Thames at a discount

[daveoi]

Hey there,

We are considering purchasing a property in Thames as a rental. It's currently tenanted and the tenants are happy to stay on.

The house is currently owned by a family member who wants to liquidate, but is also happy to do us a favour by selling the property to us for approx 10% below a registered valuation.

We don't own an investment property at the moment - it would be our first one. The gross yield would be approximately 4.9%.

My thoughts are: I am nervous about the CG in Thames and if prices come back a bit, even with the 10% benefit it is still risky. With interest rates where they are we should end up around even, possibly slightly negatively geared. However, it still seems like a reasonable deal - but am looking for some reassurance

Would be keen to hear what others think - and also what others would do in the same situation.

Thanks in advance!

[Nick G]

You can get 5%+ GY just about anywhere in NZ so I wouldn't be doing it in Thames.

[Beano]

[QUOTE=daveoi;422475]Hey there,

We are considering purchasing a property in Thames as a rental. It's currently tenanted and the tenants are happy to stay on.

The house is currently owned by a family member who wants to liquidate, but is also happy to do us a favour by selling the property to us for approx 10% below a registered valuation.

We don't own an investment property at the moment - it would be our first one. The gross yield would be approximately 4.9%.

My thoughts are: I am nervous about the CG in Thames and if prices come back a bit, even with the 10% benefit it is still risky. With interest rates where they are we should end up around even, possibly slightly negatively geared. However, it still seems like a reasonable deal - but am looking for some reassurance

Would be keen to hear what others think - and also what others would do in the same situation.

I agree with Nick G
4.9pc gross. ..so likely to be 3.6pc net you could get get almost anywhere in NZ

[Wayne]

Gross 4.9% doesn't cover the mortgage - in Thames why would you do that?
Great way to turn a family member into a hated family member.

[daveoi]

Thanks for the advice guys.

Follow up question: At what % discount off a registered valuation do you think would make it worth purchasing? Or is Thames just not a great idea overall?

[Wayne]

Thanks for the advice guys.

Follow up question: At what % discount off a registered valuation do you think would make it worth purchasing? Or is Thames just not a great idea overall?

Work out the return you need (net excluding finance) and work from a realistic rent to calculate the price.
I doubt your relation will want to sell at the price you come up with.

[flyernzl]

The BIG question - if and when the current tenant leaves will it be quite easy to get a new tenant?
The answer to that is also the buy/no buy answer.
The actual price negotiations come after that decision.

[BigDreamer]

Ouch - 4.9% gross yield is awfully low for Thames.

If you don't currently live in Thames then you might have problems when/if the tenant leaves and you would need to find new ones. A lot to consider especially if this is your first investment.

[Rosco]

Hey there, We are considering purchasing a property in Thames as a rental. It's currently tenanted and the tenants are happy to stay on. The house is currently owned by a family member who wants to liquidate, but is also happy to do us a favour by selling the property to us for approx 10% below a registered valuation. We don't own an investment property at the moment - it would be our first one. The gross yield would be approximately 4.9%. My thoughts are: I am nervous about the CG in Thames and if prices come back a bit, even with the 10% benefit it is still risky. With interest rates where they are we should end up around even, possibly slightly negatively geared. However, it still seems like a reasonable deal - but am looking for some reassurance Would be keen to hear what others think - and also what others would do in the same situation. Thanks in advance!

Hi Daveoi, Why do you want this as a rental? 1) capital gain - you have answered this quite negatively already! 2) cashflow - at 4.9% Gross Yield, the property will be negative when allowing for 100% mortgage and all expenses. There will be repairs and accounting and probably a property manager that you might not be including. Also what if you have some weeks vacant or interest rates go up? The only time I would look at this if it had a big opportunity like a subdivision. But even then you might find the costs out weigh the benefits in Thames. Who cares about discount below valuation. You need to buy based on what works for you and at what level helps you get ahead. Unless you are trading, and then 10% isn't much. Ross

[watchful]

Hi Daveoi. I have spent a lot of time down that way and we own rural land close to Thames. I have seen residential values climb markedly in areas as Thames, Paeroa and Ngatea etc have marketed themselves as commutable Auckland alternatives. I know people who do this and are comfortable with the hour drive to work on open roads outside of peak periods.

I do think however, as affordability creeps back into the Auckland market as investors flee, that these fringe towns will be some of the first to drop in value and the drop will be more pronounced than most Auckland addresses.

[Frezzinghot]

Hey there,

We are considering purchasing a property in Thames as a rental. It's currently tenanted and the tenants are happy to stay on.

The house is currently owned by a family member who wants to liquidate, but is also happy to do us a favour by selling the property to us for approx 10% below a registered valuation.

We don't own an investment property at the moment - it would be our first one. The gross yield would be approximately 4.9%.

My thoughts are: I am nervous about the CG in Thames and if prices come back a bit, even with the 10% benefit it is still risky. With interest rates where they are we should end up around even, possibly slightly negatively geared. However, it still seems like a reasonable deal - but am looking for some reassurance

Would be keen to hear what others think - and also what others would do in the same situation.

Thanks in advance!

Forget about it, look in auckland for that yield.