Northland properties for cashflow- strategy ok?

[Saunders01]

Hi All- first poster here.
Wondering what peoples thoughts are here- is this the right thinking or is the risk too great?

My wife and I have a property portfolio of 11 properties- we are in our early/ mid 30s. We like to have a cash flow positive portfolio and use cheaper Northland properties with the rents more than covering the mortgages to cover themselves and also contribute to the shortfall in rent from some more "growth" type properties. Is this a sound strategy?

Some of the "cash flow" properties we have purchased so far:
1) Purchase price 108K, rents for $220pw
2) Purchase Price 100K, rents for $260pw
3) Purchase price 107.5K, rents for $250pw
4) Purchase price 110K, rents for $250pw
5) Purchase price 97.5K, rents for $240pw
6) Purchase Price 95K, rents for $230pw

We are not based in Northland so the houses are property managed and we have had no great issues with vacancies having owned most for 2-3 years. These properties are not going to make us rich by themselves but they do serve a function. 2016 QVs on these properties did show a 133K increase (across all 6) on what we paid for these which is nice also.

Any feedback appreciated.
Cheers.

[drelly]

Hi There. I'm based in Whangarei. Assuming these are 3 bedroom houses and not flats, I'm guessing you've bought in the Kawakawa to Kaikohe area, Kaitaia, or some other small rural location?

The right question is "will it work for you?" and only you can answer that. For me, the type and location of these properties is probably too risky. I started buying in 2002 and although I didn't buy all real cheap properties, I still think I would have done better to buy a little better quality and in a better location, than focus on cash flow as much as I did. The trouble with cheap houses is that a new roof still costs roughly the same amount as a more expensive property. I've found that there's a kind of false economy in buying cheap, as maintenance is higher and it means losing out on 10's of thousands in capital gain. I think if you recognise that cheap property generally means the shit is more likely to hit the fan at some point, then you can be prepared for it. There's many paths to wealth!

[Hurricanebold]

Drelly, I'm moving to Whangarei in a month and looking to buy my first couple of properties.
Looking for cashflow not capital gains. How have you found investing in Whangarei? Do you mind if I ask what locations you buy in? Looking at Kamo, Tikipunga, Raumanga or maybe Onerahi. Cheers

[drelly]

Drelly, I'm moving to Whangarei in a month and looking to buy my first couple of properties.
Looking for cashflow not capital gains. How have you found investing in Whangarei? Do you mind if I ask what locations you buy in? Looking at Kamo, Tikipunga, Raumanga or maybe Onerahi. Cheers

Whangarei has a boom and bust economy and we lack diversity when it comes to large employers. We've had very little capital gain from 2007 through to early 2015 but prices are rising fast now. Good tenants have been hard to come by in the past but now the demand for tenancies is insane. I've advertised one recently and had over 60 enquiries. Lots of Aucklanders moving up here pushing the prices up!

The cheaper areas in these suburbs would be;

Kamo - east side of Kamo Road north from Station Rd, through to Corks Road)
Tikipunga - Roads off the south end of Vinegar Hill Road
Raumanga - south side and west side of Otaika
Onerahi - what we call the "sunken village" down the hill on the north side of the airport (Raurimu Ave area)

[Hurricanebold]

Whangarei has a boom and bust economy and we lack diversity when it comes to large employers. We've had very little capital gain from 2007 through to early 2015 but prices are rising fast now. Good tenants have been hard to come by in the past but now the demand for tenancies is insane. I've advertised one recently and had over 60 enquiries. Lots of Aucklanders moving up here pushing the prices up!

The cheaper areas in these suburbs would be;

Kamo - east side of Kamo Road north from Station Rd, through to Corks Road)
Tikipunga - Roads off the south end of Vinegar Hill Road
Raumanga - south side and west side of Otaika
Onerahi - what we call the "sunken village" down the hill on the north side of the airport (Raurimu Ave area)

Cheers Drelly, yeah I've heard prices are on the move. It's difficult to make the numbers work on some of the properties I've seen online but I'm keen to get to know the place and get amongst it!

[Hurricanebold]

Sorry Saunders01 for hijacking your post!
Where are your properties??

[Meehole]

Whangarei has a boom and bust economy and we lack diversity when it comes to large employers. We've had very little capital gain from 2007 through to early 2015 but prices are rising fast now. Good tenants have been hard to come by in the past but now the demand for tenancies is insane. I've advertised one recently and had over 60 enquiries. Lots of Aucklanders moving up here pushing the prices up!

The cheaper areas in these suburbs would be;

Kamo - east side of Kamo Road north from Station Rd, through to Corks Road)
Tikipunga - Roads off the south end of Vinegar Hill Road
Raumanga - south side and west side of Otaika
Onerahi - what we call the "sunken village" down the hill on the north side of the airport (Raurimu Ave area)

Our rental in Kensington had over 2500 views and only 1 application (through letting agent). Alot of enquiry but requirements quite high for the tenant as property is up row with 3 other houses. I've heard that there is a shortage of good rentals but my recent experience (secured tenant this week) says otherwise.

