Tokoroa investment

[Wayne]

speight

Speights - I'll drink to that.

Hint - spate.

[Hamz1207]

Thanks Nick. Tokoroa is an interesting place for me. Its close to Hamilton, Tauranga, Cambridge and Rotorua. Lack of industry there worries me but being so close to a few major centres it's not a long commute for work. As you say can pick up a decent rental for 100-150K. I don't think it will be a boom town per se but I think house prices will remain consistent and people may look to Tokoroa as first house option.

[muppet]

small town in a remote location.

Well said.
80km and 1hr to Hamilton, 75km and 55mins to Tauranga, 55km and 40 mins to Rotorua, 65km and 45mins to Taupo
220kms to Central Auckland and 210kms to Napier.
A damned sight more central to the North Island than Auckland is.
How long does it take you to get to work in Auckland?

[Nick G]

The thing to look at is what's going to happen from here? An awful lot of folks are hitting retirement age right when there is a housing squeeze and are looking for more bang for their pension buck. Anyway, do your research and maybe message Wayne from our website he'd be happy to talk about it having lived there his whole life.

[Anthonyacat]

Speights - I'll drink to that.

Hint - spate.

I wrote spate, but it was underlined and suggested spat. Good to know.

[Frezzinghot]

Thanks Nick. Tokoroa is an interesting place for me. Its close to Hamilton, Tauranga, Cambridge and Rotorua. Lack of industry there worries me but being so close to a few major centres it's not a long commute for work. As you say can pick up a decent rental for 100-150K. I don't think it will be a boom town per se but I think house prices will remain consistent and people may look to Tokoroa as first house option.

Cashflow good capital growth poor. Problem is time. How long will you have to wait before you get any positive growth out of a portfolio down there. I think if you can accelerate your growth you should try. Auckland, hamilton, and other main centres offer this. Yes its more expensive but in 10 years who is going to care. (providing you can afford to keep it)

FH

[Wayne]

Cashflow may be good but you must look at net cashflow - after rates, insurance etc.
Usually in places like this (small size) rates are around the same as the bigger cities (costs the same to flush a toilet no matter what the cost of the house) but as a % of the value they look high.
So as a % of the rent (number of weeks rent) they suck up your cashflow.
Repairs make a bigger difference too.
You need a much higher % return to make them pay.

[Puff]

It depends on what your investing strategies are I guess.
For example you aren't going to get major capital gains, especially if you start this time of the cycle.
Tokoroa is like other small town NZ that is a little vulnerable when the market peaks. When it does it traditionally losses 10 -30% and then stabilises for 5 - 8 years until it again follows the larger cities and goes through a couple good years of growth like it is now, always be weary of whats coming up and how the major business's are going.
Make sure you are holding enough for the expenses from the rent, i.e. maintenance, rates, insurance, etc...
Just make sure you are investing their for the right reasons.

[Rosco]

Cashflow may be good but you must look at net cashflow - after rates, insurance etc.
Usually in places like this (small size) rates are around the same as the bigger cities (costs the same to flush a toilet no matter what the cost of the house) but as a % of the value they look high.
So as a % of the rent (number of weeks rent) they suck up your cashflow.
Repairs make a bigger difference too.
You need a much higher % return to make them pay.

As Wayne has said, make sure you include repairs in the comparison. Often the tenants are not great in Tokoroa, so the repairs are more. Also some of the houses are run down and need more repairs in the long term.

Ross

[Beano]

Cashflow may be good but you must look at net cashflow - after rates, insurance etc.
Usually in places like this (small size) rates are around the same as the bigger cities (costs the same to flush a toilet no matter what the cost of the house) but as a % of the value they look high.
So as a % of the rent (number of weeks rent) they suck up your cashflow.
Repairs make a bigger difference too.
You need a much higher % return to make them pay.

All so true
Perhaps also vacancies can be extended for long periods too!

[Perry]

Given that one of PT's long-standing moderators lives in Tokora, that just has to make it a great place - right?

[Bobsyouruncle]

I was wondering why M hadn't been in to put everybody straight?

[Nick G]

Talk to Fiona from Rent Assured about what makes a good rental. She's local and fussy :-)

Good tips in this thread about keeping an eye on your fixed costs as a ratio to rent.

[muppet]

Check post 11 above.

[Rosco]

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!