Hi Suzette,

Often, changing the nature of a property can be very lucrative. In your case, possibly from residential to commercial or possibly for future development.

I would enquire as to what commercial activity could go there and what sort of rentals they are paying on a square metre basis. The location is important as you would need growth in the area for it to happen.

Some examples I know of are a 3 bdrm house converted to a restaurant, others to dentists, physios, chiropractor, financial services, rental agency, mortgage broker and one demolished and used for LPG storage for a service station.

On the otherside of the coin was a commercial property converted to residential. The building was demolished and 60 apartments built.

So there are opportunities. On the downside the rates could be more expensive.

Cheers
Jeff

I doubt you’ll buy the property with only a 10% deposit unless you can do some creative financing eg vendor finance, equity partner, cross collateralisation etc.

Recalculate your figures. If the deal is any good try putting in an offer with a longer due diligence clause then try flipping it. Alternatively your contract could be subject to putting tenancies in place. If that happens before you settle you won’t have any loss of cashflow

Cheers
Jeff

Hi Muppet,

I am quite well exposed to the Rotorua property market. It’s one of the few towns I still own residential property in. Will be down there this evening so will check out the progress on the Bunnings site on Old Taupo Road.

Cheers
Jeff

Hi FM001,
Managing a tenancy yourself can be a rewarding experience and a great big learning curve. However, if your career goal is not to be a property manager then leave it to the experts.

When your portfolio becomes sizeable enough you will learn to treat it as a business. You employ the relevant staff and/or professionals to do the day to day work for you while you concentrate on doing the deals.

Periodically you will need to reassess your goals to see if they are being achieved and whether or not you wish to create new goals or begin to consolidate.

eg when you accumulate 130 properties you may begin to take you profits and reinvest in fewer, but larger commercial properties. The theory being, fewer tenants then fewer hassles without affecting income.

In answer to your question, you can put as much time and effort into your properties and investments as you want in order to achieve your goals and within your personal comfort zone.

For me property has become a consuming passion and I will continue to shift the goal posts while I continue enjoying what I do. Time wise – a couple of days a month managing but 24/7 looking for new deals.

Cheers
Jeff

Hi Muppet

Yeah, the dog box – that’s happened before.
I actually thought my key didn’t fit but it was a stick pushed through the keyhole from the other side.

Jeff

There has often been talk of introducing capital gains tax on property in NZ. It’s a bit of a political football and often used to distract us from the real issues.

At present CGT is not on the agenda but the Labour Govt is reviewing submissions on the officials’ issues paper “Repairs and maintenance to the tax depreciation rules”

Cullen seems to think in the wake of escalating property prices, investors have had too much of a good deal and wants to bring our depreciation rates in line with Australia.

My submission basically said “fine, as long as he brings the Residential Tenancies Act in line with Australia as well.

Muriel Newman is on our side with this one. Go to http://www.depreciation.co.nz for submissions on the RTA

Cheers
Jeff

Hi Robert,

One of the major pitfalls of a boarding house is you get boarders. They tend to be more transient and less responsible with their money.

On the positive side if you are of the mind set to handle the problems that go with boarding houses then you can make extremely good money.

I presently own a pub with 40 rooms which is being run as a boarding house. We are converting it to tourist accommodation and will sell the lease off separately to be run as a motel. By doing this upgrade we effectively raise the room rate from $100 per week to about $75 per night.

That’s one option for you to keep in mind.

Regarding the on site management it would depend on the size of the boarding house. It would need to be cost effective to have a full time manager although it would always pay to have someone responsible enough to ensure the place remains secure.

Cheers
Jeff

Hi Mark,
It’s never too late to start investing or anything new to that matter. Ray Kroc basically set up McDonalds in his sixties.

Regarding commercial property, each investment will have its own pros and cons. I take it you are looking at offices so you need to research the rent rates for offices in the area to determine what the property is worth. Speak to some agents and get an idea of the type of office space there is a demand for. These days businesses have different requirements such as data cabling which can effect the demand for a given property.

Another thing to look at is alternative uses. Some office blocks are great for converting to apartments or backpackers for example. Often alternative uses are where the money is made.

I swear by commercial. Residential to me is only a stepping stone to the big stuff.

Cheers
Jeff

Valuations are based on “historical” evidence – that’s the science part of it, the rest of it is art.

I once bought a vacant retail shop with the intention of converting it to a restaurant. The valuation didn’t come up to speed making it difficult to finance.

The valuer sat outside the building from 10am to 11 am to monitor pedestrian traffic. Because there was no one around he decided it wasn’t suitable for retail. I tried to explain that the reason for this was that the shop was empty and everyone was at work in the multi story offices down the road during that time. Also that pedestrian traffic was a marketing thing and not entirely a location thing.

To cut a long story short, I bought it, converted it, leased it out and the same valuer revalued it at almost double about 1 year later.

Valuation – art or science??

Cheers
Jeff

Hi Westan,

Sorry about Te Puke I should have elaborated.The place has good growth potential due to its proximity to Tauranga and the coast.

There is more demand for rentals there now as people commute so no doubt in the future there will be pressure on rents.

As far as 10% deals go and do they exist – there is a bargain in every market.

Cheers
Jeff