Property Investment

There are many different types of property investors and styles of property investment. Personally, I work on a buy and hold strategy, some investors are looking to trade properties short term, and others hold for a number of years before selling.

For all property investors (other than those looking to trade on a very regular basis) it is common to look to income yield, capital gain, or a bit of both when assessing whether a property presents a good investment opportunity.

A basic income yield is calculated by dividing the annual rental income a property is expected to receive by the sale price. For example if a property is renting for $450 per week and is expected to sell at market for $600,000 then the gross rental yield would be 3.9% (($450×52) / $600,000= 3.9%).

A good rental yield depends on the particulars of the property itself. If the property is in a very good area for capital growth or capital stability (i.e. sought after school zones) then you may accept a lower income yield than a property that is in a less desirable area. And if a property is “as is where is” (i.e. uninsured) or in a poor area then the investment could be seen as more risky and you should be compensated with a much higher income yield. The potential for you to add value to the property (and therefore contribute to a high valuation) may also impact the rental yield you would be happy to accept.

In addition to rental yield it is also very important to consider cash flow. The total income of the property (i.e. in the above example this is roughly $450×52 = $23,400 per annum) should ideally exceed all outgoings, including mortgage repayments, rates, insurance, and general maintenance.

If you are interested in property investment and would like to discuss further, please do give me a call.

Lewis Donaldson, Real Estate Agent, Harcourts Gold, Papanui, Christchurch 0275348965

GV’s

In my role as a real estate agent I often meet potential buyers that are very focused on the GV (government value) or CV (current capital value) of a property they are looking to purchase. This information is important as part of your overall due diligence of a property, for one, the GV is used to determine the rates the owner of the property will have to pay. However, I always tell buyers to be very careful using the GV or CV as a determinant of sale price.

In a world where many houses are presented to market without a price (i.e. they may be a deadline sale or auction) buyers may be tempted to turn to GV or CV as a price indicator. My personal experience (I provide specific examples below) along with recent data presented in the media by valuation firm MyValocity consistently shows difference in sale price and CV. This is not surprising when………..http://lewisdonaldson.harcourts.co.nz/

NZ home ownership is at its lowest levels

A recent Stuff article highlighted that NZ home ownership is at its lowest level in more than 60 years. This will come as no surprise to most, given the media attention rising house prices, supply shortages and increasing proportion of renters has been given and also, for many of us, given our own personal experience in the residential property market.

There are obviously wide ranging implications of a significant downward trend in home ownership, the issue is of political interest and will be the subject of diverse opinion. Today I wanted to note just two points.

If owning a residential property in our main cities is indeed now (or, if not already, may soon be) viewed as a privilege rather than just one step along the path of all average New Zealanders, then it follows that a housing transaction is of heightened value and importance. If you are buying or selling it is essential you enlist the help of a professional, and that professional is of the highest standard. Using a high performing agent will ensure you maximise the value of the property transaction. If buying or selling residential property is no longer something that most people have the luxury of being able to do, then if you do have this luxury make sure you do it right.

If home ownership rates are falling then it follows that the housings stock is owned by a smaller proportion of people – or in other words, there is a greater number of property investors or individuals owning multiple properties. If this is where you fit in then I would urge you to consider a professional agent with investment experience to assist you in future transactions. The world of property investment can be very specific and agents with investment experience will not only be able to discuss numbers, understand where you are coming from and what you require, but also have an informed network of buyers looking specifically for investment opportunities.

Not all professional real estate agents are the same. As transactions become more valuable, and as a greater proportion are for investment purposes, it becomes increasingly important for you to use a highly performing agent with specialist interest in investment-style properties to ensure maximum value.

