Yields in the Provinces

[drelly]

Just wondering what sort of yields investors are looking for in the provinces? I'm considering selling a couple of properties later this year in Whangarei and Paihia.

[Courham]

Looking for or getting?

My best yield is about 22% based on what I paid for it, about 12.5% at current market value.

If I were buying I'd be looking at 8%+ down where I am but that is getting harder to do at present.

Craig

[Beano]

Is that gross or net yeilds?

[BigDreamer]

My best gross was 18% and if I was to buy in the provinces again (I don't count Rotorua as one), I would not settle for less than 12% gross as I know the challenges involved with them.

[JBM]

newbies

And the next to nil cap gain ...I seen a property in Invercargill(sisters old house) that recent sold for less than it did several years ago ....and going off rents you be doing well to get 7-8% gross yield over those years ....then add in the high rates to values one pays in southland (have seen rates make up near 10% of R.V)....
you newbies are welcome to buying them up ... as every decent high yielding Southland/otago property i have enquired about 20+ has been brought by out of the area investors ......

the smart buyers down here are buying the high Capital Growth areas close to the likes of Queenstown when is the most expensive town to incomes in NZ..... I myself after fighting with many out of the area investors in buying higher yield properties to instead buy two side by side 1000sqm Lake view sections 30mins south of Wanaka 45mins to Queenstown ...178k + GST ea titles due early to mid 2017 so only 10% now ......

[BigDreamer]

I don't think it's fair to indicate that only newbie investors purchase in provinces. We have a number of properties in Auckland, Hamilton, Rotorua as well as some provinces. It is just that if anyone is keep to purchase in provinces they need to have a very clear goal and have done their research. My main worry about the provinces is not the capital gain (as any knowledgeable investor would know there is no to very little) is the cost of maintenance due to limited number of tradies around.

[Courham]

I don't think it's fair to indicate that only newbie investors purchase in provinces. We have a number of properties in Auckland, Hamilton, Rotorua as well as some provinces. It is just that if anyone is keep to purchase in provinces they need to have a very clear goal and have done their research. My main worry about the provinces is not the capital gain (as any knowledgeable investor would know there is no to very little) is the cost of maintenance due to limited number of tradies around.

Somehow the internet ate my reply last night. My yields are gross- only expense is rates, insurance and some maintenance.

As for no capital gain in the provinces, that is bull. Invercargill has had some very flat years at times but other parts of the South have enjoyed reasonable gains oer sustained timeframes- I don't invest up north so no expert on North Isladn provinces but from what I've read on these forums NI provinces have very different experiences to South Island ones in the past decade or so where many East Coast south Island provicnes have doen weell economically. The gains may not be as spectacular as in Auckland over the past few years, or other major cities, but still reasonable in many places. Depends what you are after though.

As for less tradies IMO it is safer and easier down here- it is all about relationships and a trademsen word is still worth something and reputations can be easily lost so they tend to look after them and their customers.

Craig

[Beano]

Somehow the internet ate my reply last night. My yields are gross- only expense is rates, insurance and some maintenance.

As for no capital gain in the provinces, that is bull. Invercargill has had some very flat years at times but other parts of the South have enjoyed reasonable gains oer sustained timeframes- I don't invest up north so no expert on North Isladn provinces but from what I've read on these forums NI provinces have very different experiences to South Island ones in the past decade or so where many East Coast south Island provicnes have doen weell economically. The gains may not be as spectacular as in Auckland over the past few years, or other major cities, but still reasonable in many places. Depends what you are after though.

As for less tradies IMO it is safer and easier down here- it is all about relationships and a trademsen word is still worth something and reputations can be easily lost so they tend to look after them and their customers.

Craig

Hi Craig What would your net rental yield be ?
My properties in Napier net yield 6.5% hard to tell what the capital gain has been but CG is not main aim ..its the profit margin i am interested in!

[Minz]

My central Invercargill house has a 6% gross yield. It is a high quality property and has experienced only modest CG over 6 years, a total of 4 weeks vacancy, excellent tenants, and quality maintenance. It is a trouble free long-term investment and the principle has been quietly reducing. Net yield is still quite good as I have a good property manager who is not extortionate.

