Hi, we've just bought IP No. 10, but still feel like novices (wonder how long it takes til you actually feel like you know what you're doing??)
Anyway, discovered these forums a little late in the game, and bought 2 Ultimo Student Units B4 I'd read the warning here. Now, having bought them 7 months ago, I'm wondering if we should cut our losses and sell. On the surface, though, it seems like they've done us a few favours. If I outline the ways I think they've been useful, I'm wondering if some of you would mind 'checking my thinking' and maybe tell me what I'm not seeing.
* At the time we had low income but a bit of equity. Serviceability was stopping us from buying anything else, so the positive gearing (11.6%, at least on paper) got us the loan with the bank, PLUS boosted our income to the point where we were able to buy our next IP. Don't know if all banks are the same, but ours took the gross return, and ignored the big strata downside, which brings the returns back to a still respectable 8.2%.
* We just had one of the units,plus 2 other properties revalued to buy our latest. The unit had gone from $130 to $140 in 7 months, while the other 2, in suburbs that have averaged 10- 13% CG over the last 10 years, hadn't moved.
* So it SEEMS so far that the CG and returns have been fantastic, but I note past posts that say CG is actually non-existant as the norm.
* Given the above (and the fact that at the time, it was either the units or nothing, excluding somewhere in the boonies with a great yield, but low likelihood of keeping regular tenants,) should we keep them, or try to get rid of them?
* If we sell, we probably couldn't replace them with anything else, as our LVR is 79.9%, and we'd need to show pretty close to an 11% return to make the loan serviceable.
* Still, are we better off to have nothing in their place, or to keep them, since they're costing nothing, or close to nothing, even though we probably won't see any CG?
* Lastly, has anybody actually had a positive experience with them, as all I've read are negatives?
Thanks in advance 4 any opinions…..Hi, I bought 5 such units in NZ. If I have the choice all over again, I'd not have bought them. Not that they are bad investments, they're actually much sounder than shares or tree plantations or ostrich farms. The reason I'd choose not to buy them is that i'd have done far better with the funds on my own.
The units yield 7.4% nett which is very good especially as I've fixed the rates under 7% They are set & forget & steadily increasing in net worth. The council has valued the properties much higher than the bank did, i'm sure so they could increase the rates.
There were some problems last year & a number of investors wanted to sell. I was totally against the idea of selling in a depressed market.
The investments in student units were planned for at least 20 years, to have them paid out in time for retirement. It's 6 years & in another 4 years, I'd realised most of the capital I put in. It was cf+ from the start.
It looks like your units are about the same in performance. 7 months is a very short time, unless you feel or know something detrimental or unless you can sell for a gain.
I view my student units quite favourably in spite of a few glitches last year. From 2003 to 2009, what kind of investment would have produced a nett 7.4% year in year out? And preserve the capital as well.
Good luck with your decision,
KYFrom the information in your post I would sit on them. At the moment they bringing in rent and appear to be CF+. You have gained some capital gains to help fund further expansion of your portfolio.
As you said if you sell them you wont be able to do anything else, so you wont be missing out on a better opportunity.
As longs as they dont cause you headaches and they pay for themselves then keep them their to help boost rental income to pay for your next property.
Keep them if they provide the cash flow you need for servicing more loans for proper property investments. If you are looking for CG then get out of them as soon as you can – its not going to happen.
Hope you like feedback. You're gonna get a few on this post
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