[Alanz]

I started buying in Whangarei since September last year and bought 4 so far. One in a better street of Tikipunga, two in east Kamo, one in the better part of Raumanga. I am lucky to start early as all of them are Positive cash flow with 100% finance. The Whangarei market is moving fast and selling quick from my observation, especially from January this year. Most of the good properties are snapped up in a few days when on the market and many end up with multi offer.

I agree with maintenance issue with those cheap ones. Be prepared for it.

In terms of tenant demand, I think it's more depending on which part of the year when it's on the renting market. In the early year the demand is high, one of my properties was gone within a week in January. However another one was vacant for one month and half in October last year.

[Meehole]

Sold in November last year in Tikipunga. Purchased 2007 $255k, spent $20k reno. November 2015 sold $310 had spent another $10k on reno as tenants in that area wreck your properties, don't care what anyone says. Sold privately so a bit of a capital gain. Should have purchased in Mangawhai, better capital gain since 2008.

[Hurricanebold]

I started buying in Whangarei since September last year and bought 4 so far. One in a better street of Tikipunga, two in east Kamo, one in the better part of Raumanga. I am lucky to start early as all of them are Positive cash flow with 100% finance. The Whangarei market is moving fast and selling quick from my observation, especially from January this year. Most of the good properties are snapped up in a few days when on the market and many end up with multi offer.

Wow! You mush have done some good buying with 100% finance to get positive cashflow! We are looking at 80% and the numbers are still difficult.
Thanks for the feedback, it's been really difficult to find info on the Whangarei market.

[Saunders01]

Haha- post hijacked but its all good discussion!
4x properties in Kaitaia and 2x in Kaikohe. All 3 bedroom houses built in late 70s/ 80s. Having worked a bit on these properties recently I would say we would not buy again in Kaikohe. Kaitaia has a nicer feel about it though so would consider there again. We are also finding a bit of cashflow in Dunedin at the moment- long term this may be the better solution for us- located closer to us, larger city, potential for more growth/ better tenants. We learn as we go......

[drelly]

Kaikohe has been in a steady decline for many years now. The prison only made it worse, as gang members moved to Kaikohe to be closer to their inmate relatives. Kaitaia has suffered economically as well. There's a high level of unemployment there. About 30% I believe. Only one major employer in the area.

[tulson28]

have just brought my first Investment property in Kamo. Have just gone unconditional recently renovated 3 beady with tenants in place paying $385 p/w Payed 320k.

can anyone recommend a good property manager?

[Beano]

Hi All- first poster here.
Wondering what peoples thoughts are here- is this the right thinking or is the risk too great?

My wife and I have a property portfolio of 11 properties- we are in our early/ mid 30s. We like to have a cash flow positive portfolio and use cheaper Northland properties with the rents more than covering the mortgages to cover themselves and also contribute to the shortfall in rent from some more "growth" type properties. Is this a sound strategy?

Some of the "cash flow" properties we have purchased so far:
1) Purchase price 108K, rents for $220pw
2) Purchase Price 100K, rents for $260pw
3) Purchase price 107.5K, rents for $250pw
4) Purchase price 110K, rents for $250pw
5) Purchase price 97.5K, rents for $240pw
6) Purchase Price 95K, rents for $230pw

We are not based in Northland so the houses are property managed and we have had no great issues with vacancies having owned most for 2-3 years. These properties are not going to make us rich by themselves but they do serve a function. 2016 QVs on these properties did show a 133K increase (across all 6) on what we paid for these which is nice also.

Any feedback appreciated.
Cheers.

What would your properties net yield be after
Rates
Insurance
Repairs
Allowance for major repairs/refurb
Vacancies
Management ?

[tulson28]

mortgage- $360p/w 100% finance P and I
raes- $25 P/W
Insurance-not sure yet
repairs $12 P/w
refurbs? Has just been renovated shouldn't need anything for awhile?
Management- $25 P/W The previous landlord didn't use a manager tenants have been in place a long time and she done frequent visits and meth tests all documented well. I still think I am going to get a manager though as I don't live in whagarei she did.
Vacancies -not sure

By no means do I think this is the best deal around in terms of yield. I was after something a little nicer in the hope it attracted better tenants if this lady moved out/less maintenance. I will be around -$40-50 per week (1-2 coffees per day) in saying that I won't be giving them up. there is some room to add value/increase rents by adding a deck and fencing.

Buying a shiter that offered great yield didn't really appeal to me, for my first anyway! possibly might make sense down the track. I brought well with my personal home in Auckland which will become an investment property in the next few years and will offer 8-9% yield on todays rent prices. depending on the new unitary plan i can also place a minor on my auckland place also which would give around 11% yield

hopefully ive made a good decision to buy something a little nicer (only time will tell)