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  1. #31
    Senior Member
    Join Date
    Apr 2004
    Location
    , , Cayman Islands.
    Posts
    551

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    Hi Longtack

    I didnt actually watch the program on TV that was mentioned, but I think aiming for 4 times improvement cost is not such a bad idea because it leaves lots of risk margin in case you much it up. I.e. if you calculate to earn 4x and actually only earn 2x youve still done well. Whereas if you aim for 2x and make a loss your not a happy camper.

    Of course it all comes down to how you are doing those sums anyway. Doing up houses and flicking them has negative tax implications and doing them up and not selling them poses the problem of valuation as any gains are not realised and untill you sell you never really know what value you have actually added, regardless of what a valuer might tell you.

    Unfortunately we dont have the benifit of seeing the buy and sell bids (depth) with property like we can with shares. Would be nice though!

    I have a similar property to the one you mention, but I did the opposite. My fully furnished and serviced property (otherwise known as a boarding house ) had 12 bedrooms and two bathrooms (one of the bathrooms has 3 showers and two toilets in it). I put an extra wall and door in the living area which created another room so now it has 13 rooms. This cost me $4100 and added $130pw in exta rent - if I could recreate that return on a refular basis i would be a very happy young lad.

    If you can up your rents to offset the loss of the room, then you will be ok, but personally my opinion is that adding rooms is best and will add more value than just about anything else you can do. an extra $130pw is a 9% yeild on $75,000 so you should ad at least 75k in capital value to an investment property (on current yeilds)if you can lift the income by $130pw. So 4k down is peanuts.

    So i guess just be carefull that if you spend 15k to remove a room, that you definitely get the return back elsewhere, otherwise you could potentially reduce your capital value after spending money on it!

    Those sorts of properties are a bit more trouble for your yeild, I get a 14% gross return on mine which equates to about 11.5% after expenses and provides the cashflow that has allowed me to buy lower yeilding (higher cap gain) properties over the years in comfort.

    Interesting that they dont fall under the residential tenancies act, although that is due to change with the bill in front of parlaiment at the moment.

    Regards,

    Sauce [}]

  2. #32
    Guest

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    Thanks Sauce. Good points there.
    We're getting a bit sick of dealing with the lower end of the mkt as they require a bit more mngmnt and frankly they're bloody hopeless.
    If you can get good tenants (not young single working males)it's great - even the two flats full of young NZ-born students are low mtce and reliable. They're practical, got plenty of commonsense, (and don't tip fat down the sink.)
    My niece has a $1.3m (R.V.) multi-bdrm villa place in New/Grey Lynn I think. Lawdy knows how she copes as she's off-shore most of the time.

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