[Anthonyacat]

I don't understand why people seem to think there's no capital gain in the provinces. I have no experience there myself, but basic logic tells me you're dead wrong.

http://www.enz.org/house-prices-si-towns.html tells me that the average price in Invercargill was $198k last year, and $195k in 2010. So I accept there has been no gain on average for the last five years.

But you can't tell me prices were $195k twenty five years ago. In 1990 the average Auckland house price was around $200k. I don't have any stats to support it, but I'd guess that average Invercargill prices back then were $60-85k, about a third of Auckland's at the time, as they are now. Anyone have stats to support or disprove me?

If anything, I argue that regions that have been flat for a while are due to go up. Unless a town is clearly dying, why would the value of a region significantly decrease proportionally in relation to the rest of the country?

[Courham]

Hi Beano. Net yield on that one about 17% but longest held property. Others are about 10% net but yields have dropped as prices increased in last few years for people buying now. Last one I bought last year at a much lower but bought as retirement home for my parents so yield wasn't important, somewhere they'd be happy in main goal. We've seen reasonable capital gains in all properties but was always mainly after cashflow with these ones.
Craig

[JBM]

My central Invercargill house has a 6% gross yield. It is a high quality property and has experienced only modest CG over 6 years, a total of 4 weeks vacancy, excellent tenants, and quality maintenance. It is a trouble free long-term investment and the principle has been quietly reducing. Net yield is still quite good as I have a good property manager who is not extortionate.

So what's your nett yield after all the costs ? I've found the biggest problem with invercargill is getting a decent rent to match the higher price you have to pay for a good property say 350k 4 bed your be doing very well to get $350pw(seems like you can get many a good property for under $300) ...so 18k gross income ..rates 3k mgmt 1.8k , insure 1.2k mat.... leaving 12k ....90% loaned long term fixed rate 5% ...$15,750 pa so a loss per year $3,750 ....so then your banking on the big Cap gain ..

Now compare that to the southern lakes(2hrs north of Invercargill) ,, seeing properties sell for 500-600k to only a couple of years later command 800K+ ....

[Beano]

My central Invercargill house has a 6% gross yield. It is a high quality property and has experienced only modest CG over 6 years, a total of 4 weeks vacancy, excellent tenants, and quality maintenance. It is a trouble free long-term investment and the principle has been quietly reducing. Net yield is still quite good as I have a good property manager who is not extortionate.

After allowing all the costs (incl property management and vacancies) would the net yield be 4pc?

[Beano]

Hi Beano. Net yield on that one about 17% but longest held property. Others are about 10% net but yields have dropped as prices increased in last few years for people buying now. Last one I bought last year army a much lower but bought as retirement home for my parents so yield wasn't important, somewhere they'd be happy in main goal. We've seen reasonable capital gains in all properties but was always mainly after cashflow with these ones.
Craig

That is a great yield
Its made all the difference (early purchases) on the portfolio cashflow
Not as good as before but you can still get 6.5pc plus net yields
Quote from Bayleys residential agent "the market is moving rapidly . However one thing remains clear for investment property,it must show a 6.5% + NETT return or else it will sit dormant on the market. Ive appraised a couple of 5% nett properties recently and declined them or advised to hold" this statement was made only this week

[Beano]

So what's your nett yield after all the costs ? I've found the biggest problem with invercargill is getting a decent rent to match the higher price you have to pay for a good property say 350k 4 bed your be doing very well to get $350pw(seems like you can get many a good property for under $300) ...so 18k gross income ..rates 3k mgmt 1.8k , insure 1.2k mat.... leaving 12k ....90% loaned long term fixed rate 5% ...$15,750 pa so a loss per year $3,750 ....so then your banking on the big Cap gain ..

Now compare that to the southern lakes(2hrs north of Invercargill) ,, seeing properties sell for 500-600k to only a couple of years later command 800K+ ....

What are the net yields in the southern lakes?
Would it be over the cost of funding?