Tokoroa investment

[Beano]

On Trademe, 4 to rent in Tokoroa!
But also 120 for sale.

An example of one for sale.

Units, and agent saying 10% Gross Yield - which sounds good but obviously based on 52 weeks.

7 owners since 2004, plus currently on the market! Gives you an idea of what investors have thought once they actually own it!

Here would be my workings on cashflow

Income:
Rent -	Weeks	46				22080
	Per week	160	3 units
		As a % of total house			8.83%
Less Expenses:
Accounting					1200
Bank fees					50
Body Corporate					0		If interest goes up
Insurance					1500
Interest		Rate	5.00%		12,500		7.50%	$18,750.00
Property Management at 7.5% plus GST					1,904
Rates					4779
Repairs and Maintenance					2000
Seminars
Subscriptions
Travel					500
Total Expenses						24433.40		$30,683.40
NET CASH SURPLUS (DEFICIT)						-2353.40		-$8,603.40

So in my opinion factoring in vacancy and fair expenses, it would be losing cash!

Great post ...i think I will stick to the main cities!

[Davo36]

Great post ...i think I will stick to the main cities!

Hey Beano,

Several people on here have done a story about how they got into property, what they did etc. up until the present day.

Would you consider doing this?

[brokerman]

Only issue from a finance perspective is reselling if the buyer can't get Bank money. Non bank lenders do not like Tokoroa at all and limit the LVR to 70 possibly 75%.

[Beano]

Hey Beano,

Several people on here have done a story about how they got into property, what they did etc. up until the present day.

Would you consider doing this?

Hardly. ..unless it is called "my life as a mis-manager of property" made more mistakes than anyone I know.
Really the truth is never done anything exciting but made many mistakes.
Just lucky to hold high yielders when interest rates fell

[Courham]

Hardly. ..unless it is called "my life as a mis-manager of property" made more mistakes than anyone I know.
Really the truth is never done anything exciting but made many mistakes.
Just lucky to hold high yielders when interest rates fell

But that is where the real learning for investing comes from Beano, lessons for others to learn from and maybe avoid themselves.

Craig

[Perry]

Here would be my workings on cashflow:
Accounting: $1200

Are you suggesting that adding one new rental to an existing portfolio would add an extra $1200 to the existing portfolio accounting fee?

[Rosco]

Are you suggesting that adding one new rental to an existing portfolio would add an extra $1200 to the existing portfolio accounting fee?

Hi Perry,

Every situation is different. Some will be buying their first rental too, or have existing rentals but choose to put this rental in a new entity.

So when completing the estimated cashflow I prefer to allow more. But yes if you already had rentals, and were going to put the new rental in the same structure, it would cost a lot less.

Ross

[Beano]

Hi Perry,

Every situation is different. Some will be buying their first rental too, or have existing rentals but choose to put this rental in a new entity.

So when completing the estimated cashflow I prefer to allow more. But yes if you already had rentals, and were going to put the new rental in the same structure, it would cost a lot less.

Ross

That is s great post Ross
There is only one additional item that i put into your (pre tax) cash flow and that is CapX to maintain the cash flow
Unsurprisingly it is very similar to my tax depreciation in many years and unsurprisingly it really is a material cash flow item.

If you extend this cash flow to post tax then principal payments (as well as lumpy tax payments need to be taken into account)

Ps I enjoy digesting Cashflow statements

[Nick G]

Thought he had that with R&M.

With a 1-2 simple B&H portfolio, depending on your structure, there are some property specific accountants who will do lower fixed fee work. However it's best to get your set-up right early (expensive later).

[saleemn]

Investment in Tokoroa

Hi

Any idea about investing in Tokoroa. The gross yield is over 11% A block of unit of 4 - 3 x 2BR and 1 x 3BR can be picked up for 350K

Any comments welcome

[Nick G]

Hi Saleemn, suggest you ask Wayne Dickson about it (disclosure I am part of iFindProperty) http://www.ifindproperty.co.nz/about...wayne-dickson/ he grew up there, invests there and has both done well and learned from early mistakes investing there.

I've driven around Tokoroa with him and he pointed out a few blocks of flats that are a bad deal at any price. High turnover, crime, just a nightmare. His partner is a property manager in Tokoroa and there are some flats/street she won't manage despite growing up in the town. I don't know if these are the same units but if they are better to find out now! They tend to change hands regularly for a new investor to enjoy. On the flip side, Fiona is a great PM should you invest there. We have no financial relationship with her property management business.

When I visited Tokoroa a while back I was pleasantly surprised. The town was rocked by decline in forestry in the 80's and 90's but there are some new industries (particulalry farming, logistics and freight) and folks are a bit more up-beat. They're putting in a rail siding through to port of Tauranga and businesses operate there because of proximity to farming/forestry and low costs. The Cambridge bypass has benefited Tokoroa in terms of foot traffic and more eateries are popping up. On the flip side it is a small town that is exposed to the same economic vulnerabilities as the rest of rural New Zealand. If you do buy in a small town you want to have a property that will rent well through any upcoming economic dip, so I'd compromise a bit on appraised gross yield and go for something a family or pensioners will want to live in for years at a time. My .02c.

[saleemn]

Thanks Nick this is a great advice

Saleem

[Rosco]

Hi Saleem,

What is your long term aim or goal with this property? If you are after a quick gain, most likely now is not the time to be taking a gamble on Tokoroa. With Auckland and Hamilton slowing, how long before Tokoroa is affected? In the last boom cycle, Tokoroa jumped up in value, but also a lot of investors lost in the following few years!

If you are looking at long term rental and passive income, does the rent pay for all costs including fair repairs, and can it pay off a mortgage over say 25 years? Also allow for higher vacancy?

Ross

[Frezzinghot]

Search this thread, you will probably see it is the most asked about town. High yields but for most a poor area to invest in. Then again I am bias towards auckland!

FH

[Beano]

Hi

Any idea about investing in Tokoroa. The gross yield is over 11% A block of unit of 4 - 3 x 2BR and 1 x 3BR can be picked up for 350K

Any comments welcome

What is the net yield ?
9pc ? 8pc ?