Thank you for reading this blog and if you would like to discuss property further please contact me on at lewis.donaldson@harcourts.co.nz or 0275348965 http://lewisdonaldson.harcourts.co.nz

School Zones – Property – Prices

It is often said how much New Zealanders love property. Residential property is a topic of interest and debate in many households and seems to be a favourite subject for the media. The other topic often debated in Christchurch homes is schools. Many of you may have seen last week these two hot topics combine in articles focused on potential changes to Christchurch school zones, with specific reference to Christchurch Girls’ High School. So what difference does a school zone really make to the desirability of a house? In my experience, the location of property has always had a large bearing on the price a buyer needs to pay. Throughout Canterbury prices vary significantly suburb to suburb for a number of reasons including proximity to transport, shopping, entertainment and recreational areas.  School zones are a prime example of this, buyers pay a premium to purchase homes in suburbs that are in good school zones. In some areas it is as specific as one side of a street being in two school zones while the other is only in one school zone. Prices adjust accordingly. Any changes to school zones therefore could have a very big impact on the price or value of a property impacted by a change.  A good real estate agent will always be up to date and knowledgeable around topical property news. Whilst the school zone issue may seem pretty obvious to someone who has lived in Christchurch for awhile the potential for less well known or understood developments or changes to impact property prices is very real. This is where a well informed real estate professional can be key importance in your property decision making.

Buying property at auction

To date our June auctions have been very successful. We hold our auctions every Thursday morning from 10:00am . You are always more than welcome to come and watch them.

On 2 June 2016 – 10 out of 14 of the properties up for auction sold unconditionally under the hammer.

On 9 June 2016 – 6 out of 7 properties auctioned sold unconditionally under the hammer.

On 16 June 2016 – 9 out of 15 properties sold unconditionally under the hammer

This is a 69% success rate unconditionally under the hammer. Another 18% are then going on to sell soon after the auction.

Occasionally I speak to buyers and they say they do not want to buy at auction. They say “let’s wait and see if the property is passed in”. Why give someone else the option of buying the house first? I always discuss the positives of buying at auction with them. One huge bonus of buying at auction is the transparency – you will know exactly how much more you have paid than the second highest bidder. Personally I have purchased numerous investment properties at auction. I know many buyers who went from being opposed to buying at auction to then going to auctions time and time again because they could buy investments properties in this extremely transparent environment. If you are not comfortable buying real estate at auction please contact me to discuss, as with many things, more information and a greater understanding can provide comfort. I have seen so many buyer celebrate because of the success they had buying through this process.

 

Selling investment properties

Property investment is a form of business. Most good businesses have an ambition to provide a great product or service and to create profit. Whilst many property investors focus on collecting rent each week to generate profits from their investment, it is often when the property is revalued and refinanced, or at sale time, that the largest gains for the investor are achieved. Too often I see property investors selling their investments privately, often to another investor or a personal contact, and it concerns me that this opportunity to generate profits to the investor is not maximised. Property managers use expert advisors throughout many aspects of their business e.g property managers, lawyers, accountants, tradespeople or valuers and with the assistance of these people are often able to achieve a sale that seems pretty good and relatively straightforward. But has it really maximised the return on their investment at the time that really counts?

Personally, in the last two weeks I have observed two high yielding residential investment properties being marketed by professional real estate agents on the open market with sales resulting. Both were set up for investment purposes and could not easily be lived in as a family home without lots of work being carried out. Both properties have current tenancies in place and were generating income. Both properties had competitive bidding and sold unconditionally at auction. Both sales completely exceeded expectations of the sellers and the experts in their networks. Personally I was thrilled for the owners as these were outstanding results!

Landlords often think that they can achieve a good result from selling an investment privately and can do so with ease. However without exposing the property fully to the open market and to the network of buyers a top real estate agent has available there is likely profits that they have missed out on.

If you are considering selling any of your investment properties you need to speak with me. A real estate sales consultant and active property investor.

Investment flats prove popular at sale time

Last Friday I was privileged to sell by Auction a block of five 2 bedroom units in Christchurch. Demand for these units was extremely high with over 23 groups of investors and property developers attending the Auction in anticipation of buying the property. The units were sold on an “as is where is” basis and were uninsured given they had not yet been repaired. The units were liveable and repairable and have always had good occupancy both before and after the earthquake. The three most compelling reasons the particular block was so highly sought after were:

  • Having multiple units can reduce risk because if 1 unit becomes vacant the remainder may still be occupied.
  • Because the block is repairable there will be an attractive equity gain for the buyer if the buyer does the repairs cost effectively and then obtains insurance.
  • The block was sold with tenants in place meaning the property is income generating from the possession date.
  • The seller was transparent with documentation which included a geotech report, LIM report, scope of works from the insurance company and floor level measurements, title and rental incomes.

