Investing In Levin, Gisborne or Putararu

[haydenbigelow]

A friend and I are looking at Investing between 150k-220k in a rental in smaller towns like Gisborne, Levin or Putararu. We are first time investors and looking at paying down the mortgage quicker rather than taking to full term of a loan say 20 years and then building on the portfolio in 3-5 years as equity increases. Can any one give me advise on strategies for these areas?

Regards

Hayden

[Nick G]

Hi Hayden

What attracts you to those towns?

Cheers

[donna]

NZHerald says they're great areas for yield, Nick. Also Orion (Graeme) has mentioned Levin and maybe the other areas too for cash flow.

cheers,

Donna

[Kirwee]

Graeme also thinks Fielding is a good area for higher yields too.
Lower Hutt is a good place for rentals as there is stable employment and is close by rail and road to Wellington.
Do you have your IPs in Kapiti Donna?
I live in paraparaumu now and wonder if there's a social network of investors here.

Cheers,
Brian

[Rosco]

A friend and I are looking at Investing between 150k-220k in a rental in smaller towns like Gisborne, Levin or Putararu. We are first time investors and looking at paying down the mortgage quicker rather than taking to full term of a loan say 20 years and then building on the portfolio in 3-5 years as equity increases. Can any one give me advise on strategies for these areas?

Regards

Hayden

Hi Hayden,

I prefer major cities because there is always other buyers if it all goes wrong, large number of businesses to give employment to your tenants and generally they are growing.

I would suggest you start by looking the population figures. In my opinion if the population goes down, this can't be good for property investors as less people, mean less houses which mean rent and values goes down.

The only reason I would buy in Gisborne, Levin or Putaruru was if the rent was amazing. I know Putaruru best of these 3 and I see it as a dying town and I would guess the population is decreasing. But if you drive through the town you will see lots of empty commerical buildings, as businesses have slowly left the town. This can't be good for tenants and rent! I don't think 10% gross yield would be nearly enough for me in Putararu and I might look at 12%, but would probably want even higher.

Also make sure you do a full cashflow on the expected rent and expenses, plus at higher interest rates incase interest goes up. Often rates can be high in small towns. Also as a % of rates, your insurance, repairs and other costs are normally higher. For example an electrical repair might be $1000. In an Auckland property renting for $800 pw, that might be 2.5% of the annual rent. In Putararu a property renting for $200 pw, the repair is 10% of the annual rent!

I like the idea of paying mortgage down quickly. But chances are this won't be from the rental income, and rather come from your own pocket (so you might be able to do the same thing in a better location).

Ross

[haydenbigelow]

It is a foot in the door for a first time investor. I don't want to over capitalize and feel it is a good start. In other words it is affordable for my friend and I while still having a life style in Auckland . (Currently we are renting and don't see Auckland as an option)

[haydenbigelow]

Thanks Ross. I appreciate your sound advise.

[ScottSI]

Worth looking in the regions but if you have up to 220K why not buy Hastings, Napier, Porirua, Dunedin, Timaru, even the slums of Nelson, Upper Hutt, even Palmy has a few come up.

These all have bigger population and more industry etc.

[haydenbigelow]

Thanks ScottSI for the advice

[Nick G]

That was what I was sort of angling at. If you know those towns really well and can buy very low, renovate and create a great rental that will be first on the list to get tenants then sure why not. As a cheaper alternative to Auckland there are far lower risk alternatives at that price point as Scott suggested.

[orion]

A friend and I are looking at Investing between 150k-220k in a rental in smaller towns like Gisborne, Levin or Putararu. We are first time investors and looking at paying down the mortgage quicker rather than taking to full term of a loan say 20 years and then building on the portfolio in 3-5 years as equity increases. Can any one give me advise on strategies for these areas?

Regards

Hayden

Would stay away from Gisborne and Putaruru, population too small. Levin would be okay, rates are a little higher there but still workable and close to Wellington/Palmerston North.
Rotorua, HB, Feilding, Wainui in Wgtn good too at moment but if prices go up too much as they have been doing, won't be as attractive to do.