Are rentals now worth it?

[minimoke]

This is an issue. I too have nearly paid off the mortgages on 3 rentals. Maintenance is the killer. The costs to get any jobs done is now more expensive. So what is left is not much for the return on what the capital is worth.

I alos look at out-of-control councils who keep increasing rates way above rates of inflation - there appears to be no appetite to reigning them in.

Then there is teh insurance companies - look for significantly increased premiums over the years to ensure they have full cover for our natural disaster risks - of which there are many.

And a government that seems hell bent on having the quality of rentals at a higher level than many who actually own their homes. Costs associated with heating/insulation for example.

Add the costs of any mould removal due to tennants not properly ventilating the property and ongoing repairs and maintenance. It all adds up.

Then there is the imbalance of power. A tenant only needs to give 21 days notice a landlord 90.

Which might be OK if you have a tennatn that can afford the rent and pays regularly. Another risk a landlord has to bear.

So much easier to own property stocks on the sharemarket.

[fungus pudding]

I alos look at out-of-control councils who keep increasing rates way above rates of inflation - there appears to be no appetite to reigning them in.

Then there is teh insurance companies - look for significantly increased premiums over the years to ensure they have full cover for our natural disaster risks - of which there are many.

And a government that seems hell bent on having the quality of rentals at a higher level than many who actually own their homes. Costs associated with heating/insulation for example.

Add the costs of any mould removal due to tennants not properly ventilating the property and ongoing repairs and maintenance. It all adds up.

Then there is the imbalance of power. A tenant only needs to give 21 days notice a landlord 90.

Which might be OK if you have a tennatn that can afford the rent and pays regularly. Another risk a landlord has to bear.

So much easier to own property stocks on the sharemarket.

Or a commercial building.

[minimoke]

Or a commercial building.

That is something I have ever done. May be I should (but in the meantime remain happy to hold the likes of AIA long term)

[BeeBop]

I have rentals and by far they have returned well. HOWEVER, that is because I held them for a long time and got an ‘advantage’ I.e. one, when purchased was not subdividable, but now can hold 14 units. All properties are in great locations and target professionals, or are affordable to those who have good jobs. The rents have grown significantly in most of the locations. Although, Invercargill has been more modest, that said, the yield has been good enough to pay down the mortgage and maintain the house.

The question is now: would I buy more residential or commercial property? ONLY if I wanted leverage, otherwise the hassle is not worth it, especially when there are listed property companies on the NZ and international markets.

IF my project goes well (14 units), I could be tempted to do a quality development again but that is because the margin gain is circa 25% but it is a risk.

Overall, my shares have returned a higher yield (when leverage is excluded) but working the two together has been great e.g. buy usd10k worth of PFE in 2011, sell full value in 2013 for usd17k, return funds to nzd (exchange rate was similar to buy rate), and cut down mortgage. Rinse and repeat a handful of times, then I could leverage up nicely again and I bought in 2014 in Dunedin when no one else wanted to. I did try to manage my risk by doing this in small lump sums and it worked very nicely back then. Now that my LVR is 30% overall, I am not doing it any more.

I would not purchased a low value home in NZ to use as a residential rental property now unless, I could add good value to it and bring my yield to north of 7% and I would not bank on capital gain at all....it is nice when it arrives but it could be sure as heck nasty when it disappears (I have seen people bankrupted).