It’s been a busy year for the investors we profiled in 2020. Joanna Jefferies caught up with some of them to see how they fared in the post-lockdown months.
1 January 2021
In The Post-Lockdown environment, the Rotorua market has gone nuts, says investor Michael Burge. But rather than wait for a market slowdown that Burge says is unlikelyto transpire, he’s gone ahead and purchased three properties, this time in Tokoroa.
Not only has he had to venture outside of his Rotorua investment stomping ground, he’s also had to break his own rules, investing for cashflow rather than for value-add potential. “[A deal] doesn’t have to have the value-add as long as the cashflow is high,” he says.
One property that fit his criteria was a unit in Tokoroa, which he snapped up for just $170,000 in December. The weekly rent is $380, giving him a yield of almost 12%.
‘Everyone always talks about “I want to get ahead” – like they’re behind, effectively. I feel ahead, I’m not chasing anything anymore’ MICHAEL BURGE
He also purchased a three-bedroom house in Tokoroa for $182,000 in November last year, which he completed a $40,000 renovation on, including replacing the flooring, fencing, kitchen and bathroom. It took less than four weeks to complete the renovation and Burge will be able to recycle the equity created to finance his next purchase. It’s a similar unit to his other Tokoroa property, with an equally attractive purchase price and weekly rent.
To up his servicing ability for his latest purchases, Burge started a property consulting company in early 2020, setting up deals for new investors. Due to the initial hesitancy in the property market post-lockdown, he oversaw many excellent deals. “A lot of people stopped offering on properties, so I essentially got clients to put offers in, and we did really well.”
Burge says BNZ were happy to lend to him on the back of only six months’ business revenue, which means if all goes well, the property he currently has under contract will become his ninth hold – only two years since he bought his first investment property. “Everyone always talks about ‘I want to get ahead’ – like they’re behind, effectively. I feel ahead – I’m not chasing anything, anymore. I feel I’m forward of where I need to be.”
When the borders closed early in 2020 and overseas students were effectively banned from entering the country, there was speculation that Auckland City Central’s apartment market would crash. But for Hamish Duke – aka Mr Viaduct – the reality hasn’t been anywhere near the prediction.In his 26-apartment portfolio, there was only one rent decrease, due to a change in personal circumstances, and the rest have continued renting out business as usual. “There’s still enough students around and also young professionals; because the rental prices in the suburbs are still quite high, apartments are easy for them to rent and close to everything.”
However, within his apartment rental and management businesses there have been a few changes – notably converting short-term rentals into long-term due to the lack of overseas tourists. But Duke says he will continue investing in apartments and he’s currently on the lookout for properties yielding 6-7%.
“Why I want to invest more in apartments is because traditionally the apartment market takes a year to increase in value after the house prices go up; we’re seeing a huge housing boom at the moment and prices are going crazy. “So, I’m predicting that in 12 to 15 months we’ll see a big increase.”
Added to this, says Duke, is that loan-to-value ratios (LVRs) for apartments are still at 80%, whereas for standalone homes lenders will still fund 90% of a purchase.
He says when banks eventually lift LVRs to bring them in line with apartments, then the lower price point of apartments in the CBD will start to look attractive to buyers “so that will have a really good effect on the apartment market”. In addition to this, the America’s Cup in March is already bringing more renters into the Viaduct, both long and short-term, and Duke says as a result rents are increasing – particularly for premium apartments.
Overall, CBD apartments look positive in 2021, says Duke. “The market is a lot better than we thought it would be!”
Renee & Vaughan Tither
Since we profiled Renee and Vaughan Tither the Christchurch property market has finally seen some huge price increases and appears to be playing catch up after many years of only moderate growth. It’s great news for the Tithers, as their portfolio of eight properties climbs in value, however, it means spotting a deal is harder than ever.
“All the properties I would normally target are getting snapped up very quickly!” says Vaughan. It’s lucky then, that following the settlement of their first commercial property earlier in the year, the focus was off the portfolio and on their own home.
Just before Christmas they finished a complete renovation and extension of their own home, while living on site. It involved building the extension, and moving into it while the existing house was gutted and overhauled with a new kitchen and master en suite.
