Property investment in NZ still worth it?

[Tafa]

Hi all,

Was hoping to get opinions on whether property investment in Auckland is still worth it.

I am currently looking at a property in the range of 500 to 600k, with a weekly rent of around $500.

With a loan of $500k, after rates, taxes, and all expenses, I will be looking at a weekly cash flow of minus $200.

How can I justify such an investment?

Is there something I am missing? I always hear talks of people using property investment as a positive cash flow but it seems highly unlikely in Auckland.

Thoughts?

Cheers -
Tafa

[Courham]

Hi all,

Was hoping to get opinions on whether property investment in Auckland is still worth it.

I am currently looking at a property in the range of 500 to 600k, with a weekly rent of around $500.

With a loan of $500k, after rates, taxes, and all expenses, I will be looking at a weekly cash flow of minus $200.

How can I justify such an investment?

Is there something I am missing? I always hear talks of people using property investment as a positive cash flow but it seems highly unlikely in Auckland.

Thoughts?

Cheers -
Tafa

Well the obvious answer is avoid Auckland- seriously over valued, look into smaller centres where you can get some positive cashflow. There is money to be made all over the country if you care to look, but if you want to burn a $200 hole in your pocket each and every week, more if the place goes empty then do it, just don't ever, ever call it an investment.

[Nick G]

Auckland is quite hard unless you create yield or solve a problem somehow to increase value.

If you want to look outside of Auckland but don't know where to start then maybe I can help as I run an business that helps folks buy in new markets they aren't familiar with. Feel free to get in touch through the link in my signature.

[Beano]

Auckland is quite hard unless you create yield or solve a problem somehow to increase value.

If you want to look outside of Auckland but don't know where to start then maybe I can help as I run an business that helps folks buy in new markets they aren't familiar with. Feel free to get in touch through the link in my signature.

I think you can still buy properties in Wellington (blocks of units) in Wellington with net yields of 6pc + Nick.
Just watch out earthquake prone buildings

[Nick G]

Trying to line some up at over 7pc net, new actually.

When I was at the property conference in Dunedin recently there was an investor who had picked up some really cheap properties at bad NBS and had restored them to a beautiful state. Wow that was cool and he rejuvenated a whole street.

[John the builder]

Just watch out earthquake prone buildings

'earthquake prone' doesnt apply to houses?

[Rosco]

Hi all,

Was hoping to get opinions on whether property investment in Auckland is still worth it.

I am currently looking at a property in the range of 500 to 600k, with a weekly rent of around $500.

With a loan of $500k, after rates, taxes, and all expenses, I will be looking at a weekly cash flow of minus $200.

How can I justify such an investment?

Is there something I am missing? I always hear talks of people using property investment as a positive cash flow but it seems highly unlikely in Auckland.

Thoughts?

Cheers -
Tafa

Hi Tafa, everyone is different, so there is no one perfect investment for everyone. Someone who is about to get $2 million inhertiance might find the property you mention awesome for them.

Generally if you are going to have a full debt, you need to add major value. So something like subdividable, add a minor dwelling, add a bedroom etc. This generally gives you more equity and more cashflow long term.

Otherwise if you buy the property you mention and there is no added value options, you are just gambling on capital gain. Obviously you need to be able to fund the cash deficit for 5-7 years to make this work, and this is where most people become unstuck. Interest rates go up, or there is more maintenance or they have a vacant period or a tenant issue, and end up getting sick of the rental - so find themselves owning it for 3 years, no capital gain in flat period, desperate to sell so sell at a loss, plus the 3 years cash loss. End up losing $50k and never buying a rental again.

Ross

[DaveW]

You really have to know what you are buying if you are carrying a negative cashflow. Like Rosco said if you find something that you can add value/renovate then you could be onto a winner as the added value would mean increased rent and increased market value.

[Davo36]

'earthquake prone' doesnt apply to houses?

If it's 3 or more units it does.

So for apartments etc. it is definitely an issue.

But not for standalone houses.

[jack2016]

What kind of issues? Costly upgrading costs? Thanks

[John the builder]

If it's 3 or more units it does.

So for apartments etc. it is definitely an issue.

But not for standalone houses.

s122 says 2 or more storeys and 3 or more units,, I dont think this is meant to include blocks of apartments joined terrace like exen if 2 storey and several in a row?

[Davo36]

s122 says 2 or more storeys and 3 or more units,, I dont think this is meant to include blocks of apartments joined terrace like exen if 2 storey and several in a row?

No, maybe not.

More like a 2 storey building with 3 or more apartments.