Would you invest??

[rem33]

Hi all,
Been following this forum for a while, its a great collection of knowledge...
I thought I post my dilemma and get some input and your thoughts.

I have made an offer on a 5 bedroom 2 bathroom house, cross lease with 1 other, in Wellington.
More specifically in Karori central, 10 mins by car from CBD.

There are some pros but there are some cons...
am not 100% decided on which way to go.

pros;
buying at GV price
$500pw rent
7.9% gross yield based on 50weeks and $490pw (7.3%inc other costs)
good location
$25k instant equity
has the potential to be converted into 2x3 bedroom units

However my biggest porblem is the lack of permits for alterations and no current floor plan

What would you do?
Is there anything else you would suggest I might have overlooked?

many thanks,

[Kiwi_Investor]

Hi rem and welcome !

Would this be your first investment property purchase ?

If so I would probably be looking to buy something in the mid price range say 200-300k, that was easy to manage and rent.

I don't think you would want too many complications for your first IP.

Also ask youself some questions, have a plan for your purchase.

1. What is my reason for buying the property , CF or CG or both, rennovate and on sell for profiet ?

2. What is my exit strategy ?

Maybe try a cheeky offer and see how it goes, you never know.


K

[fudosan]

Hi rem33,

A warm welcome to PT

Have you talked to the council about whether such conversion is possible?

[Dean@Massiveaction]

Not enough info to comment competently but if in doubt with the council I suggest you do nothing until you can establish costs to gain compliance.
And yield is too low as it is. Again factor in costs to get it legally set up as 2 incomes and see what the yield would be. If you can get the nett yield up to 8% plus then I'd buy it. Otherwise find a cleaner deal

[rem33]

Thank you for the info and the welcome.
This is my 1st purchase, and I guess its a little stressful and time consuming.

I want to buy in central Wellington and the pricess are getting crazy. You won't find anything decent in Wellington for under $300k.

I want to buy a property for cashflow, this one anyway.
Location is key to me, and any capital gain is a cherry on top...

I know the 7-8% return is not ideal, but getting any above that, in Wellington is very hard to find.
I am sticking to Wellington as I know it quite well.

I have spoken with the council and it is possible, it would take a bit of time and cost.

I have decided not to proceed and the feedback from this forum has been great.
Thank you all,

[Stevegoodey]

Hi Rem33

I think your karori property sounds quite good although having lived there I would be looking at sun and traffic flows at peek times as these will be considerations to you tenants.

Secondly I would not really say that you can't get good deals in Wellington at the moment.

I have just bought a 3 up 1 down in Wadestown and after 4 weeks and about $15,000 in renovation I am now getting $280pw downstairss and $500 pw upstairs.

Purchase price was $475,000 GV was $495,000, valuation pre renovation $510,000 valuation post renovation $607,000.

The next property I will be working on has been under offer waiting for settlement for a couple of months.
It's in Kilbirnie and has 1 commercial tenant and 5 residential tenants. Purchase price $870,000 GV $950,000 Valuation $965,000.

Rental income when offer was made was $1250pw but I have rewritten most of the agreements and increased them to market so rent on settlement will be closer to $1950pw giving me about 11%.

My point is that deal are not found they are made, so it's notonly about what can you buy in Wellington in this market, but it's all about what can you make it into.

Lastly please consider coming to the PT Coffee Break it's Rush's cafe on the 23rd of sept I think I'ts always a great place to air out new purchases and ideas.

Cheers

Steve

[rem33]

Hi Steve
Thanks for refreshing my mind. Its great to see that the deals are there to be taken, and its about working smarter...

The property in question has a good location off main st, but it was the standard of workmanship and lack of permits that pushed me back. As well as a rather unique layout.
Also spoke with another member who also had seen the property - Thank you.

The purchases you described are quite inspiring. well done!

You are quite right, there are good deals in Wellington...in my case however is timing. I have found 2-3 potentials witin 1-2 weeks, but they last days at best....need to be quick.

I'd like to come along to your next coffee break, where is it located? Time?

Thanks very much
Remi

[Kimberly]

Hi Rem33

Lastly please consider coming to the PT Coffee Break it's Rush's cafe on the 23rd of sept I think I'ts always a great place to air out new purchases and ideas.

Cheers

Steve

Hi, unless the date changed it is the 26th September

[essence]

Wellington PT Coffee Break

As posted elsewhere:

Wellington coffee at Rushes - Pauatahanui on 26 September - 10am.

[rem33]

Great, thank you

[kolzee]

Hi rem33,

I'm interested in your post which says:

"I want to buy a property for cashflow, this one anyway.
Location is key to me, and any capital gain is a cherry on top..."

Please don't take this as a criticism (i'm just trying to get you to challenge your own thinking) but i don't believe you're in this for cashflow - if you are, you should ask yourself 'would i do this if i knew that in 3/5/10 years it will be worth my purchase price?'......and the answer should be yes!!

My gut feeling is that you are expecting capital gain (rather than it being a cherry on top) and that you wouldn't enter this deal without thinking you are going to receive this.

My point then is that if you are in this for cashflow then it doesn't look like it will provide this. If you are after the potential for capital gain on the other hand then it may be a good buy?