Investment Property in Mt.Wellington - Newbie

[weera2500]

Nearly two years ago I bought my very first property in Mt.Wgtn after so much struggle saving up for a deposit. I live in that property and plan to do so for at least 3-5 years, if not more. Very recently a 3bed-1 bath house on the same street I live in, right opposite my house actually, has been put up for auction. I am thinking of buying this property as an investment so I can rent out the three rooms in it (individually as opposed to a family rental). If I can get it, I also plan to manage it as I live across the road. It is weatherboard, so no leaky issues at a glance. But I will get a builder to check. Cross-lease with one other property, small-ish floor area, 20-30 years old, tidy and clean but not modern-modern. I also managed to get an e-valuation done through the bank.

When making an offer for a rental property, would I be right if the maximum price I offer does NOT go beyond what the e-valuation says? Is that the rule of thumb? And the income from the three rooms, let's say a total of 500pw should cover mortgage payments + rates + insurance + maintenance, yes?

I have no experience buying investment property at all and your comments would be very much appreciated! Thanks in advance!

[Damap]

As it's going to auction and is in a highly desirable area you just have to decide what you are willing ot pay. It won't be cheap. Many Auckland investors will buy on a 4% yield so assuming the normal rent would be say $450 then an investor could pay up to 600K, owner occupier could pay more.

[weera2500]

Thanks very much for the prompt response! I am very ignorant when it comes to property jargon; what does a 4% yield mean?

[Damap]

Gross yield you multiply weekly rent by 52, to make annual rent.
That figure is a percentage of the purchase price.
So $450 X 52 = $23400.
If you were buying on a 4% gross yield $23400 /4 = $5850 so a 4% gross yield would be $585,000.

[weera2500]

Thank you heaps!

[rojo6]

Hi. You might find membership to one of the property investor groups useful. APIA has monthly meetings with various key speakers. Best is the networking with other investors, both new and experienced, who are mostly happy to chat and answer questions.

[Anthonyacat]

Personally, I would recommend that you have a look at the place, go to the auction, but do not bid. Have no intention to buy this particular property.

You're clearly very new, and the biggest mistakes in property happen when you try something new without enough knowledge.

Take this as a catalyst - an opportunity to spark your interest in investment property. Use the next few months to learn all the things you need to know, maybe join a Property Investor Association in your local area, maybe read some books or blogs.

Eventually you'll have to make the jump and actually invest. But when you're brand new there is a much higher risk.

[rocket]

Get an approval, get a builder friend to walk through. , go to open home and self inspect. Surf trade me & real estate for next 50 hrs for all similar properties. Ask agent for value, get evalue etc.
Now you are ready to sit in auction.
Don't over bid.
If you are lucky you might be able to grab a good deal. Or else you will be geared up for your next try.