Buying a "Bargain" now

[CJ]

OK, but aren't the majority of apartments seem like they're built for students and low-income workers with no families? That's how it looks to me. I can't imagine many people "wanting" to live in them.

Personally, I think you have the foundations for NZ's first inner city ghettos. The price you pay for poor planning and foresight.

Most are built for students as they were all planned during the last Asian student boom (ie. 36m2 2 bed, with breezeway). I agree that these may turn into ghettos (apparently some already are with a high proportion of HNZ tenants). Some are ok though. You just need to know the complex.

[halfempty]

OK so in the interests of furthering this discussion I would like to offer my property as a sacrifice for you to pull to bits.

I renovated a large property (Residential) it now has multiple income streams and is returning a net $82,900pa.
I'm getting 52 weeks income and the property is in a major NZ city.

I wish to sell the property, to release equity, what price should I list it at?

Or alternatly what sort of yield would you expect to take from this property.

I don't want to give too much more detail because I would rather get a true answer from investors rather than have my post moved to the buyer beware section (Note mods I'm not trying to sell it here).

I've got a health renovators margin in the deal and I'm going to sell it by tender within a few weeks but what sort of retrun would you guys expect?

As a guide the income is $82,900 as above and I have aprivate valuation at a little over a million which I think is way too high.


Thoughts?

[kalovatt]

Well the first thing that springs to mind is, is this a room by room rental, or boarding house setup? You say multiple income streams, so its either room by room (boarding house setup) or its two or more individual properties on one section. In my opinion the price achieved would be quite different.

[tpr2]

OK, but aren't the majority of apartments seem like they're built for students and low-income workers with no families? That's how it looks to me. I can't imagine many people "wanting" to live in them.

Pesonally, I think you have the foundations for NZ's first inner city ghettos. The price you pay for poor planning and foresignt.

Hi tan
not all.
I own and live in a 308 m2 apartment and I have just bought a 427 m2 one.
I also own a 70m2 apartment with a 40 m2 balcony that has views out over rangitoto, corromandel (please excuse spelling), waiheke and out as far as great barrier.
I will probably by 2 90m2 2 beddies in the next month or so as well. Still deciding on that one.
So yes there are lots of crappy little apartments but there are some nicer ones as well.

One of my strategies probably next year some time will be to start looking for consolidation opportunities in some of the buildings that have smaller apartments. I think that idea came from one of olly's books and I think the timing is nearly right.

cheers

Terry

[tpr2]

Well the first thing that springs to mind is, is this a room by room rental, or boarding house setup? You say multiple income streams, so its either room by room (boarding house setup) or its two or more individual properties on one section. In my opinion the price achieved would be quite different.

I agree with this statement. If it was a plain and simple residential rental and we knew the general location then we could work out a factor based on comparative yeilds for the cashflow junkies.

Without that sort of info its a bit more difficult.

[CJ]

Hi tan
not all.
I own and live in a 308 m2 apartment and I have just bought a 427 m2 one.
I also own a 70m2 apartment with a 40 m2 balcony that has views out over rangitoto, corromandel (please excuse spelling), waiheke and out as far as great barrier.
I will probably by 2 90m2 2 beddies in the next month or so as well. Still deciding on that one.
So yes there are lots of crappy little apartments but there are some nicer ones as well.

One of my strategies probably next year some time will be to start looking for consolidation opportunities in some of the buildings that have smaller apartments. I think that idea came from one of olly's books and I think the timing is nearly right.

308 and 427m2 are huge (the average family home is between 100 and 200m2). there must only be a few penthouses that size in Auckland (or are these Goldcoast?)

What returns do you expect from the 70m2 and the 90m2 apartments (I assume all 2 bed) - The 90m2 must be about $500k+?? and rent for $500-800?. My impression is that the good returns (9%+) are only available on the crappy little apartments.

What do mean by consolidation opportunities? Do you just mean jump in at rock bottom prices or do you mean something else.

[outspoken]

I think he means knock the walls out between two smaller apartments making them into one bigger one

[tpr2]

308 and 427m2 are huge (the average family home is between 100 and 200m2). there must only be a few penthouses that size in Auckland (or are these Goldcoast?)

They are in auckland. I believe there are maybe 12 or 15 not sure exactly.
The second one is being purposely built for me in a new development and will take up the top two floors, so this one is a couple of years away from completion.

What returns do you expect from the 70m2 and the 90m2 apartments (I assume all 2 bed) - The 90m2 must be about $500k+?? and rent for $500-800?. My impression is that the good returns (9%+) are only available on the crappy little apartments.

The 70m2 I have had for a couple of years and I expect if I sold it now I would perhaps get my money back due to the location and its aspect. The yield is not the greatest due to it being out of the "student" zone but I liked the views so I bought it. yeild is roughly 7.3%

The 90m2 is another that I feel will have longer term growth potential. The yield on these will be 6%. It is in the same building as the penthouse I have purchased already

What do mean by consolidation opportunities? Do you just mean jump in at rock bottom prices or do you mean something else.

I think he means knock the walls out between two smaller apartments making them into one bigger one

outspoken is correct.

If I could get a couple of 40m2 1 beddies next to each other at the moment for the right price I think the resulting 80m2 apartment will be great value.
Its not lineing up for me yet in that area but I think it will eventually.

[watchful]

If I could get a couple of 40m2 1 beddies next to each other at the moment for the right price I think the resulting 80m2 apartment will be great value.
Its not lineing up for me yet in that area but I think it will eventually.

Sounds like you are doing well on the apartment scene. Good to hear Terry. With this consolidation idea, my only concern would be the consolidation of Body Corp fees and rates. A shoebox we used to own had B/C fees of over 4K P.A. For me 8K P.A for an 80m2 prop would blow out many of my calcs.

I also get a little dubious about the B/C and Strata Management companies that are set up with these new developments. They literally keep control of the B/C (by the way of passive prop management or just by keeping a stake in the building) and charge like a wounded bull for their associated services. We heard numerous objections to a conflict of interest our B/C management co had with the cleaners and security firms. Of course, all audited by a firm who I am sure is completely independant .

[CJ]

Terry,

I assume with those yeilds you are a looking for capital growth rather than income (even if they are net yeilds as they are both below average interest rates).

Why do you prefer off the plan. I understand for your PPOR but for investment purposes, dont existing builds offer better opportunities (especially in todays martket (with desparate sellers))?

[captaincrab]

To knock out adjoining walls you will need the consent of the Body Corporate. If you wish to amalgamate the Titles, EACH unit Title Holder in the building will need to consent. And then theres the Council to overcome.

[tpr2]

Hi Guys
All good points and all very relevant.
Of course each and every deal needs to be looked at on its own merits. Not all building will suit a consolidation strategy however there will be a time when it will.
I nearly had one earlier this year but the owner of the apartment next door got greedy and decided to try and squeeze a bit more out of me because he knew I owned the place next door and probably knew what I was up to.

I actually offered about 10k over the RV but he wanted more. I backed out and 4 months later he sold if for 40k less than I had offered. Unfortunately I was not in the position to buy it then as I had just bought the 308m2 penthouse and had a little less cash available at that stage..lol

I will coment soon on the other posts, I have an appointment I have to rush to so best be off right now though.

cheers

Terry