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$200K for first investment property - Dunedin?

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  • $200K for first investment property - Dunedin?

    Hello everyone,

    Have been browsing this forum for awhile now and learnt a lot so far. So thank you.

    We are planning on buying our first investment property next year. We have $40K (could stretch to a little more) so with the new LVR rules, looking at spending around $200K. We do not own any other property, but this is a start.

    We live in Auckland but have been priced out of the market here. Unless we get a tiiiiny CBD flat, and from what we see the rental return will not be sufficient. Plus they either leak/high body corp/don't meet EQC regs. Sounds like a minefield.

    We are planning on leaving NZ late next year and want to buy something before we go. So will also be using a property manager.

    Currently looking at Dunedin. We know it a little more than other cities outside Auckland and can get at least 7% return from what we see. Just concerned that we may not see capital gains.

    Is anyone else buying in Dunedin at present? Or does anyone have other areas to suggest, within our budget & with a sufficient return? Noticed some mentions about Hamilton, Hawkes Bay, Kapiti Coast and Rotorua. Would anyone recommend those over Dunedin and why?

    Thanks so much! I will tell our story as it progresses


  • #2
    I would be concerned about the potential capital gains.

    7% return is going to breakeven if you are lucky. Especially if interest rates go up.

    Therefore you need good long term growth to make the investment worth while. Have a look at population growth rates for Dunedin and compare to other possible areas. Also average annual salaries.

    Is Dunedin a growing city that is going to have large buyer and tenant demand in the future? Or is it slowly dying?

    Book a free chat here
    Ross Barnett - Property Accountant


    • #3
      Hot tip. If you are looking for good yield in small town nz you could do worse than Westport. With the new coalmine announced there I would guess there is going to be demand for rentals in 6 months to a year. Prices a bit depressed at the moment on the coast so may be able to pick up a bargain.


      • #4
        Just beware that costs for maintenance go up if you can't do th little stuff yourself because the property is too far away.


        • #5
          Hey Lauraf.

          I'm in Dunedin myself, and am always on the lookout for a decent yielding properties, and creative ways to do it.

          There are definitely better yielding properties than 7%. I probably wouldn't touch anything at 7% to be honest, as you wont get fantastic capital gains down here.

          For example: (sorry if I'm breaking rules by posting links)

          That's returning 8.5% at asking price, but unless you can REALLY increase rent or something, the price is unlikely to go up. And would require some maintenance work I'm sure.


          • #6

            With your $200k, why not look closer to home? Hamilton still has some great deals and is only 1hr - 1.5hrs drive from Auckland. Not saying this link below is THE DEAL for you, but it's an example of what $200k could buy http://www.trademe.co.nz/property/re...-655414644.htm.

            You could also pick up a tidy 2 bedroom unit in Hamilton for $200k.



            • #7
              deepest, darkest poets corner.


              • #8
                Thank so much for the replies everyone. Really helpful stuff.

                Rosco and Ghouly - A quick read regarding the future in Dunedin is fairly pessimistic. I hope things pick up for Dunedin, in my opinion it's a great place. So Rosco you are right, may focus elsewhere for capital gains. Thanks for the link too Ghouly, I was looking at that place yesterday. 7% was the lowest return I have seen for Dunners so I just stated that to be cautious.
                Jumpin - I'll have a look at Westport. Thanks.
                ShaneD - I'll definitely have a closer look at Hamilton. It makes sense as we could easily pop down from Auckland while we are still here. Plus the Uni, hospital, proximity to Akl.

                Doing a bit of research yesterday, I noticed that in the census Nelson has shown the second highest rate of population growth after Auckland (8.3%). There are properties there in our price range too. Anyone buying in Nelson?

                Thanks again
                Last edited by lauraf; 29-10-2013, 12:37 PM.


                • #9
                  I just bought latest in Kapiti Coast. Paraparaumu.

                  Reason Transmission gully route to Wellington commences construction next year, additional requirement for rental accommodation while it is constructed and potential for capital gains when it is complete and Wellington is 10-15 minutes "closer".

                  Dunedin in my opinion should be targeted for cashflow only, not capital gains. In long term, much more $$ from capital gains so choose an area with potential.


                  • #10
                    I just signed up for online emails through a company called Real Estate Investar advertising on Trade Me, and received a couple of free reports including fastest growing NZ suburbs and top 50 NZ yielding suburbs. I can't vouch for the reliability of the data but it's interesting reading! I'm also currently looking at cheaper properties in Hamilton (for my first investment) and finding it hard to find anything decent which is cashflow positive. However there are quite a few interesting things happening in "the Tron" and I'd like to get in now if possible.


                    • #11
                      Hi lauraf

                      we invest in and currently look after nearly 250 properties mainly in Dunedin but also Central Otago. We have many out of town and international investors who buy here mostly for Cashflow or manufactured capital gain (renovations, extra let able space etc).
                      If you are thinking of buying in Dunedin then most investors here look in the 9%+ return range and the better investors 10-11% plus range.

                      This obviously can be a real asset if you want to keep buying as too many capital gain properties too early in your portfolio might hamstring your options, your financing specialists will be able to explain more to you on that.
                      Hope that helps


                      • #12
                        I agree with Kyleelmar,
                        Dunedin have good Cash-flow and added value opportunities one just need to hunt for the right deal and most important get some local edvice if you are new to the city.

                        There are many fundamentally important buying rules one should keep too, like buying at the right side of the hill for more sun, knowing how to add value correctly and what tenants are looking for in that area.
                        get a property vacant at the wrong time of the year and one can have 3 month vacancy etc.

                        I do suggest and highly recommend you contact Kyle if you want some rental advice or rental appraisal BEFORE you buy.

                        Good to have you on board Kyle, I'm sure we can all learn from your local knowledge and experience !
                        Last edited by Orkibi; 31-10-2013, 07:34 PM. Reason: typo
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                        • #13
                          Originally posted by Rosco View Post
                          Or is it slowly dying?

                          NZ is slowly dying, there is a drift Nth and from there a drift to Aussie


                          • #14
                            While immigration is topping 33k a month ??
                            New Zealand's #1 Marketplace for Property Investors & Sellers!
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                            CLICK HERE FOR MORE INFO.


                            • #15
                              Originally posted by jimO View Post
                              NZ is slowly dying, there is a drift Nth and from there a drift to Aussie
                              The drift seems a lot more from Aussie to NZ now. I've got no less than 4 ex-aussie mining guys on site now. I don't think that has happened for about 2 decades, if ever.