The sale of this block of units proved a huge success and exceeded all expectations. If you are considering selling any of your properties please feel free to contact me to discuss maximizing your success at sale.

Keeping your home safe while you’re on holiday

While you’re having a good time on holiday, you want to make sure that your home is going to be safe.

What you should do before you depart:
Secure all tools
Secure all ladders, axes, hammers and saws – anything that will help thieves break into your house.
Lock all doors
Lock all doors and windows, set alarms and use deadbolts. Don’t forget the garage.
Leave your curtains open
Leave your curtains open and your blinds up.
Turn off all appliances
Make sure you turn off all appliances at the wall to minimise the risk of electrical fires.
Prevent leaks by turning off your water
Prevent leaks by turning off your water. Alternatively, have someone stay at your house or drop in regularly. They won’t be able to stop a pipe leaking or bursting, but they can deal with it sooner.
Clean out your fridge
Minimise the amount of food you keep in the fridge and freezer while you’re on holiday. That way, less will be lost if there’s a power cut while you’re away.
Turn down the ring tone on your phone
Turn down the ring tone on your phone. Long loud unanswered rings are just another way of shouting out, “No-one’s here.”
Be careful who you tell
Don’t advertise your absence on your phone answering machine, sites like Facebook or anywhere else that isn’t secure.
Leave a number
Leave an emergency contact number with friends or neighbours.
Cancel your newspapers
Cancel newspapers and other deliveries, so they don’t pile up on your doorstep and advertise that you’re away.
Keep the garden tidy
If you are away for an extended period, arrange for someone to come and mow your lawns and tend the garden.
Ask a friend to help
If you’re going to be away for an extended period, you may want to ask a friend to pop over once a week or a neighbour to park in your drive occasionally.
Ask your neighbours to help
If you know them well enough, ask them to check on your house for litter, branches that have blown down or pot plants that have fallen over – tell-tale signs you’ve gone away.
Tell neighbours you’re going away
Tell trusted neighbours that you are going away and arrange for them to collect your mail. Nothing says, “No-one’s home!” like an overflowing mailbox.

Property Investment – Christchurch Rents Stabilising

This morning I was speaking to a contact of mine about a house that I currently have listed to sell. The house is presently vacant, but until very recently had been renting for $460 per week.

We were chatting about how a number of property investors have seen rents and rental yields in Christchurch move backwards recently. The fall in rents being the result of additional supply, given there are now as many houses available to rent as there was before the earthquakes, and reduced demand, as we enter the next phase of the recovery where many earthquake repairs are now completed and people are back in their homes.

During the conversation it was mentioned that now potential tenants have plenty of options available, particularly if they are looking for a rental around $400+ per week. The take-out of this conversation for me was that it is now even more important to stand out from the crowd and ensure your house is as appealing to tenants as possible. The warmer months are an excellent time to ensure maintenance is up to date and it pays to make sure heatpumps and dishwashers are present and in good working order. And if you are looking to buy, ensure you make your purchase in areas most sought after by renters – so you maximise your ability to keep your property tenanted.

Know What You Are Buying

Over the past week I have been made aware of two properties that at a first glance appeared to provide an excellent opportunity for any potential home buyer or property investor. However in both situations there was a catch. The first example was published in the media – an article about a property that was potentially the “cheapest” house for sale in Auckland. Indeed, the purchase price was low. But the catch was that the property was on leasehold land with annual levies of $34,925. The second example was a commercial property in a South Island town of about 30,000 people. Again, on paper, the property looked like a great purchase, but as it turns out, it was right next door to some less than desirable neighbours, potentially lowering any re-sale opportunity no matter how excellent the property itself was.

There are many more examples of situations as the ones I note above, where a property that is attractively priced grabs the attention of buyers, but once you delve deeper into the deal it is much less attractive than at first glance. The examples I have used are pretty obvious, but there are situations where a property has even a minor issue that can prove to be a real problem over the longer term.

These situations remind me that whilst we hear stories of buyers that have purchased houses sight unseen, this can carry a huge amount of risk. If you are buying a property, particularly in another town/city, always make sure you do your homework on the property and the location the property is in. You don’t want to be purchasing someone else’s problem! As always consult the experts and do your due diligence.