Toni Heath, our Business Development Manager, recently joined Roy Adams of Asset Consulting on a free property road tour around Auckland held on Sunday 26th January 2020.
Written by Toni Heath
Alongside Roy and other keen property investors, I joined a free property tour where we visited a number of properties around Auckland and discussions were held around their suitability as investments, and more importantly whether each property would provide good equity and cash flow through renovations or other endeavors.
The following areas of interest were discussed in some detail that I thought I would share with you:
How will the latest industry regulations affect rents?
The Government in the last couple of years has added more legislation compliant requirements to landlords to ensure rental homes meet a certain standard, such as:
- Changes to the Residential Tenancies Act and the Healthy Homes Guarantee Act 2017 (e.g. insulation, ventilation, heating, ground moisture barrier, drainage)
- Ring fencing of rental losses
- Extended bright line test from 2 to 5 years
Some requirements have benefits to tenants, and some don’t. But one thing I think is for sure – it makes it harder and more costly for landlords with rental properties.
So how does this affect the rental market?
- Some landlords will leave the market resulting in less investment stock and less rentals available to tenants, the government cannot provide enough rental houses so as demand outstrips supply, rents increase.
- The compliance costs for landlords are significant, and some of these costs will probably get passed onto tenants (e.g. installing a heat pump – costs an extra $46 a week, spread over 1 year). This will cause rents to increase.
- When rents go up, more people can’t afford it which will see an increase in government subsidies & grants. g. Grants for Emergency Housing increased fivefold in the past 2 years (Government spent $48 million in 3 months on grants)
Making money in property is simple but not easy
We had a look at a small (50m2) two bedroom unit that needed renovation. The
CV is $470,000 and the asking price is $459,000. Based on a rent estimate of $440pw, this property will break even.
The owner purchased the property in 2004 for $150,000. Over 16 years it has made the owner $320,000! In a portfolio of 3 properties like this one, would have made the owner $1 million.
It also shows the effect of the Property Cycle – property price doubles, on average, every 10 years.
This property has 7.3% compounded growth rate, year on year – exactly doubling every 10 years! (Compare that to 2.5% that you get on term deposit.)
This wasn’t my first property tour with Roy and I always come away with useful knowledge that I can pass on to prospective clients. Very interesting topics were discussed that certainly provided food for thought for any investor out there looking to purchase their first investment property (or add to an existing portfolio).
Roy Adams from Asset Consulting offers investors a detailed training course which helps people change their lives through property investment and first home buyers to get into their first home. You can contact Roy on [email protected] if you have any property questions or you would like to join in the next property road tour.
Toni Heath is a Business Development Manager with experience in Residential, Body Corporate, and Commercial property. Toni has been in the industry for over 20 yeras and with her vast amount of experience and knowledge in property and facilities management, you can be assured that your investment portfolio is in safe hands; and achieving its full potential.
If you are looking at a number of options to purchase, Toni will provide you with a free rent income assessment on each property, plus a synopsis of current market conditions in that area. This will go a long way to assisting you in purchasing that investment property. Contact Toni today on [email protected]
If you have any questions about recent legislation updates, or the property market then feel free to get in touch with Auckland Property Management on the below form.