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$340,000 property in gore with $890 week rent return

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  • $340,000 property in gore with $890 week rent return

    Who would buy? Who would not? And why

  • #2
    Given the detailed information to-date, I'd say:

    1. Someone after a pretty decent return because they like decent returns.
    2. Someone who doesn't like Gore because it's cold, wet, full of inbreds and they talk funny.


    • #3
      Given that on TradeMe the average rent in Gore seems to be under $200/week, I'd be wary of taking the 13.6% yield at face value .... But I'd buy it if I was happy that that sort of yield was sustainable.



      • #4
        Is it a single dwelling or a block of flats? or a shop etc. If its a single house then youd be hard pushed to get someone to pay that much for a place in gore.


        • #5
          Block of flats. Was wondering if the location and lack of capital gain would be enough to put some off.


          • #6
            I'd have to say no to that as I think the risk of people moving out and not being able to get tenants would be high.

            Would need further information to make a decision as its not just the yield return that makes a property a good or bad investment.
            Last edited by shanecarruthers; 29-07-2011, 12:56 PM.


            • #7
              What's the rates and insurance like?


              • #8
                Investment returns in Gore as just like anywhere else. You get what you pay for. I'd hazard a guess that the property is run-down and attracts troublesome tenants. Certainly you would expect a slightly higher return from a provincial town where there is no immediate prospect of growth but 13% tells you to be careful. There are professional landlords in Southland and if this was a bargain, it would already be sold.


                • #9
                  Not run down. Meticulously maintained, long term tenants, rent records look good. The 'professional landlords' don't know about it.


                  • #10
                    If you trust the people giving you the current numbers (sounds like you have an inside connection) & are prepared to hold for a long time, I would look very seriously at buying.
                    Its cash positive, its not a lot of money, $340k @ 7% is $457pw just to service mortgage so at worst you could loose about half the tenants before it becomes negative.
                    Just make sure you allow for PM, inceased insurances, increase rates, maintenance (cold winters can be rough on buildings) & make sure the building isnt likely to be hit by the building code changes that are now inevitable for earthquake strenghtening.

                    Gore may seem to have slow capital gain, but it still grows like everything else does in good times, just look at Invercargill - average price used to be about 40k & is now more like 350k.
                    Is Dairy expanding in Gore like it is around Invercargill ? Isnt there a new dairy factory around there somewhere- good for job prospects.

                    As a part of varied portfolio it is probably a fairly low risk punt that should pay its way and have reasonable prospects long term.


                    • #11
                      Main thing I would look at in Gore or any other small town, is the tenant demand. Why would someone live in a unit, when there are probably tonnes of reasonable houses (with garages, section, and more room etc) to rent?

                      In a main centre I think units can work great, but I'm not sure how popular they are in smaller centres? Doesn't every kiwi want a back yard?

                      Also is there lots of vacancies or places to rent? What are the business's like in Gore, any major ones that might close down or move?

                      Book a free chat here
                      Ross Barnett - Property Accountant


                      • #12
                        Life is a funny old thing. In the 1960s Gore had the highest per capita income of any town in NZ. It has quietly declined since then but is still a pleasant middle-class town with good shopping and new homes being built occasionally. Essentially it is a stable rural services and retirement community.

                        There is a proposed new milk factory but that appears to have stalled. Of greater certainty is the Solid Energy plan for a lignite briquette plant which will introduce jobs. Beyond that Solid Energy are considering conversion of lignite to urea, and possibly lignite to diesel, or a power station.


                        • #13
                          Son has a property in Mataura 5km's down the road from Gore.
                          We have been lucky regarding keeping the property tenanted as demand is pretty low in Mataura and I believe better in Gore; though budget for 6 to 8 weeks vacancies in a year.
                          It was purchased for $52k and pays 150 per week so as long as it is tenanted it doesn't really matter how long the area takes to have an economic upturn.
                          As Winston points out the largest lignite coal seam in the country is there.
                          We are looking to change our property manager down there so if anyone knows of a good one names would be much appreciated.


                          • #14
                            Just look at Miltons (few hours from Gore) property prices they pretty much trippled when the new factory / prision went in down there. I know one investor who scooped up 15 houses. Unfortunatly I was a poor student at the time and couldnt afford to get one myself.