

[emmajane6]

and this might be the last time you can purchase an investment property for a few months where would you buy?

i know this isnt a lot of money - but all my rentals are around this kind of entry price (obviously they are not in auckland). Plus I generally like to stay at the lower end of the market as they are easier to rent.

any suggestions?

cheers,
emma

[Green Fish]

What's wrong with Auckland? You can buy a reasonable apartment in Auckland Central for 165k, and get a 6-7% gross return (at present).

[emmajane6]

hi green fish - nothing wrong with auckland, i just cant seem to get into the market there cause we cant get anything for our price range, would love to buy in auckland if i could. this will be 90% finance so doubt my bank would lend that on an auckland apartment.

[Green Fish]

So shouldn't the question be: "If you had $16,500?"

[Glen]

and this might be the last time you can purchase an investment property for a few months where would you buy?

i know this isnt a lot of money - but all my rentals are around this kind of entry price (obviously they are not in auckland). Plus I generally like to stay at the lower end of the market as they are easier to rent.

any suggestions?

cheers,
emma

What area ARE you in emma?
Maybe you could edit your profile to include your area to show up?

[emmajane6]

sorry, i live in sydney, but i am from chch. will try to edit it. have other rentals in chch, invercargill, westport.

[Green Fish]

Use the $16,500 to pay off existing debt, and have another look in 2 years (or 1 year for Auckland apartments).

[wotstheguts]

I agree with Green Fish. If you really want to invest right now, apartments beat houses in terms of yield. There seems to be a window of opportunity with current interest rates - you can get a positive cashflow with 100% borrowings on cheap Auckland apartments at the moment, and in the right area they are in high demand by students. A two-bedroom near AUT and Auckland Uni for $160K to $180K will rent for around $330 to $350 pw and yield 6-7% NET. My bank offered to lend up to 80% as long as it's minimum 40 sqm.

Of course, the current economic situation is uncertain to say the least, and these apartments could drop further in the next few months. Particulary with a few hundred more new units coming available. But my personal opinion is that they're near the bottom as the yields are back to the levels when I last bought an apartment in early 2003. Some of these boxes are available for $100K+ less than their registered valuations a couple of years ago.

Just don't buy leasehold (a licence for the landowner to print money in NZ), and avoid City Sales if you can - they seem to have an allergy to conditional offers and an unhealthy obsession with auctions!

[NatNZ]

Where can I obtain information (like a list) - or would anyone know - how much percentage of purchase price banks are lending for apartments at the momment? I know ASB is lending 70% of the purchase price as long as the apartment is over 50sqm. Or would i have to ring each bank individually?

[Rosco]

Hi NatNZ,

Talk to a mortgage broker. They are normally free and could easily give you this information plus help you get a loan.

Ross

[Rosco]

Hi Emma,

Have you thought of using a property finder?

They generally charge a $5k fee but can find you amazing deals.

This way the property finder would do all the hard work of looking and just report back to you. Otherwise on Property billboard or the buyers part in Property talk, there is some pretty good deals and some have good cashflow.

In your situation, I would really be careful of some of the smaller areas. One of my clients was recently talking about vacancy's in areas, and said there was only 5 unrented houses in Huntly, but in Muapapa (I apologise for the spelling, but it is a small town relient on logging I think), there was 50, and its only a tiny place!

Also watch repairs. I prefer to buy new, higher quality properties to avoid tenant hassles and large repair bills.

Ross

[PAB]

wotstheguts says 'don't buy leasehold. Can you spell that out for a newbie. I have been in nz for 2yrs and I understand there is groundrent - but is it that bad. There are some nice 'leasehold' aparts in orklund but of course freehold is intuitively more attractive. In the UK my bro has a 99yr leasehold with no problems....
Just trying to avoid a big mistake
PAB

[PAB]

I'm still on a learning curve here - where is 'prop. billboard' and ' the buyer's part in prop talk'? Thanks for any pointers!
PAB

[Green Fish]

PAB: There's nothing wrong with leasehold.

The problem is that in NZ and Australia we have become used to the "fee simple estate": you own the property for the rest of eternity. As a result, most NZ valuers don't have the faintest idea as to how to value a leasehold interest. Their performance in this regard has been "less than satisfactory".

A consequence is the "don't touch leasehold" mantra - which I also chant. This is not because leasehold property is worthless. It's because I don't have any clue as to the property's worth, and I don't trust the opinion of any NZ valuer.

If you could crack this nut, you could obtain a good "buy". For example, the best suburbs in Auckland are Remuera, Mission Bay, Kohimarama, and St. Heliers. There are numerous leasehold properties in this area.

Why not consult a UK valuer?

[wotstheguts]

Admittedly I'm no expert on leasehold, but as I understand it, with leasehold properties the landlord owns the land the apartment block is built on and can therefore charge apartment owners a "ground rent". Recently there have been huge hikes in ground rents due to increases in land value and (greedy?) landlords trying to cash in on this. For example Beaumont Quarter ground rents went from about $4K a year to about $18K a year (the owners are in the middle of a court battle over this). Similar situations in some other blocks like Q-Central. Here's one article about BQ:

http://www.stuff.co.nz/business/363764

I have also owned property in the UK but the rules are different there and ground rents are generally tiny, or sometimes a "peppercorn" - meaning none! By law, tenants also have the right to get together and "buy out" the landlord, which converts their leasehold property to "leasehold with a share of freehold".

As far as I know there are no such laws or regulation in NZ, so IMHO it's a huge risk taking on a leasehold property, when the rent can be increased a few hundred percent at the next rent review. I think the idea behind the whole leasehold concept was that leasehold properties could be bought much cheaper than freehold - but in the last few years people have been paying freehold prices for leasehold property.

That's my understanding of the situation; others feel free to correct me if I'm mistaken.