Investing in wanganui

[surfbluedog]

Thinking of investing in Wanganui. New to the game.
Just after people's opinion?

[Rosco]

Why? What is your aim to achieve from investing in property and why are you looking at Whanganui to help you achieve this?

Everyone is different so it's impossible to answer your question without knowing what you want to achieve!

Ross

[surfbluedog]

Hi Ross,

We are looking at long term investment here.
Prices at and around wanganui appear really good, with possibilities of a cashflow +ve property.

[PTWhatAGreatForum]

“If liberty means anything at all, it means the right to tell people what they do not want to hear.”
― George Orwell

“Censorship is to art as lynching is to justice.”
― Henry Louis Gates Jr.

“If freedom of speech is taken away, then dumb and silent we may be led, like sheep to the slaughter.”
― George Washington

“Hypocrites get offended by the truth.”
― Jess C. Scott, Bad Romance: Seven Deadly Sins Anthology

“Give me the liberty to know, to utter, and to argue freely according to conscience, above all liberties.”
― John Milton, Areopagitica

“Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regardless of frontiers.”
― United Nations, Universal Declaration of Human Rights

“To criticize a person for their race is manifestly irrational and ridiculous, but to criticize their religion, that is a right. That is a freedom. The freedom to criticize ideas, any ideas - even if they are sincerely held beliefs - is one of the fundamental freedoms of society. A law which attempts to say you can criticize and ridicule ideas as long as they are not religious ideas is a very peculiar law indeed.

It all points to the promotion of the idea that there should be a right not to be offended. But in my view the right to offend is far more important than any right not to be offended. The right to ridicule is far more important to society than any right not to be ridiculed because one in my view represents openness - and the other represents oppression”
― Rowan Atkinson

[Cass]

Hi, I'm guessing you are looking for an investment property to hold onto for possible capital gains over the long term, and if you have a decent deposit, a great cashflow opportunity. This maybe to help you out in retirement, or possibly sell later down the track to help your kids out. I think Wanganui has great potential. Ring and speak to the local agent's regarding area's to be avoided, area's that attract good tenants, how much rent you will get, and up and coming area's. Talk to a good mortgage broker, make sure you could cover your expenses when mortgage rates rise. Also I believe the rates are quite high in Wanganui, so you may want to check that out. Go down and have a good look around, most importantly trust your gut instinct and research the area, (population growth/infrastructure etc).
Good luck 😊

[hawkeye]

Make sure you are buying in a good area. There are lots of rough areas in wanganui and unemployment.

One upside is the proposed new ferry to the South Island. I imagine that might lead to growth there.

[Sportsvee]

And remember, it's Wanganui and Whanganui. Just to save confusion 😊

[Rosco]

Hi Ross,

We are looking at long term investment here.
Prices at and around wanganui appear really good, with possibilities of a cashflow +ve property.

1) Cashflow - often they aren't positive once you allow for fair repairs, and also vacant periods. Repair an item to fix might cost $1,000. In Auckland that might be 2% of rent, but in Wanganui that might be 7%. So the gross yield might look great, but once you really go through the whole cashflow, a lot are no longer positive.

2) search population of Wanganui. Obviously you want a growing area, as more population needs more houses. Helps with rents and property prices. Also ask locally what is happening.

3) Look at what happened in the last cycle? How much did Wanganui crash around 2008 to 2010. My guess is it probably dropped 20% or more.

4) What is the average income in Wanaganui compared to the main centres?

5) My ideals
- big employment, and diversified employment - ie the local sawmilll closes you don't want to lose all your tenants. I think you find if a recession hits, people move away from Wanganui looking for jobs
- growing place
- cost to replace is less or similar to value of doing it.
- opportunity to add value - hence the point above. no point subdividing and building, if cost more than value at end!
- stability. This is a big cross against the little towns. At some point they follow the rest of NZ and boom, but then they also bust
- high average income. more income means more ability to afford rent.

If you are chasing the next big thing, maybe you will get lucky with Wanganui, or maybe not.

But if you are truly looking for a long term investment (10-20 years), i wouldn't invest in Wanganui. I think you will get much larger growth of rental, stability of rent and increase in values from bigger cities with better fundamentals.

Ross

[mrsaneperson]

Make sure you are buying in a good area. There are lots of rough areas in wanganui and unemployment.

One upside is the proposed new ferry to the South Island. I imagine that might lead to growth there.

Castlecliffe i have been told is cheap and nasty..

[surfbluedog]

1) Cashflow - often they aren't positive once you allow for fair repairs, and also vacant periods. Repair an item to fix might cost $1,000. In Auckland that might be 2% of rent, but in Wanganui that might be 7%. So the gross yield might look great, but once you really go through the whole cashflow, a lot are no longer positive.

2) search population of Wanganui. Obviously you want a growing area, as more population needs more houses. Helps with rents and property prices. Also ask locally what is happening.

3) Look at what happened in the last cycle? How much did Wanganui crash around 2008 to 2010. My guess is it probably dropped 20% or more.

4) What is the average income in Wanaganui compared to the main centres?

5) My ideals
- big employment, and diversified employment - ie the local sawmilll closes you don't want to lose all your tenants. I think you find if a recession hits, people move away from Wanganui looking for jobs
- growing place
- cost to replace is less or similar to value of doing it.
- opportunity to add value - hence the point above. no point subdividing and building, if cost more than value at end!
- stability. This is a big cross against the little towns. At some point they follow the rest of NZ and boom, but then they also bust
- high average income. more income means more ability to afford rent.

