Which place to pick?

[td91]

I was originally looking at buying a property in Lincoln North (Henderson, Auckland) but between me and the owner the price couldn't be negotiated to a price that would leave both of us happy so I've had to walk away and look else where. I'm looking at these two places and I can't pick any advice from people who might be able to see it from a different view could be helpful.

House number 1: http://www.trademe.co.nz/property/re...-567900232.htm
Fully renovated, tidy section, 5 minutes drive to Henderson Shopping Mall and train station along with the library and Unitec, the North Western is probably 10-15 minutes drive away from this place. There is a bus stop about 5 minutes down the road, good primary schools and in zone for Henderson High School and there is Kelston Boys and Girls about 10-15 minutes up the road.

House number 2: http://www.trademe.co.nz/property/re...-560142397.htm
Fully renovated, tidy section you're probably a couple of minutes drive from the Henderson Shopping mall with the library and Unitec and 10-15 minutes walking distance approx from the house. The bus stop is a few seconds from the door, the Sturges Road train station is 5 minutes down the road, block of shops is 5 minutes up the road, in zone for popular Summerland Primary, it's also in walking distance to Liston College, St Dominic's College and Waitakere College. You have Lincoln Road with the multiple of food places, shops and the North Western Motorway on ramp just 5 minutes drive away.

Obviously each house has something nicer about it than the other but any opinions would be good I'm real stuck with this.

[gavinc]

I see one place is going to auction - I have been to 6 auctions recently and the prices some got up to were just crazy. I gave up with auctions. It may be different out west , don't know?
SO on that basis I would go with the one marketed with a price and negotiate.

[td91]

But would the first place go for more or less. My only concern with that second place is that it's a little over priced.

[gavinc]

I cant judge that, do some research and see what others in the area have sold for recently

[Rosco]

Hi td91,

Are you looking at these for rental purposes? If so what is the rent?

Obviously a key part of any rental property is the return!

Ross

[td91]

Yes whichever I pick will be a rental property.

I think the rental return is around the same for the two properties $370-$400 p/w is the estimate I've been given by a few management companies I'm just not sure which is the best one to choose because in terms of size they are pretty much the same

[AMR]

Neither of them seem to give terribly exciting rental returns. Maybe expand your net further to look at do-ups or properties which would benefit from alterations?

[Rosco]

Yes whichever I pick will be a rental property.

I think the rental return is around the same for the two properties $370-$400 p/w is the estimate I've been given by a few management companies I'm just not sure which is the best one to choose because in terms of size they are pretty much the same

At $370 per week, this wouldn't even be giving you a 5% gross yield based on the $389,000 purchase price. At this yield, you are really gambling on getting a good capital gain. And if you were doing this, a bigger house would probably still give this return.

At low interest rates, this property is still going to cost you $100 per week (or else lost return on your cash), and if interest rates go up to their historic levels or around 7.5-8%, then this could cost you closer to $200 per week.

I agree with AMR, that maybe you should look at some other options. Maybe something with multiple income streams that improves the cashflow and at least makes it closer to break even.
Ross

[td91]

The $370 that I was quoted was as a very last resort (If I couldn't get tenants which in the rental market as it is, is rare)

I've been told about $400 for the first one and $420 for the second one due to its ott specifications.

As for the $389K purchase price, the vendor won't get it. The house isn't worth $389,000 the vendor paid $248,000 back in May 2010 and I know what the condition of the property was like prior to its sale in 2010 (A friend of mine tenanted it) all the new vendor has done is pretty it up a bit it's not worth much more than $350-$360K

[td91]

Besides I'm not on a huge budget either.

A run down old 3 bedroom on the corner of Larissa Avenue and Rathgar Road (busy busy road) went for $386K the other day. This is in the middle of the not the best part of Henderson it needed new paint, carpet, curtains, kitchen and bathroom basically a full renovation so say $20K that brings you up to $406K that you've spent already then you have to take into account that in the area rents are only $400 it's really not a sound investment in my opinion. The two places I'm looking at seem like good investments.

[ptuser]

Been reading these forums for a while now and just wanted to pipe in. Looks like the 2nd property has been on the market for well over a month now, which is a bit long considering the market. If the vendors are motivated you could try to talk the vendors down in price? Otherwise I'd have to agree with the other posts, there isn't a lot of return. If you keep looking, I'm confident that you'll find better return from do-up properties (even if it's just paint licks) as per AMR's comments.

[td91]

The second property went to auction around 3 weeks ago but didn't sell. The vendor has put too much money into the house hence why he is expecting so much for it. As for finding a do up or something that needs work it can almost be easier to pay a few thousand more and be able to rent the house out instantly once you take possession rather than having to spend 2-4 weeks renovating, finding tenants etc.

I'm starting to think the first place might be the best option, although the second one does have the walking distance to local schools, trains and buses, and the shopping centre as well as Lincoln Road being on your door step. Very difficult decision.

With the second place I think I'm more buying the convenient location than the house because property managers have all said it's the location that is pushing up the price of the property rather than the actual dwelling sitting on the section

[Wayne]

With the second place I think I'm more buying the convenient location than the house because property managers have all said it's the location that is pushing up the price of the property rather than the actual dwelling sitting on the section

Location, location, location.

[td91]

Exactly.

Very difficult decision!