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Thread: First Rental!

  1. #1
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    Default First Rental!

    Hello,

    I've been looking to get into the property market to complement my other investments. I've done the numbers on owning my own home and the investment potential in Auckland seems horrible once all costs are factored in. I was advised to buy rentals which stack up as better investments until I have equity for my own home.

    So I'm going to look for some property, however I'm new to the property world and don't know the ins and outs and catches I should look for before buying. I was hoping some experienced property investors could help with my questions below.

    - What types of properties have the best capital appreciation I can't find info on the capital gains by property type i.e flats, apartments, freehold sections etc. I don't want to over estimate this value in my calculations.
    - Costs for buying and selling property like realtor and legal fees. I've never bought a house so I don't know how much fees to account for.
    - Any other traps for new players.

    Any and all advice is much appreciated.

    Regards,

  2. #2
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    Quote Originally Posted by samdaman View Post
    Hello,

    I've been looking to get into the property market to complement my other investments. I've done the numbers on owning my own home and the investment potential in Auckland seems horrible once all costs are factored in. I was advised to buy rentals which stack up as better investments until I have equity for my own home.

    So I'm going to look for some property, however I'm new to the property world and don't know the ins and outs and catches I should look for before buying. I was hoping some experienced property investors could help with my questions below.

    - What types of properties have the best capital appreciation I can't find info on the capital gains by property type i.e flats, apartments, freehold sections etc. I don't want to over estimate this value in my calculations.
    - Costs for buying and selling property like realtor and legal fees. I've never bought a house so I don't know how much fees to account for.
    - Any other traps for new players.

    Any and all advice is much appreciated.

    Regards,
    Buy your own home first - no matter how modest; it's obviously a first home. Don't overlook the advantage of creating a tax deductible mortgage on your home by doing this.

  3. #3
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    Plenty of traps for new players! Here are just a few -

    - buying unit titles property (Body Corporate). Research carefully beforehand as many rules and fish hooks present and future. More legislation coming this year.
    - buying cross lease property. Also rules, they will mostly be in the lease and can be very restrictive.
    - check Consumer website for summaries around boundaries, fences, neighbours and trees - can be stressful and expensive.
    - lots of new compliance (cost, hassle) for landlords coming, probably including increased protection for tenants, much of it in 2018.
    - the government has indicated negative net rents will not be able to be offset against other income. Makes a big difference in returns esp in the early years.

    To become more educated, suggest -

    - read 2 Matthew Gilligan's books - Tax Structures 101 and Property 101.
    - read the Propertytalk.com forums.
    - join local Property Investors Association.

  4. #4
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    Quote Originally Posted by fungus pudding View Post
    Buy your own home first - no matter how modest; it's obviously a first home. Don't overlook the advantage of creating a tax deductible mortgage on your home by doing this.
    I think worth waiting to see what is to be offered to first home buyers by this government. Kiwibuild properties are (apparently) going to be sold more cheaply than others similar, maybe by ballot. Should know more details soon, even if the first Kiwibuild properties take a long time to come to market.

    Also only FHBs can use Kiwisaver, and there can be additional subsidies available.

  5. #5
    Antiquated & irrational t.rexjr's Avatar
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    Buy the best house possible with little to no maintenance requirements (brick/aluminium windows...). The better the address the better the tenant. Buying outside of Auckland is probably advisable.

    Expect capital gains to be moderate to flat in the near term. With current climate it may be beneficial to build.

    Thoroughly vet prospective tenants. Every single one has the ability to destroy your asset. The fairer the rent, the more selective you can be. i.e. high rents attract desperate people.

    Too much capital in a property is dead money. If you don't think you'll see 30% improvement per annum on your capital outlay then I'd say it's probably not worth the hassle and you'd be better off investing elsewhere. Remember that it can be time consuming. You need a return on your capital and your time.

    The land agent will take far more than their fair share.

  6. #6
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    Quote Originally Posted by samdaman View Post
    Hello,

    I've been looking to get into the property market to complement my other investments. I've done the numbers on owning my own home and the investment potential in Auckland seems horrible once all costs are factored in. I was advised to buy rentals which stack up as better investments until I have equity for my own home.

    So I'm going to look for some property, however I'm new to the property world and don't know the ins and outs and catches I should look for before buying. I was hoping some experienced property investors could help with my questions below.

    - What types of properties have the best capital appreciation I can't find info on the capital gains by property type i.e flats, apartments, freehold sections etc. I don't want to over estimate this value in my calculations.
    - Costs for buying and selling property like realtor and legal fees. I've never bought a house so I don't know how much fees to account for.
    - Any other traps for new players.

    Any and all advice is much appreciated.

    Regards,
    I HIGHELY RECOMMEND you do more research before making the leap as its much harder to sell and get your money back if the market has a negative move south ...I see sales numbers in Auckland dropping like a stone of late >> Fed increasing rates with talk of another three rate increases next year ...if so we could well see 7%+ floating rates sooner than many think ...that will cause many overleveraged to hit the wall and you will see some ripping bargains >>

    IMHO Cap growth is very limited for the next decade or so .. so in my case I have just purchased a High yeild commercial property with a 10.55% net yeild (all costs paid by tenant) now the location has nil Cap growth potential but solid yeilds on prices..
    People don't have ideas, ideas have people

  7. #7
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    There are some good first time buyer guides on here . http://www.reaa.govt.nz/Pages/default.aspx
    Agree with JB imo , Auck prices have definitely topped out for now . Who knows what a foreign buyer ban could do to the market ?? What if 5000 or so people are disappointed that their families /friends can't come and join them and they all decide to goto the next best place ....that amount of property , plus less immigrants could mean a serious pullback ....
    Last edited by stoploss; 18-12-2017 at 05:02 PM. Reason: change spelling

  8. #8
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    Whats the reason for going with a rental over buying your own home? Is the idea that you will get a rental that is lower/higher than your personal renting circumstances? I'd be interested to see your numbers as typically I've found it hard at the moment to justify due to high house prices and relative low rent. Also you will be required to have a larger deposit (generally).

