NZ 1st homebuyers are ScReWeD...

[STRAT]

PS. I had a look thru a couple of properties in Papatoetoe today. At 100% borrowing I need to buy at a 20% discount to CV to make them cashflow positive ( assuming 50wks per year occupancy ). The agent said that's not out of the question if you get the "right" vendor. Am looking in Avondale tomorrow. Can see the first offer going in on something before the end of the month ....

Hi GGG,
Just out of interest what made you choose those two areas?

[The Great Gold Guru]

Avondale is quite popular with buyers who have been priced out of Westmere,Waterview sort of area. Good schools , 10mins to CBD off-peak , train service , lots of good solid 40's and 50's houses which are the one's I like to buy , similar to quite a bit of the housing stock in Papatoetoe. My basic rule for purchasing over the next 12 months or so will be ....

Possible rent per week must equal 1.5 x house price / 1000.

So for instance if purchase for $280,000 then must be able to rent for $420/wk
( 280,000 / 1000 = 280 x 1.5 = 420 )

$280,000 mortgage at 6% = $16,800
Rates = $1600
Insurance = $400
R & M = $1200

Total annual expenditure = $20,000

Rent at $420/wk = $21,840

Positive cashflow of $35pw at 100% gearing. ( $30-$50pw is my target )

In both Papatoetoe and Avondale I beleive this equation to be possible , strong rental demand in both areas , good solid housing stock , plenty of choice , find the right vendor and keep making offers til one is accepted. Getting the finance will be the hard part but I have 8 other properties with an LVR at 65% over the portfolio so pretty sure if I buy at 10-20% under RV I will get most deals accross the line.

Buying well and keeping good tenants is the key. I think that is not beyond most people.

[fungus pudding]

[QUOTE=The Great Gold Guru;249384]

$280,000 mortgage at 6% = $16,800
Rates = $1600
Insurance = $400
R & M = $1200

Total annual expenditure = $20,000

Rent at $420/wk = $21,840

QUOTE]


Good luck GGG. Hope it works out well for you. I made my living for many years as a residential landlord. Can't say I'd bother these days as I see so many better, certainly easier, opportunities, and I don't like the look of the residential market. But I would say you should look very hard at your R and M. It's nowhere near enough. You might get by on it with a bit of luck (make that a lot of luck), but your properties will not be up to scratch after a short couple of years, and that's when the riff-raff tenants appear. And be careful budgeting on getting 52 weeks rent for the year. Even without vacancies you can lose out - tenants skipping, that sort of thing. Most often not worth chasing.

[foodee]

FP
You're absolutely right.

À good friend has been selling down his portfolio of 25 props
over the last 2 years-only 3 to go! He has actually redefined
'residential landlord' as 'glorified cleaners'

[Yossarian]

Avondale is quite popular with buyers who have been priced out of Westmere,Waterview sort of area. Good schools , 10mins to CBD off-peak , train service , lots of good solid 40's and 50's houses which are the one's I like to buy , similar to quite a bit of the housing stock in Papatoetoe. My basic rule for purchasing over the next 12 months or so will be ....

Possible rent per week must equal 1.5 x house price / 1000.

So for instance if purchase for $280,000 then must be able to rent for $420/wk
( 280,000 / 1000 = 280 x 1.5 = 420 )

$280,000 mortgage at 6% = $16,800
Rates = $1600
Insurance = $400
R & M = $1200

Total annual expenditure = $20,000

Rent at $420/wk = $21,840

Positive cashflow of $35pw at 100% gearing. ( $30-$50pw is my target )

In both Papatoetoe and Avondale I beleive this equation to be possible , strong rental demand in both areas , good solid housing stock , plenty of choice , find the right vendor and keep making offers til one is accepted. Getting the finance will be the hard part but I have 8 other properties with an LVR at 65% over the portfolio so pretty sure if I buy at 10-20% under RV I will get most deals accross the line.

Buying well and keeping good tenants is the key. I think that is not beyond most people.

Is that 2 or 3 bedrooms? Regardless, the rent seems expensive for such a cheap property. Or maybe I'm just on a good deal. I would pay less well under "1 times" rent on your calcs.

PS not that I'm saying you're wrong - just seems like a crap suburb to be a renter!

[The Great Gold Guru]

I agree, there are some suburbs where renting looks outrageously cheap ... obvious places are like St Heliers or Mission Bay where you can rent a house worth a couple of million for less than $1000pw ... meanwhile down the road in Papatoetoe you can rent a property out for 40% of that that is worth not much more than 10% of the house value.

Horses for courses ... you'd never buy a rental in Mission Bay , if you could ( and that's the key ) you would buy in Papatoetoe rather than rent ... but alot of people just can't or don't want to buy. Opportunity !!

[Yossarian]

interesting that there is such a discrepancy. i guess as a general rule the 'nicer' suburbs are going to be 'cheaper' (compared to price to buy) on the whole.

[Dr_Who]

I agree, there are some suburbs where renting looks outrageously cheap ... obvious places are like St Heliers or Mission Bay where you can rent a house worth a couple of million for less than $1000pw ... meanwhile down the road in Papatoetoe you can rent a property out for 40% of that that is worth not much more than 10% of the house value.

Horses for courses ... you'd never buy a rental in Mission Bay , if you could ( and that's the key ) you would buy in Papatoetoe rather than rent ... but alot of people just can't or don't want to buy. Opportunity !!

I have a couple of rentals in the Bays area (recently purchased), also have a couple out south. Found that it is much easier to get good tenants in the good areas, while it takes longer to find an ideal tenant out south.

[upside_umop]

it seems the governor has a similar view on interest rates with the damage it would cause households...

http://www.bloomberg.com/apps/news?p...Ajo&refer=home

[minimoke]

Oh dear Shrewdy. Median sales have moved up this month to $335,000 - $5,000 more than your price point. And up 2nd month in a row and 3% this year. We know that interest rates are way lower and banks lending criteria much harder. There are more buyers back in the market and days on market have dropped from 62 to 44. Demand is coming back to the market and we know what that means! Haven’t heard from Bernard Hickey (30% drop man) or Gareth Morgan (40% drop man) today. I wonder why?