yield on flats

[elliot]

looking at buying a small block of flats in Rotorua. I assume the yield achieved is directly related to price. Will borrow total amount. 3 yr mortgage rate around 7%.

Form an investment perspective in today's market what is an acceptable net yield on flats in a reasonable area.

[Stevegoodey]

That's is going to depend on a great number of factors, likethe condition of the flats, the title (Freehold?).

And even your own risk profile.

[elliot]

thanks steve

who do I go to for independent advice?

[Stevegoodey]

This is a good place.

Post the details and get some ideas from the replies that you get.

Or go and attend your local property investors meeting and ask lots of questions.

[revdev]

This is a good place. Post the details and get some ideas from the replies that you get.

Agreed...although until you have the property under contract, try not to give too much away!

G

[Dean@Massiveaction]

Rates in Rotorua are very high. I have 12 flats there and the rates are RIDICULOUS.
Off the top of my head you would want at least 9.5 to 10% yield in this market, you may need that to be cash positive anyway.

[action]

You should be able to rent out a 2 bedroom unit in Rotorua for around $210 per week, so work out all your expenses, ie mortgage, rates, insurance and only buy if the rent will cover those.
helen

[Re@der]

http://www.dbh.govt.nz/market-rent?TLA=Rotorua&RegionId=4

This is a good starting point. Remember the data is collected over the last 6 months so needs a comparison with local advertising as well.

[Orkibi]

you would want at least 9.5 to 10% yield in this market

Dean Is probably meaning gross yield above.

one thing I look at, is it sold as one block on one title or is it / can it be Unit titled ?

If you purchase well this will add value and give some option for selling separately if needed

what is an acceptable net yield on flats in a reasonable area..

If your NET yield is higher then your Interest rate you will be cash flow positive.

[elliot]

Thanks for all the comments. Some more info, construction of the 60s, geothermal, total rent $600 week, insurance, geothermal fee and rates comes to around $8000, have separate titles (old type of crosslease), they say it is under rented, long term tenants, unit size 80, 60, 60sqm. Condition satisfactory for age. Easy to look after grounds. Want above $400000. I personally think towards 360000, am I on the right track?

[Rizowz]

I would say $350k and get some advice or learn for yourself what you could do to up the rents to market val or just under, then you'd probably have yourself a nice 10 or 11% earner.

[elliot]

Thanks, unfortunately you need a motivated seller.

[revdev]

You never know until you ask..peoples motivations can change pretty quickly. Put an offer in that works for you and see what happens.

All the best
G

[action]

Really you would only want to pay around 330K. Having seperate crosslease titles is a bonus but doesnt really help as regarding to being a cashflow property which is the only type i would reccomend buying otherwise you are limited to how many you can buy. Great location, I know the flats. Put in a cheeky offer and who knows, you might just get them!
helen

[Kerry Christian]

Think it through

Gross yeild sucks

If Net yeild is BELOW interest rates -- cashflow positive
If Net yeild is ABOVE interest rates -- cashflow Negative



If it is not Cashflow positive- then you should think about a long term HOLD and evaluate as a long term hold