South Auckland property market

[Guest]

Hi there,

started investing in South Auckland in 2004 (MANUREWA AND TAKANINI) but it seems that the whole portfolio made minimal
gain if any?First property was bought for $132,500 (3 beddie +sleepout) but now the agents are estimating the sale price as $190-210K.
Rent is $420.....I am very confused with the market.Also issues with depreciation claw back.What are you paying back in case that you are selling the property on which you claimed building and chatells depreciation?
Moved to Oz in 2011 and I would like to free some equity but with 10 properties seems I shoot my self in both legs,no equity,massive debt and there is no way to get out?

Thank you.Cheers.

[Shane D]

I would guess the RE Agent is trying to talk down the price for an easy sale. A 3 beddie + sleepout is worth more than $190k-$210k. Unless its an absolute dive of a property. I would suggest to spend the money on an indepenent valuation.

Shane

[artemis]

...... Also issues with depreciation claw back.What are you paying back in case that you are selling the property on which you claimed building and chattels depreciation? ......

Simply put, depreciation claimed in the past as an expense becomes income in the year you sell, and tax is payable at your marginal rate. However, it may not be quite that simple. For example, if you can demonstrate that the proportion of land value has increased, you can offset that against the sale price. Or if values of chattels at the time of sale have decreased below book value. Or if the property was sold at a loss. If getting a registered valuation for sale purposes, make sure the valuer knows what you are wanting to achieve, eg by including current value of chattels. Also get the IRD booklet on Depreciation (downloadable).

[Bluekiwi]

Yeah artemis is right, any good property accountant (you have 10 props you should have one of those) will show you how to do it best.
Off the top of my head you can have a go on the sale agreement to specify the value of land and buildings so the buildings are sold at the fully depreciated rate, and pay no tax.
But that is from a short seminar 7 years ago.

[Tom]

$190 - $210k for a three beddy + sleepout??? Really? What area is this property in? General condition? Crosslease or full site? Is the sleepout permitted?

My portfolio is primarily South Auckland based and I have a fairly good gauge on values. On the face of it this appraisal sounds "light" but I'd like to know the above details.

Cheers

Tom

[buxlo122]

Hi there,

started investing in South Auckland in 2004 (MANUREWA AND TAKANINI) but it seems that the whole portfolio made minimal
gain if any?First property was bought for $132,500 (3 beddie +sleepout) but now the agents are estimating the sale price as $190-210K.
Rent is $420.....I am very confused with the market.Also issues with depreciation claw back.What are you paying back in case that you are selling the property on which you claimed building and chatells depreciation?
Moved to Oz in 2011 and I would like to free some equity but with 10 properties seems I shoot my self in both legs,no equity,massive debt and there is no way to get out?

Thank you.Cheers.

That property does not sound to bad. You achieved a compounded 5% capital gain over that period. This also included a property downturn.

As well as the capital gain it sounds like you have got good cashflow.

[Guest]

Property is in Manurewa,in good condition,crosslease,permited sleepout.

[Bluekiwi]

Your right, thats all its worth.
Sell it to me for 210k and it will save you agents commission.

Whats it renting for captain, of course manurewa is a large area.

Is it Coastal Clendon with seaviews and easy prison access ?
Or is it Trimdon Road in the gangland triangle within a short walk to mob headquarters.

OR, is it Great South Road / Manukau, close to good roads and transport and better schools.

[flyernzl]

Generally Manurewa seems to have had only modest gains over the last few years.

A crosslease property I have had there for six years and upgraded a modest amount has shown around a 15% appreciation over that time.

Good cashflow though.

I expect it will eventually appreciate as the rest of Auckland goes through the roof.

[Guest]

Thanks Artemis...

[Bluekiwi]

Well that would put you in as buying it, in 2006 at the peak of the market, and prices dropped 25% in that area from 2006 to 2009.
If you bought it in 2009, you would have made a greater gain to 2012.
So it is tricky.

I hope you are right though

Certainly central auckland has gone mad, and key area's of the shore I know are also like that.
There is no gold rush in south auckland, yet !!!

But the cost to build a new "cheap" house thanks to the meglamaniac council and new regulations means the marginal cost to build a basic 3 beddie is around 450k, so prices have to rise.

[flyernzl]

I'm not complaining.
I bought it 100% financed, so its still a great percentage gain.

[Bluekiwi]

Interest rates low, rents high (easing at the moment for some reason), house prices rising.
Not a bad combo to have really.

Probably a bad time to sell anyway captain.

If you need money, get new RV's and take them to a bank who will re-finance you at 85% and give yourself a massive fat Revolving Credit account.
If you have 10 houses you should be able to easily get 250k out that exercise.

[Guest]

Yeah,last time I have done RV on that very same property in Manureva figures where $269K (2007).Also for the 2 beddie bought in Invercargill for $44.5K RV was $100K.Agent figure is 20% bellow peak price.I used to use "Prendos" for RV.Any recommendation?Thank you!

[Tom]

Property is in Manurewa,in good condition,crosslease,permited sleepout.

Hey mate,

What area of Manurewa? Can you give a street as it does make a big difference?

Almost regardless though, unless it is in one of the real rough streets, you've said it is renting for $420pw (provided that is a genuine market rent which it sounds like it is) and the agent has quoted $190 - $210k. So that's a 10%+ return. That wouldn't even hit the websites before it was sold...

If you want to PM me details of the agent, I know a lot of them and maybe could shed a bit of light on how they are known to operate (maybe)... No worries if not though of course.

Cheers

Tom