  9. #9
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    I'm a great fan of property and used to post regularly on these treads in days goen by. But today - its a different story. I've been thinking about getting back into rentals having lost mine a few years back. But no matter how I try I cant get teh numbers to stack up. So in that context



    Quote Originally Posted by samdaman View Post
    - What types of properties have the best capital appreciation I can't find info on the capital gains by property type i.e flats, apartments, freehold sections etc. I don't want to over estimate this value in my calculations.

    I don't see there being any serious capital appreciation in the residential property market for some time. I reckon we are now coming off highs here we wll see a flat lining with a major risk of depreciation in some areas (take Rolleston as an example of near where I live - wouldn't touch it with a barge pole)

    Quote Originally Posted by samdaman View Post
    - Costs for buying and selling property like realtor and legal fees. I've never bought a house so I don't know how much fees to account for.
    Real estate commission 3.5% of sale give or take + plus what ever they try to rip you off by going to auction. $1 - $2,000 legal fees. Depends on complexity of transaction. I always sel lmy own propery and keep it simple. Add to this tax as you are very clearly thinking of being a trader wanting to make money on trade rather than investment. So loose 33% of any gain

    Quote Originally Posted by samdaman View Post
    - Any other traps for new players.

    Some of the traps are shown above. The other one is considering property as your only investment vehicle. I already have my own home so well placed in "property" (and yes I do see this as a valid part of an asset portfolio). I'm moving belatedly back into shares as I see much better opportunity there. If you are looking at traps shares are great. You cant easily see your house depreciation - with shares you can so can trigger a sell at a moments notice. You cant sell property instantly. With shares you can - minimising potential loss (I've just set up a second share portfolio. In a month its up 6.9%. I'll be happy if its up 10% in a year)

  10. #10
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    Quote Originally Posted by minimoke View Post
    But no matter how I try I cant get teh numbers to stack up. So in that context


    I've been looking at picking up another property but no matter how I run the numbers I can't get it to work, maybe I need to look elsewhere, but 320k house renting for $300pw just isn't a big enough return in my book. Even with no mortgage, tax, insurance, maintenance, a month or so of vacuancy... I'm not sure how anyone does it?

    Am I just looking in the wrong area?

  11. #11
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    Quote Originally Posted by FIsaver View Post


    I've been looking at picking up another property but no matter how I run the numbers I can't get it to work, maybe I need to look elsewhere, but 320k house renting for $300pw just isn't a big enough return in my book. Even with no mortgage, tax, insurance, maintenance, a month or so of vacuancy... I'm not sure how anyone does it?

    Am I just looking in the wrong area?
    Could take a medium plus view. Ten years, even five, of rent rises, principal paid down a bit each year, increased value should change the return from then onwards.

  12. #12
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    It does not cost you anything to buy a property through an agent. Fees are only payable when selling. When selling you should always consider all your options but to say agents are rip offs just shows you may not understand how the market works. I'll never forget my neighbour skiting to me how they saved 15k in agent fees selling privately and that i was silly selling with an agency. Once they had finished i was able to tell them i had just recieved an offer for 64k more than they got selling privately. I was very happy to pay for the agents fee. I'm now an agent also and i don't get paid nearly as much as I'm worth.

    Advice

    Buy properties close to good schooling as they appreciate more in value when the market moves and are also less volitile when the market slows.

  13. #13
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    Quote Originally Posted by Topagent View Post
    It does not cost you anything to buy a property through an agent. Fees are only payable when selling. When selling you should always consider all your options but to say agents are rip offs just shows you may not understand how the market works. I'll never forget my neighbour skiting to me how they saved 15k in agent fees selling privately and that i was silly selling with an agency. Once they had finished i was able to tell them i had just recieved an offer for 64k more than they got selling privately. I was very happy to pay for the agents fee. I'm now an agent also and i don't get paid nearly as much as I'm worth.

    Advice

    Buy properties close to good schooling as they appreciate more in value when the market moves and are also less volitile when the market slows.
    This wil get me going!!

    Havent used an agent in all but one of my property sales and quite content with the out come. But heres a "rip off" test. Take a $500,000 house. Approx how many hours labour does it take to sell? (it hasnt taken me any more than 40 for any of my properties). How much of a $500,000 goes to a real estate agency?

    Heres another test. "go to auction as the market will dictate the price" says our local agents. Duh! So what are we paying yoiu for if you dont know the market you work in?

  14. #14
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    On average $15000 plus gst. So on many houses there would be quite often a difference of value from buyer a to buyer c greater than this. Just sold a property for $46,000 more than the asking price. We received 5 in total the worst being 10k under asking. The two best offers came from agents who had been working with their buyers for some time.

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    Sorry one more point most of you would be the worst buyer in this scenario as you donít use agents. But when your selling who do you want to sell too? An investor active in forums like these or a motivated buyer working with an agent. When you are successful it will be because no one else wanted the house, probably not the best choice when you are looking for gains.
    Last edited by Topagent; 07-01-2018 at 09:13 PM. Reason: Missed sonething

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