Investing in Wellington, Lower Hutt or Porirua

[DontPanic]

Hi PT Forum

We are long term Auckland Investors who are currently selling one off 1 property to reduce debt and exposure to market risk.

Grahams post has got me thinking about our next step (we are in our 40,s) and I am crunching numbers on leveraging a freehold Auckland rental (would require selling 1 more Auckland property) to build a positive cash flow portfolio outside of Auckland with 20 year P&I terms. This is the type of fundamentals we started out with 14 years ago but with the Auckland market you adjust your strategy to make it work, no regrets there either.

My search of potential locations has lead me to Wellington suburbs were stagnant market seems to have provided an abundance of potential 7 or 8% deals that would work with a 20% deposit.

I need information about the market if Wellington investors can help.

• I like the idea of looking for target yield in the best area possible and closest to the main centre would this make Lower Hutt a better candidate than Porirua or Upper Hut or is there other factors to consider around Wellington Demographics
• What are vacancy rates like in these centres, is the tightening or the government sector affected the suburban rental market
• Would a $200K 300pw, 3 bedroom home attract professional people if it was in tidy condition or should I look at different type of properties
• There has clearly been a short-medium term lack of confidence in the Wellington property market, what is the real fundamentals like, has the population suddenly declined, is the job market deteriating or is there real long term factors that need to be considered before investing there.
• Is there Earthquake risk to consider with single level standalone homes in Wellington

I hope my questions don't sound to derogatory, I think Wellington is an awesome city but I don't know much about the suburbs and just need gather information and would be grateful for any advice or perspective anyone who knows the investor market can provide

Cheers Brendon

[Damap]

Why not go Hamilton instead of Welly? Better populatoin growth and employment.

[Nick G]

I invest in Wellington. Love the place. It is a diverse property market however once you start to factor in all the surrounding towns and cities that all feed into Wellington central.

• I like the idea of looking for target yield in the best area possible and closest to the main centre would this make Lower Hutt a better candidate than Porirua or Upper Hut or is there other factors to consider around Wellington Demographics

>> A big thing to consider is sun, Wellington is very hilly so properties that show good yield on paper may not be attractive to tenants because of sun issues. If you can buy well in Lower Hutt then yes, it is attractive to commuters. Do your research on rents in different areas and speak with some property managers and agents.

• What are vacancy rates like in these centres, is the tightening or the government sector affected the suburban rental market

>> Nice properties with good sun, or anything central will rent well and rents are rising.

• Would a $200K 300pw, 3 bedroom home attract professional people if it was in tidy condition or should I look at different type of properties

>> One thing folks miss is Wellington has high average household incomes, historically on par with Auckland. So your "professional" market tends to live more central because they can afford to and central Wellington is a fun place to live and work. I guess by professional you mean young corporates and government workers.

• There has clearly been a short-medium term lack of confidence in the Wellington property market, what is the real fundamentals like, has the population suddenly declined, is the job market deteriating or is there real long term factors that need to be considered before investing there.

>> Well, if by that you mean it took longer than Hamilton and Tauranga to shoot up then you are right and I am thankful. I think the Herald stops looking at property below Hamilton. The Wellington market has gone nuts with >100 people at open homes regularly and properties welling for over RV on many occasions. That doesn't apply to every property and Wellington extends through other principalities quite far out (Kapati, the Hutts...).

• Is there Earthquake risk to consider with single level standalone homes in Wellington

>> Insurers have no problem with them in general. Just get a building inspection done.

[artemis]

There will be very little in Wellington in your price range, and only in areas which would be unlikely to attract professional people, but would attract those on low incomes. Definitely suggest do not buy sight unseen and without checking neighbours carefully, and not just those next door.

There is high demand in Wellington for standalone houses. One I know of in the outer city fringe had over 100 people through in the first week and an offer accepted for $600k+.

Wellington is on a fault line so earthquakes are always an issue, but most of us have insurance, an emergency pack and get on with our lives.

[DontPanic]

Thanks for all the quick responses guys, sounds like things are picking up in the central and more desirable owner occupied areas maybe a return of confidence?

I am fortunate to have some relationships in Wellington Property Management and plan to leverage these very soon.

By professional people I just mean working people rather than unemployed.

We are looking to invest about 1 million straight up so would be thinking of 5 at $200K or 3 at $300K etc with 7 or 8% yield, I am thinking similar demographic to Henderson or Manukau but with yield!! it just looks like Manurewa 6 years ago.

Thanks for the comments about Sun I can appreciate that would make a difference

So the abundance of properties I see on trademe the 200-300k range that rent between 300 and 450pw is that a good place to start considering basic due diligence.

Thanks for the responses' so far!!

[DontPanic]

Why not Hamilton?

Why not Hamilton?

It looks to me the yields are lower in Hamilton than Wellington probably because of a fair bit of buyer demand from Auckland in the last 12 months.

I really don't know Hamilton at all and I don't fancy competing in a sellers market to buy 3-5 properties.

And I figure a 1 hr flight is not that much harder than a 1 hr drive?

Long term Wellington must come right.

Brendon

[Damap]

Fair enough. I was glad to get out of Wellington it was too far away compared with the Tron. In theory an hour drive/flight are the same but in practise not really. If I have problems in Hamilton I can fix them from Auckland. Most companies I deal with have branches there or you can pay someone to drive down.

However if yields have moved down that much then head south I guess.

[donna]

Dean you're in Fiji so that's a bit further isn't it?

[Damap]

True Donna but our NZ base is Auckland. And I am not investing for myself actively anymore. If I was it would be Hamilton I'd be in for yield. Especially the outlying commutable bits of town. Apart from one LO in Welly we are out of everything there now.

[SleepyTiger]

I would recommend buy in the city fringe. you can still pick them up at 6.5% - 7% yield (buy H&I), around 550-650K. but tenant pool is much better than the 200K houses you would get. I know Grahams mentioned that you should focus on cashflow, but the capital growth at city fringes properties will be much, much better. More importantly, think maintenance.

I think the inner city supply demand is outbalanced, open homes are crammed with people and competition is fierce, this eventually will translate to prices escalating (already have). But anything spread out of the wellington city region is fairly balanced. We just don't have the population growth to tip the market over like Auckland, not yet.

[Damap]

I wish Tawa would move. It's been flat for years and years now.

[Eugene]

There will be very little in Wellington in your price range, and only in areas which would be unlikely to attract professional people, but would attract those on low incomes. Definitely suggest do not buy sight unseen and without checking neighbours carefully, and not just those next door.

There is high demand in Wellington for standalone houses. One I know of in the outer city fringe had over 100 people through in the first week and an offer accepted for $600k+.

Wellington is on a fault line so earthquakes are always an issue, but most of us have insurance, an emergency pack and get on with our lives.

Agree with all this

[Kbkiwi]

I wish Tawa would move. It's been flat for years and years now.

there's nothing remotely attractive about living or renting in Tawa - I doubt capital gains will be large there.

[orion]

I wish Tawa would move. It's been flat for years and years now.

You mean you want some movement, like an earthquake?
Or you want the price to go up? Why would it matter if you have done it as a L/O?

[Kirwee]

Yes Dean, Tawa is flat...but there are hills on either side so you should be OK.
Don't think the Mayor would be impressed if it did move....he would arrive in front of where his office was in the morning and it wouldn't be there.