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Where do all the good tenants live?

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  • Where do all the good tenants live?

    Kerry the presenter did suggest a possible strategy is to build then flick several until you get to a point and build hold a house.
    That way you get a low maintenance house with a better class of tenant. A completely viable strategy for some investors.

    I have addressed here whitt's above comment in another thread, so as to avoid hijacking that other thread.

    ( http://www.propertytalk.com/forum/sh...9072#post69072 )

    Out of interest, do the big time landlords believe this is really true?

    Does a newer or new property necessarily mean a better quality of tenant?

    In my experience the two do not go hand in hand. A new house in a rough area will attract rough tenants, not quality ones.

    A rough house in a quality area will attract quality tenants.

    Rough tenants will not live in blue chip residential suburbs and quality tenants will not live in rough suburbs.

    A better guide, always, is clean, tidy, functional and in working order.

    So as not to start a semantics war, by quality tenant I really mean one that pays the rent and looks after the place and is honest. By rough tenant I mean one who doesn't. Plenty of rough tenants are stuck up snods with a university degree and who dress well. Plenty of excellent tenants swear, smoke, work as mechanics and eat fish and chips every day while farting in front of Shortland St.

    xris
    Last edited by xris; 03-04-2007, 09:35 PM.

  • #2
    I agree...well said !

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    • #3
      The increasing costs of construction would make this idea prohibitive I feel. Inefficient use of capital. You'd have to be bloody mad or incredibly clued up.

      Better to focus on location as xris suggests.

      Comment


      • #4
        You have to know you market and therefore your tenants.

        My properties are all in high capital gain areas, new or near new, with 3 bedrooms plus study and garages so that my tenants can park their nice cars in.

        I have never had a missed rent payment in more than 5 years.

        So in a way the real answer is knowing your market and target tenants. My properties would not suit people on the dole (they could not afford the rent) and the type of property I market is to attract professional working couples who pay by direct debit and who don't seem to have any issues paying the rent and who look after the place (my property inspections always come back favourably.

        LK

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        • #5
          Originally posted by LondonKiwi View Post
          You have to know you market and therefore your tenants.

          My properties are all in high capital gain areas, new or near new, with 3 bedrooms plus study and garages so that my tenants can park their nice cars in.

          I have never had a missed rent payment in more than 5 years.

          So in a way the real answer is knowing your market and target tenants. My properties would not suit people on the dole (they could not afford the rent) and the type of property I market is to attract professional working couples who pay by direct debit and who don't seem to have any issues paying the rent and who look after the place (my property inspections always come back favourably.

          LK
          How do you afford these kind of properties initially? As the rent would no where near cover the costs of mort & other expenses?
          Need a website or anything to do with online marketing? Visit Christchurch Web Design.

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          • #6
            Originally posted by srv View Post
            How do you afford these kind of properties initially? As the rent would no where near cover the costs of mort & other expenses?
            By looking longer than the first year or two - if you can support the mortgage until the rent rises, and you don't care about servicability for more purchases immediately, then negative gearing may be suitable, with the reduction in tax a welcome bonus.

            cube
            DFTBA

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            • #7
              Originally posted by LondonKiwi View Post

              My properties are all in high capital gain areas, new or near new, with 3 bedrooms plus study and garages so that my tenants can park their nice cars in.

              LK
              I like the sound of this and I too, would like to hear your strategy for getting into these types of property.

              1. For each purchase did you assemble a large enough deposit to go cash neutral/positive from day one or did you cover the shortfall initially?
              2. How fast have you added to your portfolio?
              3. Any problems with serviceability with these types of (-ve cashflow?) properties?
              4. What locations do you favour - Ak?

              Hope you don't mind the inquisition.
              tricky

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              • #8
                Hi guys. Interesting discussion. One of the things that I have learn't from reading the sage "Glen of Nelson" submissions is that there is money made in all types of properties and tenants. We buy the property and then the property management skill is to manage the tenants in the way that is most appropriate to these people. It appears as though he has people to fit any property but some have a far more controlled relationship with their property manager than others.
                Last edited by [email protected]; 04-04-2007, 11:47 PM.
                Doug

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                • #9
                  Originally posted by srv View Post
                  How do you afford these kind of properties initially? As the rent would no where near cover the costs of mort & other expenses?
                  If I'm honest by living in the UK, earning pounds, and then being able to pay down mortgages when I can.

                  If I was in NZ I don't think I would be able to go down the same route with my property purchases, I would probably have a different strategy and target tenant demographic.

                  LK

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                  • #10
                    Originally posted by tricky View Post
                    I like the sound of this and I too, would like to hear your strategy for getting into these types of property.

                    1. For each purchase did you assemble a large enough deposit to go cash neutral/positive from day one or did you cover the shortfall initially?
                    2. How fast have you added to your portfolio?
                    3. Any problems with serviceability with these types of (-ve cashflow?) properties?
                    4. What locations do you favour - Ak?

                    Hope you don't mind the inquisition.
                    tricky
                    To answer these questions specifically.
                    (1) I always contribute a min of 20% deposit and then pay down the mortgages to break even after all expenses. These properties are cashflow negative at time of purchase, but as I earn income in the UK there are no tax advantages of this in my situation.
                    (2) I attempt to add 2 x properties per year.
                    (3) Not too much of an issue but only because I am living in the UK and earning pounds and this alllows me the opportunity to pay down these loans when I can.
                    (4) All in Wellington as its the market I know.

                    LK

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                    • #11
                      You are correct in what you Xris about better class of tenant.

                      The other benefit that was raised was the bonus of low maintenance you get with a new home in the first several years.

                      I can vouch for that. The new ones I own hardly cost anything in maintenance. $600 in 3-5 years.

                      So the yield can sometimes be lower but overall costs the same as an older property.

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                      • #12
                        This maintenance issue with newer homes is an important one, in a similar way to depreciation. In both cases the early figures will be quite different from older houses and to the landlord's benefit, ie low maintenance costs and high depreciation claims.

                        However, I believe one has to be a little careful here so as not to dismiss completely the possible later implications of this. Higher maintenance costs will occur and clawback may occur. If the landlord is aware of this and his plan takes it into account then all should be fine, but if he does not then he might be in for a nasty shock further down the track.

                        In the past there have been some excellent threads on this topic, in my opinion some of the best on this site.

                        xris

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                        • #13
                          Once again I agree Xris.

                          I did well in the early days as my first investment property was brand new. This meant I had virtually no maintenance.
                          I later realised that these low figures would only be in the properties early years. However rents have gone up and also capital gains since.

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                          • #14
                            Terms of Trade

                            LK

                            Did you actually mean DD, rather than AP? Or is
                            it a nomenclature difference between UK & NZ?
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                            • #15
                              Originally posted by Perry View Post
                              LK

                              Did you actually mean DD, rather than AP? Or is
                              it a nomenclature difference between UK & NZ?
                              I did mean AP, yes. Just about all automatic payments over here in the UK are DD so just inserted that by habit!!

                              LK

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