2020 has been a very tough year. Things got tense in February and stayed that way. COVID-19 turned our entire understanding of what was normal upside-down and even though a vaccine is maybe, possibly, probably on the horizon, the best-case scenario on the health and economic front is that we still have a long and uncertain slog in front of us.
All of which makes the current property market remarkable. When New Zealand went into lockdown I was one of many who anticipated a slow-down, at least initially... Some bargains were coming, right on their 10-year schedule. And then... Kaboom! Interest rates fell through the floor, tens of thousands of New Zealanders collectively realised it is now cheaper to buy than rent and leapt at the chance. This doesn’t seem to be limited by location (with the notable exception of Queenstown, which was already a very expensive market); many areas expected to slow down - such as Rotorua and Invercargill - have surged.
Our team around New Zealand are very busy helping investors purchase. However I thought I would do something different today and share what I have been up to. I stuck to familiar strategies and have made 6 purchases since lockdown. Here they are:
1. I bought a home. Actually, I bought a do-up that would work as a standard rental, an Airbnb, or a project to renovate and sell. Multiple exit strategies are important and this deal has options. I went in with no conditions on my offer after the property had fallen over four times in quick succession due to finance and builder issues (I did have a builder check it out). I picked it up for a good price.
2. I bought a property to do-up and sell. My bank refused the property as security for a loan, it was that bad! A non-bank lender sorted us out and we are at the end of a long renovation and hope to list the property within the next few weeks. Please consult with your property accountant and understand the correct structures and tax implications before trading property.
3. I bought three buy-and-hold rentals. Two were very tired and needed a lot of work and the third is better but requires some redesign and consented changes to optimize. I hope to start to wrap the first two up by Christmas and refinance and the third is next year's big project. Note that I offered at the asking price because there was a lot of upside with these deals and I wanted to snap them up quickly.
4. Lastly, I bought a nice property in a good suburb of Rotorua. A rare deal with almost nothing to do! Again, the strategic play was an unconditional offer as the seller needed a quick result in order to confirm on their next home. Multiple options again and I decided to team up with Maree and try out Airbnb. It seems there are fewer holiday lets available since Covid-19 and for the next two years a lot of domestic tourism is expected. If we do well, great, if not then it will work well as a regular rental property in a great area. It’s nice not to have to renovate much for once... Except for the new kitchen, two new bathrooms, new wall, flooring, paint, lighting, deck, conversion of a cross-lease to fee simple...
Phew, that’s a lot and I hadn’t planned on expanding my portfolio, but the opportunities came up as they do and I had some lending capacity so I took them on. I will wrap these projects up before going any further. Five projects on the go means your bank balance goes down pretty fast!
Some tips from my experiences this year: lending approval is an asset in this market; have more than one exit strategy for a property; and
adding value puts you in a good position to both weather uncertain times and keep investing.
This article was published in the November 2020 issue of the New Zealand Property Investor Magazine and is shared here with permission from the magazine.
The magazine is an excellent resource with digital and print options. We highly recommend it.
Business Owner & Operations Manager
027 358 3855
Right as the CCCFA changes were starting to bite, an investor asked us to market their 3-unit property in Rotorua. We used our investment experience to highlight the upside potential for the incoming buyer and marketed it to our exclusive database of investors, generated a good result. Read More…
In part 2, we look at strategies to navigate through, and ultimately profit from inflationary periods. Read More…