I’ve put a contract on 2 +ve CF properties in Dunedin, NZ (not unconditional yet so can bale out) as follows:
1. 8 bedrm house + 6 x 2 bedrm units 1km from city centre
expected rent return 10.5%
CoCr (net) 4.5%
Students from local uni in the house and mostly professionals in the 2 bedrm units2. 2 x 5 bedrm houses 3km from city centre
expected rent return 10.8%
CoCr (net) 5.5%
Students from local uni are the main renters for these housesI wanted to get some views on student accomodation in Dunedin and these deals from anyone out there who has been down this road before?
Thanks
FlyHigh [cap]
Do you live in Dunedin? Renting to students is fairly labour intensive. Are these rented by the room to students. Renting 4 rooms gains a better return than renting a 4 bed house to a family.
But the higher return cames at the expense of requiring more effort in getting the rents.
What is the price for the two properties (if you don’t mind me asking)? Just curious.
Ozi
I live in Melbourne and the properties would be managed locally in Dunedin by a property manager. Rooms would be rented out individually in the 8 bed house and either indivdually or to a group of 5 persons in the other 2 houses.
Around 930k for property 1 and around 400k for property 2.FlyHigh
a word of warning Otago Uni students are a mad bunch with a reputation for destroying rental houses, the houses should be of very solid construction or very cheap to aquire or your investment may start to haemorage cash[comp]
cocr seems a little low considering that you could probably get that on a term deposit.
are you expecting capital gains or rents to rise?Is the COCR figure etc based on best case, but what are the numbers like worst case?
apart from that in general terms Dunedin is fabulous, but have you ever been there?
i would recommend it.cheers-
Minijoy to the world
As an ex Otago Uni Student (Scarfy) myself I would also put out a word of warning…They do not have the greatest reputation for looking after the houses that they flat in, so I would personally make sure that the place will be able to stand up to the Otago student lifestyle
Between tenants there may be a bit of work to do, so I would factor this into the figures. Dont get me wrong, I personally believe Dunedin is a great place to invest…havent bought there myself, but know a couple of people who have invested and done very well out there.
One thing to consider as well, which is a bonus, is the students there typically arent too fussy on the condition of their place, some items that a normal tenant would complain about, become the places ‘character’ to a student….
Also to note is the typical lease structure in Dunedin. Because of the student year, 90% of the places have a fixed term lease covering the holiday period as well i.e from Feb to Feb, and becuase of the demand for some of the places (depending on where and what they are) you can sometimes be guaranteed a fully tenanted place year in and out.
Just my 2cents worth [cap]
If you dont mind me asking, where abouts are the student places you have in mind…I might be able to give more advice based on their location[cap]
Cheers
RobSorry all for my slackness in any responses on this – my computer had a meltdown for a few days!
Although CoCR may seem low, remember this is after tax and is higher than all other properties I have seen for sale in NZ. I also got valuations showing that we are paying much less than their valuation so expect capital growth in there.
The numbers are calculated on a lower rent than i believe we can acheive and a high interets rate – just being conservative.
Have considered the uni student issue with flats in Dunedin, and yes I have seen some real dumps! These are tidy and well maintained which I believe is they key to keeping them that way, also will provide weekly cleaning and rubbish removal to tenants (costed into rent of course).
One is near the casino (2 blocks SOuth) and other is in North East Valley.Cheers
FlyHigh [cap]
In Northeast Valley you will most likely end up with the more ‘placid’ student.
I am assuming it is still the same as when I was there, where the general rule of thumb was that the further you got from campus, the more more placid the students tended to be as far as causing havoc goes.There are certain areas on campus where your property has a high, if not inevitable chance of being trashed (Castle St for example). But as you say, if the place is tidy to start off with, and you make the effort to keep it tidy, then you should be able to attract the ‘right’ tenant who will look after it.
An example is my first flat, that was in the party area – wasnt a mansion by any means, had a bit of ‘character’ but we looked after it, and apart from a mass of beer being soaked up into the new lounge carpet it was in the same condition when we left.
The successive tenants however completely trashed the place; they kicked and punched in walls, graffitied all over the place etc etc, so I would just be wary of the types of students that you let it to.
Cheers
Rob
[suave]
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