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  • 'silly question time'

    Just found your site, love the info and am learning lots.
    There is a property for sale locally, just over 8 hectares, Maori lease with a yearly rental of $21000. Has a small amount of grapes and apples on it. Otherwise bare land I believe. This property has a valuation of $755,000 and is for sale at $4999.
    I am curious as to whether this could be turned into something exciting and wondered if anybody had any ideas.
    I must add I am a 40 yr old mother of 5 with no money, no business savvy and no intention of buying this but would think this property would have been snapped up.
    Thanks for taking the time to read this

  • #2
    Hi Jenny,

    Welcome to PT - there is a saying in the world that the only silly question is one that wasn't asked.

    Did you mean $4,999 - if so, there must be some conditions. Its also possible that the lease it due for renewal and the owners are looking for a significant increase.



    • #3
      Hello jmbmot,

      Do you mean rateable or registered/market valuation of $755,000?

      I assume you mean it is being offered for $499,000.

      The Maori lease is likely to be the reason it is so "cheap".

      Do you know anything else about the lease? Also, where is the property?



      • #4
        Hi Jenny
        What is the current zoning for the land ?
        Where abouts is it ?
        Contour etc ?
        If that is the price as you say and lease also.
        With right zoning this can worked (twisted) nicely.

        "after all is said and done - more is said than done"


        • #5
          My guess is the lease is up for renewal so will increase significantly.

          Therefore you are getting bare land and shortly be paying market rental for it. ie. it has no value except for what you do to it. The value is not in the land (that goes to the maori lessor) but in what you plant, grow etc.


          • #6
            Well I will have a guess.
            I have had a tiny bit to do with buying Maori lease and other types of lease hold land. Never rural though.
            My guess is the "bare" is worthless as bare land. By worthless I mean it can not earn enough money to pay the annual lease fee of $21000. Any business that can not earn enough to pay its rent for the shop, machinary, or sales yard is not a viable business and everyone knows that businesses that make a loss are worthless. Well almost. You can sometimes sell the assets like the good will. What you are paying for with the $4999 is in effect good will. I suspect the $4999 is the fee for the real estate agent or it could be the debt to either the bank or the leasee and the vendor will get nothing, For some people it would be a stupid thing to buy an annual liability of $21000. In the one case where my client purchased a Maori leasehold property this is pretty much what happened. The vendor walked away with nothing.
            but for my client it has been a wonderful investment because he has managed to earn enough to pay the lessee and have plenty left over for himself.
            So the answer is are you able to make use of this site and made it work for you. Like build a wonderful home on it and pay the $21000 a year for the lease. The annual fee is cheap when compared with the annual interest that one would need to pay on a $750000 loan if you were buying it freehold.
            So yes invest your million dollars on central city real estate and build your million $ home on what sounds like a wonderful bit of rural residential land.

            Only if if if. bugger better leave it to someone else.


            • #7
              Yes it is $4999, no missing numbers.Lease is due for renewal in 2013 so I take it it has just been renewed. I don't know what the zoning is. Owner has stated he just wants to recoup real estate fees and court costs.
              Propery is in Sunny Motueka (much like myself!)
              It is on Trade Me (no. 44147643) if anyone would like to take a look. I am interested in your comments.


              • #8
                I saw the property before on TM too.
                In effect you are just paying $5,000 for the right to rent the land for $21,000p.a.
                It sounds like the current owner can't make enough from the land to pay the ground lease, and is merely trying to offload the responsibility of paying the rent to somebody else!


                • #9
                  Originally posted by jmbmot
                  Yes it is $4999, no missing numbers.Lease is due for renewal in 2013 so I take it it has just been renewed. I don't know what the zoning is. Owner has stated he just wants to recoup real estate fees and court costs.
                  Propery is in Sunny Motueka (much like myself!)
                  It is on Trade Me (no. 44147643) if anyone would like to take a look. I am interested in your comments.
                  Well how about that. Not a bad guess on my part.
                  Do I get some sort of prise for making the right guess.


                  • #10
                    One thing about Moari lease land in general, it can be hard to get a bank loan. In this case of course you probably aren't looking at a loan, but if you built and needed to borrow, that could definitely be an issue worth looking into carefully.



                    • #11
                      You were right on the money Glenn Im impressed again.Hey dont they grow tobbaco in Motueka that should be profitable


                      • #12
                        That actually might be the problem.
                        A lot of land at Motueka used to be used for this very profitable crop. Since those bafoons in Wellington stopped us growing it (but allowing imports from repressive backward countries) a number of properties have become unecconomic. I do admire crusaders of morality that only go half the way. It just shows the sincerity of their beliefs. Nothing like making the peasants starve in order to uphold a moral high point in remote cities.
                        A few enterprising types have branched out in another even more profitable crop that is smoked. However this runs the risk of having the land confiscated.
                        Too bad the same law could not be applied to tenants goods that get caught using drugs.


                        • #13
                          Hi John

                          Which lenders would lend on Moari lease land? I am looking at a commerical property with a good, 16% return, taking the nominal land lease out. The property is in a smaller town but in the main street with good tenants and good leases.

                          Thanks for the help.



                          • #14
                            Hi Kathy

                            My 1st, 2nd anr 3rd investment properties were all leasehold and all financed directly through a mainstream bank, National Bank, at 80%, 100% and 100% financing respectively.

                            Obviously you're not buying the land, just the improvements, so the valuation is likely to be the value of the buildings, and possibly a lessees interest in the land component.

                            Check up when the lease expires, what the rights of renewal are, and what the new rental is likely to be set at. Talk with owners of other leasehold properties nearby who have the same landowner as they will usually know more about the current situation than anyone else.

                            Leasehold can provide good returns, but I found it's not particularly helpful towards building a good-sized portfolio as capital gains are limited and therefore it's hard to refinance against them to borrow more.

                            In my case I ended up with 4 leasehold properties, sold 2 for about cost, bought the land on the other 2 properties, sold 1 of those and am now left with 1 (now freeholded).

                            In terms of financing, just get a valuation and approach lenders, but be aware that many lenders are not interested, or just don't want to understand the unique situation of leasehold land, and put your application in the 'too hard' basket.

                            Good luck!


                            • #15
                              Thanks for this Spurner, very helpful when it comes to down the road and whats it worth. Were any of your leases Moari leases?