It was a very different experience to renovating to add value, says Vaughan. “Normally if we do a $20,000 renovation we like to add $50,000 or $60,000 in value, but this one was probably dollar in, dollar out.”
They splashed out on all the fixtures and fittings that they wouldn’t normally consider buying and completed the reno just in time to nest before the arrival of baby number two in February.
There will be a brief period of reprieve for Vaughan before he tackles the next project: a joint venture in which he is a small stakeholder, developing a piece of land into four units with a couple of mates.
The original house will be pulled down in March, and if the profit margins are good, Vaughan says he’ll be keen to repeat a development project again.
Ronelle & Kyall Boonen
This year has meant a re-shufflefor Gisborne investors Ronelle and Kyall Boonen. Post-lockdown they took a moment to reassess their portfolio and decided they wanted to renovate and move into their charming 1910 cottage rental down the road.
‘We decided to do something a bit different and put an ad in the local newspaper here – basically saying we’re seeking a property and our budget is $350,000 and it could be two or three bedrooms’ RONELLE & KYALL BOONEN
Selling the home they lived in would mean halving their mortgage, with enough cash to spare to completely renovate the cottage. However, they weren’t keen on downsizing their property portfolio and in the competitive Gisborne property market (which like most markets around New Zealand is experiencing a post-Covid-19 uptick) they still wanted to buy something with a reasonable yield.
“We decided to do something a bit different and put an ad in the local newspaper here – basically saying we’re seeking a property and our budget is $350,000 and it could be two or three bedrooms,” says Kyall.
Their letter was answered – four times over – in fact. Three of the private sellers’ properties were not in the right suburb, but the fourth ticked all of their boxes. It was a 1960s Beazley on a full section where the owner had recently subdivided the back to make way for his new home. The mid-century abode was renovated to a good standard, which meant the Boonens would upgrade their portfolio by purchasing it.
And at only $350,000 bringing in $400 per week rent it fit within their rental yield criteria. They’re now currently part way through the renovation of the cottage, which they’re doing in stages due to living on site. “It’s crazy trying to renovate a house with two boys under five!” laughs Kyall. There are changes on the home front too, with five-year old Lachlan starting school in the new year, and Ronelle taking on a new challenge, too: she’ll be working for the local branch of Mike Pero Mortgages as a financial adviser.
She is looking forward to helping firsthome buyers and investors with their financial plans, and will no doubt put all of her property investment knowledge to good use.
It’s been a whirlwind year for Hawke’s Bay investor Lauren Worsley, who finished up at iFindProperty and now works full-time as a trader. Since we last spoke, she completed a joint venture development in Papakura, and purchased another property to develop – this time in Hawke’s Bay and on her own.
The 940m2 section in Mayfair has an existing house on it, and Worsley is currently in the process of a full renovation and two-lot subdivision.
‘I’m sick of fighting the market every three months for another deal, I’d rather buy a big one which takes me six to nine months’ LAUREN WORSLEY
But it wasn’t an easy find, which Worsley puts down to extremely low market supply. The huge amount of competition meant she put in offers on 28 properties before she was able to secure the Mayfair property.
“There were 18 offers on it and 10 of them were unconditional. I probably paid a little too much, but I was sick of looking.” The $40,000 renovation of the front house will be completed in January, when it will go on the market, and a relocatable house will be moved onto the back section.
The whole process should take between six and nine months, and she’s expecting the front house to sell for anywhere between $650,000 and $680,000.
To cut renovation costs Worsley undertakes a significant portion of the renovation work herself, including tiling, laying floors and painting. She says many property mentors advise against this strategy, but she enjoys the work, she has the time and it saves her a huge amount of money.
“Conservatively, by the time I finish I expect the back house to sell for $620,000 to $630,000 and the whole project will probably cost me about $1 million.”
Not a bad profit margin for a single project. Naturally, it’s a format Worsley will repeat in the future, as opposed to smaller renovations where the timeframe is quicker, but the profit is far less.
“I’m sick of fighting the market every three months for another deal, I’d rather buy a big one which takes me six to nine months and then I don’t have to fight the market again for the best part of a year.”