Investing in smaller towns???

[Adman25]

Hi Everyone

I Have been searching around for a high yield investment property but i cant find any that are positive geared in and around the major citys i am looking in the North Island and was wondering what Medium size town are like some i have seen look to return 8-11% yields but what i am scared about is demand for rent in these towns some towns i have been looking at are.

Wanganui Pop 43 269 in 2001
Napier pop 53 658 in 2001
Hastings pop 70 842 in 2001
New Plymouth pop 68 901 in 2001
Gisbourne pop 43 971 in 2001
Rotorua pop 64 473 in 2001

Some of these towns have Declined in population from the 1996 Census to the 2001 census i cant seem to find a more current census than 2001.

There also seems to be a lot of Propertys for sale in these Towns, also a lot of rentals looking for tenants are more people moving closer to the citys for work???

Any help what be much appreciated sorry about the amature thread

[muppet]

The population difference between the 2001 and 2006 census figures are
Wanganui District -0.9%
Napier City +3.7%
Hastings District +5.3%
New Plymouth District +3.7%
Gisborne District +0.6%
Rotorua District +2.4%

http://www.stats.govt.nz/browse_for_stats/population/census_counts/2006-census_hotpprovisionalcounts.aspx

2006 Census of Population and Dwellings – Provisional Counts - Hot Off the Press (PDF, 9 pages, 170kb)

[Adman25]

Great to know thanks for the most recent census

[Perry]

Small Towns? How small is small?

There are a number of PT forumites who are
seasoned investors and who also have PIs in
small towns, ranging from Hawera to Carterton.
My limited understanding is that these folks
are buy-and-holders.

Sit pat for a while and maybe they'll wander
in to this thread and give you the inside story
on a tale that's not much in the way of bells
and whistles, but has something unique to
commend it, nonetheless.

As an example, someone employed in the
tiny town in which they live can find it hard to
hide their rental, ahh, 'indiscretions.' The
grapevine can work to a PI's advantage!

[SwissTony]

Finding good deals can be very tough, especially if you're doing it in your spare time. If you've got your heart set on one of the larger cities but aren't having any joy, you might want to consider a property finder.

After about 5 months of searching on my own I ended up using a property finder. I was very happy with my purchase.

It will cost you around 5 or 6k

[orion]

Hi Adman 25,

Most of my investing purchases/trades have been in the Hawkes Bay area (mainly due to living here) and I have found it an excellent location to invest in. The yields here you can get if you look are around 8% which would get you a fairly good rental in a reasonable location. Much above that, you would be buying in areas that would not be suitable if you are looking long term. Ocassionally you can get 9% yield, but it is more about getting a bargain than anything else.

I think Rotorua would be good as well, not that I have bought there, but do know the area fairly well.

Regards
Graeme Fowler

[Adman25]

Thanks for all the replys so far Regarding size of towns i shouldn't of used the word smaller just towns in general over 40k.

Hi Tony i will consider a property finder as i work in europe and only have 2 months home to find a place. What kind of yield did they find you or were you buying for capital gains?

Hi Graeme i have seen some good yields and houses offered below g.v in Hawkes bay i like the area as well i remember family trips to hastings and napier.

thanks again everyone its a great help!!!!

[drelly]

Hi Adman,

The best way to get those higher yielding properties is to create them. If you had someone you can trust to oversee a renovation, extention or subdivision, you'd be more likely to find a proeprty that is worth investing in.

[watchful]

Hi Adman,

We have had a buy and hold in a small town for around 8 years. A block of flats that yielded 18% on purchase price. Now runs at about 9% on latest valuation. The properties have been excellent with one tenant there since purchase and another coming up to 4 years in place. The yield offers us the freedom to offer very reasonable rents in order to secure trouble-free tenants who really do look after the place as if it was their own.

My only word of caution is be aware of council rates rises vs rental returns. Rates in this area (Ruapehu District Council) have rapidly escalated with values. Typically in (say) Auckland the levels of rent make small increases in rent to tenants not too daunting to cover this, however in towns where rents are a lot lower the % needed to cover rates rises could scare prospective tenants away.

Small town investing (we are very small scale) has been good to us and I would consider further investment with research.

[emmajane6]

Hi there,

I have IP in Westport (approx 6000 pop) and Invercargill (approx 50000 pop) and Christchurch.
My Westport property is the shining jewel in my portfolio due to rapid rental growth and steady capital growth, followed closely by Invercargill and then the CHCH properties.
Small towns are great if you do the research and there is sustainable employment (not just one industry).
They are a great way to get on the ladder as the entry price is lower.

I am not sure about the North Island but the fundamentals are universal, its just supply and demand.