Newbie - where to go?

[eldog]

I have managed to wrangle together about 70k and have been pre-approved up to 350k - I have been doing tonnes of research and reading up on where/how to invest but so far have failed to take any action.

I'm not planning to become a full time p investor but definitely wanting money to supplement my income and have a healthy retirement (I'm currently only 23) wanting to focus on buying and holding.

I am based in Auckland so nothing in the area I know is affordable (or seems like a good investment) I have been looking on trademe/realestate in mostly Hamilton at 3 bdrm stand alone houses, I just don't seem to be able to find anything which looks remotely like a good investment - the best numbers I seem to crunch are around 6.5 % yield, which seems far off the 8-10% yield I've read (and dreamed) about or are in locations which my Hamilton friends tell me to stay away from (as I want an area with good tenants).

I feel like I'm being extremely picky but I'm just trying to make sure my first investment sets me up for my future ones. I have been looking on and off for about 3 months and have seen a couple ok ones but nothing that really seems worth driving down to having a proper look (maybe this is my problem)

Where are other places to look into? Or any other general advice to help me get my a55 into gear

Thanks, any tips would be greatly appreciated.

[rocket]

What is your definition of good tenants. ?
I have heard a lot of people say this but would like to know your reply.

[eldog]

What is your definition of good tenants. ?
I have heard a lot of people say this but would like to know your reply.

Simply put it would be someone who pays rent on time, doesn't wreck the place and isn't overly demanding.

My comment on the bad (perceived) area = bad tenant is probably a naive train of thought, but I guess it also comes down to how easy it would be to on sell the house down the track... which would be harder in those lower socio-economic suburbs?

I'm just quite wary of the badly perceived areas as I've grown up in the "nicer" suburbs and probably wrongly assume that the tenant base would be difficult to handle with not paying rent on time and damaging the property and for my first one it just seems more risky.

Your comment has definitely provoked some rethinking on my behalf...

[rocket]

Simply put it would be someone who pays rent on time, doesn't wreck the place and isn't overly demanding.

My comment on the bad (perceived) area = bad tenant is probably a naive train of thought, but I guess it also comes down to how easy it would be to on sell the house down the track... which would be harder in those lower socio-economic suburbs?

I'm just quite wary of the badly perceived areas as I've grown up in the "nicer" suburbs and probably wrongly assume that the tenant base would be difficult to handle with not paying rent on time and damaging the property and for my first one it just seems more risky.

Your comment has definitely provoked some rethinking on my behalf...

Some of my best tenants are single mums with rent paid by Winz.
Mind you- bad tenants are everywhere & do are good. Properties in poorer suburbs are easy to repair as you don't need high quality work.

[eldog]

Some of my best tenants are single mums with rent paid by Winz.
Mind you- bad tenants are everywhere & do are good. Properties in poorer suburbs are easy to repair as you don't need high quality work.

True, I guess as long as you do your due diligence you should end up with an ok tenant. Still not much on offer in Hamilton that seems any good at the moment, most I've been able to calculate on what I've found is 6.5% gross yield (I tend to make rather optimistic calculation as well).

What do people think about apartments in central Wellington? As long as you got one that meet the banks size requirements, good body corp in place etc seem to be some with a net yield of 7-8%... wasn't really looking at apartments but have spent so long looking and I'm itching to make a (hopefully good) move on something.

[Nick G]

You could get quite a good yield in Dunedin for that amount. Probably a nice central dual income or something.

[eldog]

You could get quite a good yield in Dunedin for that amount. Probably a nice central dual income or something.

Dunedin seems like it would be to far away to manage however I do have some family down there. Is close to town nice around dunedin?

[Nick G]

There are some central suburbs that are slowly improving, our guy David recommends parts of The Glenn, Mornington. Anywhere within easy distance of Octagon etc. Actually he likes a few areas. Wouldn't worry about distance wherever you choose to buy, that's what PM's are for.

[PeterT]

What do people think about apartments in central Wellington? As long as you got one that meet the banks size requirements, good body corp in place etc seem to be some with a net yield of 7-8%... wasn't really looking at apartments but have spent so long looking and I'm itching to make a (hopefully good) move on something.[/QUOTE]

Yield is nice to have but capital gain is better as it will allow you to move on or buy more. I can't see apartments giving as much capital gain as a house in Hamilton.

[Grads]

Hi ED,
Don't go for an apartment for your 1st investment. Your 1st investment through buying well will set you up for future purchases. House & land will do this quicker than an apartment.

Keep hunting, set your buying criteria and you can't go wrong buying well in an average suburb, if you can't buy from motivated vendor / or at a discount look for add value opportunities to help create your own equity & improve your income/yield. It's pretty hard to add value at an apartment.

If I was to start investing all over again I wouldn't buy any apartments..
Cheers

[eldog]

Have seen two units in Caversham, Dunedin for sale on trade me - RV 205, asking 259 been on the market since last november, current rental income is 415 per week, old villa style house split into a 1 bdrm and 2 bdrm flat. Some new carpet and wallpaper would increase rental income slightly. What do people think about this area of Dunedin?

[Nick G]

Some good thoughts on Dunedin here

http://www.propertytalk.com/forum/showthread.php?39428-Dunedin-property-investment-Student-flat-or-outside-the-city&p=387858#post387858

[Beano]

Hi ED,
Don't go for an apartment for your 1st investment. Your 1st investment through buying well will set you up for future purchases. House & land will do this quicker than an apartment.

Keep hunting, set your buying criteria and you can't go wrong buying well in an average suburb, if you can't buy from motivated vendor / or at a discount look for add value opportunities to help create your own equity & improve your income/yield. It's pretty hard to add value at an apartment.

If I was to start investing all over again I wouldn't buy any apartments..
Cheers

Would you consider units where you own the whole block as good as a house?
Is the reason why you choose houses over flats , is it due to the lower land content ?

[Nick G]

I'd look at units if there was a way to increase rent.

[Grads]

Yes you could look at units if you can purchase all of them. However you would want options to add value along with increasing rent potential. Desirable location is also important.

I've been burnt too many times with apartment investments and will never invest in apartments again. Issues include - dealing with body corporates (BC), BC costs, higher maintenance costs, weather tightness issues, noisey tenant neighbours, low sale price of apartment can become precedent for market price etc.

Keep in mind that depending on number of units this type of lending can be deemed commercial which means lower LVR rules (higher deposits).

Units can be good option to start property portfolio (as more affordable to houses) and units can be good option when increasing portfolio size where yield is focus.

Traditional house and land property gives a lot more options to increase return (income and equity) eg many renovation options, add bedroom, subdivide, minor dwelling, deck, carport, garage, sleep out, exterior paint, landscaping etc.