If you are chasing the next big thing, maybe you will get lucky with Wanganui, or maybe not.

But if you are truly looking for a long term investment (10-20 years), i wouldn't invest in Wanganui. I think you will get much larger growth of rental, stability of rent and increase in values from bigger cities with better fundamentals.

Ross

Thanks for your reply.
We are looking at this long term. And I have found pricing in Wanganui appear good.
Best I can find so far. I was initially looking at Auckland, Hamilton and Wellington, but nothing has even come close to being cashflow positive. Am I looking in the wrong places?

[Beano]

Thanks for your reply.
We are looking at this long term. And I have found pricing in Wanganui appear good.
Best I can find so far. I was initially looking at Auckland, Hamilton and Wellington, but nothing has even come close to being cashflow positive. Am I looking in the wrong places?

I think you are looking at the wrong properties
Maybe look at units
My last conversation with the real estate agent was (as a vendor ) "we do not list units unless the net yield is 6.5pc"...that will return 30pc of the net rent as profit.

[deechnz]

Thinking of investing in Wanganui. New to the game.
Just after people's opinion?

Speaking from experience- I think it's a great place to invest in. I bought 8 places there in 2014. My rationale for buying back then (and still now):
- only buy in towns with 30,000 population as they are sufficiently large enough to probably not disappear, have multiple supermarkets/schools etc
- a $100k house doesn't need to increase much to double in value (the doubling of a purchase price being one of my main investing goals).

In total, I bought 8 places for $880k in 2014. They are now valued at $1.6million- so almost achieved my doubling price goal in 4 years
Back then, they were rented at $2100pw together. Now they are getting $2760pw, so 31% rent increase over 4 years.

I don't know if Wanganui has already "done it's thing" since I got in, or whether it will still keep going. In fact, haven't studied how the numbers even stack up there today if I was to buy. But my experience over the last 4 years has been a good one. I imagine that if you can still do some hard negotiating to find a good deal, that there will still be good scope for property prices to increase as a relative % of what you bought it for. NB. rates there are $2.5kpa

[Rosco]

Speaking from experience- I think it's a great place to invest in. I bought 8 places there in 2014. My rationale for buying back then (and still now):
- only buy in towns with 30,000 population as they are sufficiently large enough to probably not disappear, have multiple supermarkets/schools etc
- a $100k house doesn't need to increase much to double in value (the doubling of a purchase price being one of my main investing goals).

In total, I bought 8 places for $880k in 2014. They are now valued at $1.6million- so almost achieved my doubling price goal in 4 years
Back then, they were rented at $2100pw together. Now they are getting $2760pw, so 31% rent increase over 4 years.

I don't know if Wanganui has already "done it's thing" since I got in, or whether it will still keep going. In fact, haven't studied how the numbers even stack up there today if I was to buy. But my experience over the last 4 years has been a good one. I imagine that if you can still do some hard negotiating to find a good deal, that there will still be good scope for property prices to increase as a relative % of what you bought it for. NB. rates there are $2.5kpa

Hi Deechnz,

Obviously you have done well and timed extremely well, so I'm not trying to criticise you at all. Just point out how the figures would now look.

Your starting gross yield was 11.93% based on 50 weeks. This would easily be cashflow positive.

Now would be 8.6%. This will be neutral or even a cash loss, based on 100% debt, fair repairs, 4.5% interest rate. If interest rates went up, would be negative.

So if you purchased the same houses now for $1.6 million, your cashflow would be signficantly down and the whole rental equation would be very different.

Capital gain - no one has a crystal ball, but if house prices in Wanganui have doubled in 4 years(not sure this is right, you may have purchased very well), then based on history they are unlikely to go anywhere for the next 5-7 years. Also if there is a bit of a recession there is a chance of a correction, and prices could actually drop back slightly. Doubling in 4 years isn't sustainable!

Ross

[deechnz]

Hi Deechnz,


Now would be 8.6%. This will be neutral or even a cash loss, based on 100% debt, fair repairs, 4.5% interest rate. If interest rates went up, would be negative.

So if you purchased the same houses now for $1.6 million, your cashflow would be signficantly down and the whole rental equation would be very different.


Ross

Good point- I was too lazy to do the math! But yeah, I did bargain hard back then and bought at extremely good prices- even a couple of mortgagee auctions. So Wanganui probably hasn't doubled in 4 years, although my stuff nearly has. But as before, if you could haggle a good deal now, like I did then, then you most likely will be cashflow positive and still with opportunity for some more capital gains. But then again- would I buy those 8 properties in today's market for $1.6million? I'm not sure. It's still only $200k per house, so I'd probably consider it when looking at a few other likely towns. But I haven't been in buying phase for a few years so I really don't know how the numbers stack up in other towns like this at the moment.

[Sportsvee]

Good on ya Deechnz and thanks for sharing.

Some questions for ya:
How would you rate your PM and would you recommend them to others, or do you do it yourself?

How have your tenants been? Do they hang around or have you been through some changes?

Once the railway pulled out all those years ago, Wanganui had the feel of a dying town. How's industry there now?

Cheers.