Our first investment property- Christchurch or Dunedin?

[wiseinvestment]

Hi all,

We are from Christchurch but we are living overseas. We want to buy an investment property. Our main focus is that we want income/cash flow from the property. We currently have $70,000 saved and will have about $110,000 saved come June (when we come home for a couple of months). After this we will be saving roughly $90-100k per year. Our goal is to eventually live off the rental income of the properties that we buy. We plan to live and work overseas until we can realize this goal.

We would really appreciate some feedback on the following:

1) We are trying to work out whether we buy in Christchurch or Dunedin. We are thinking of these places because we understand the Christchurch market and Dunedin is cheaper to buy so we can pay any mortgage off a lot faster than Christchurch. Plus although we are currently saving a lot our jobs are based on 2 year contracts and so we don't want to have a lot of debt plus we are a bit risk averse.

2) Because we live overseas we will have to use a property manager irrespective of whether we buy in Christchurch or Dunedin. Do you still make a decent income when using a property manager? Or, is a capital gain the only monetary benefit you can make if you use a property manager?

Thanks

[jimO]

a Dunedin student flat will give you a good return but it will have to be a nice one and close to uni because there are lots of un tenanted flats here at the moment and the students are back already, students dont want the real dumps and the far away flats especially for the price they are expected to pay

[wiseinvestment]

Hi JimO, thanks for the reply! Can you please tell me roughly the price range for a 'nice flat close to uni'?

[jimO]

look for Nth Dunedin or anything listed as student rentals ...http://www.trademe.co.nz/browse/cate...ath=0350-5748-

[epsomtax]

Hi all,



1) We are trying to work out whether we buy in Christchurch or Dunedin.

Thanks

The Dec issue of NZ Property Investor had an excellent article on renting out to students in Dunedin. Look up the mag on the web - you might be able to get a back issue.

[wiseinvestment]

Thanks! Will try and find a copy

[Xav]

Dunedin is cheaper to buy so we can pay any mortgage off a lot faster than Christchurch.

I am not sure how long you have been away from Christchurch, but as you are probably aware the rental market in the Western (and some other) parts of Christchurch is incredibly strong at the moment. The gross rental will be much higher than Dunedin so you may want to check whether buying in Dunedin would actually pay off the mortgage faster. I'm not very familiar with the Dunedin market so I don't pretend to know whether it will or not.

Another factor to consider is that in Christchurch at the moment you are likely to have a large selection of prospective tenants whereas that may not be the case in Dunedin.

2) Because we live overseas we will have to use a property manager irrespective of whether we buy in Christchurch or Dunedin. Do you still make a decent income when using a property manager? Or, is a capital gain the only monetary benefit you can make if you use a property manager?

Property managers fees are usually around 7% of gross rental. Whether or not you make a decent rental return after payment of that depends on the yield of whatever you up buying. Generally speaking you can certainly still make a decent income using a property manager, particularly with the size of your deposit.

[Rosco]

Hi, As you are based overseas, does it matter where you buy? Why restrict yourself to Dunedin and Christchurch?

You mentioned that you are looking for cashflow, which is obviously an important part. But also make sure you buy something with capital gain potential. This is how property investors make there wealth long term, so firstly I'd me looking for a property type and area that should get capital gain and then secondly looking at cashflow.

You could buy a property in Tokoroa that would have great cashflow on paper, but I consider there to be little capital gain potential as the town is slowly dying. So you might manage to make a $1000 or $2,000 a year on the cashflow, but really the property wouldn't help you get ahead long term or gain long term wealth.

Ross

[muppet]

the town is slowly dying.

Surprising, seeing how much industrial type buildings are being built.

[Wayne]

that took you longer than I expected

[Maccachic]

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10868272&ref=rss

The number of revellers at Dunedin's annual Hyde St keg party is set to be curtailed, as stakeholders try to minimise the impact of the all-day drink-fest.
At its peak an estimated 5000 people attended last year's party, which featured 15 arrests, a roof collapse from being overloaded with partygoers, and 80 people requiring treatment by St John.

[jimO]

http://www.nzherald.co.nz/nz/news/ar...868272&ref=rss

The number of revellers at Dunedin's annual Hyde St keg party is set to be curtailed, as stakeholders try to minimise the impact of the all-day drink-fest.
At its peak an estimated 5000 people attended last year's party, which featured 15 arrests, a roof collapse from being overloaded with partygoers, and 80 people requiring treatment by St John.

yea but those 5000 students are all paying champagne price for beer accommodation

[Maccachic]

Regardless of what they are paying (demand/supply) the majority of students do not treat the places with respect. I have been to these parties (not that long ago).

Dunedin is known for its student parties and no one is going to change that any time soon. Just take a look at a new build at the end of its first year. Def need to factor in repairs each year.

The hills would be a better place to look, my rental is easy to fill with quality non student tennants and is only 10 mins out of town.