[SOLD] Single Home with $60,840 Income Stream in Wellington
150 Raroa Road, Te Aro, Wellington - $817,000
Massive cashflow on offer from this single turnkey property in the heart of the Victoria University rental zone in Wellington City.
The 6 bedroom home is rented on a fixed term lease of $1,170 per week ($195 per room) until the start of 2017. Appraised rent is $200 per room in that area - so $1,200 per week, or a bit more if rents continue to rise. This is not a by-the-room rental, these types of property are on a single fixed 52 week leases.
Aro Valley is the heart of student rental area and the house is 1km walk from the edge of the university grounds and a 400m walk from a bus stop leading into the city. Well looked after properties rent easily for fixed terms and it is common for a group of students to stay in one property for multiple years at university.
The house was built in the early 1900's and is in good condition having been recently renovated. Wiring and pilings have been redone and checked. The roof will need to be replaced at some point in the next few years, however that can be planned for and covered from rent cashflow when it does come up.
The gross yield is 7.4% and investors who have been on iFindProperty's database for some time may be accustomed to higher gross yields. Remember that you pay only one set of rates, insurance and accounting fees and you're maintaining one house instead of 3 or 4. Carpet and curtains cost the same regardless of the property.
Lets look at net yield and cashflow - a portfolio of 4 smaller properties with the same total price would need to gross over 9% to produce the same cashflow, while being 100% occupied (which is the norm for student properties in Wellington).
We ran the numbers in our cashflow calculator for 0%, 10% and 20% deposit scenarios. You can see the projections over time for both interest-only and P&I loans in the attached PDF.
One strategy could be:
* Lock in a P&I loan for 5 years at low rates.
* Each year if the same rate is available re-fix for another 5 (i.e, push out the end date)
* With a 10% deposit the property will be CF neutral (becoming positive) AFTER you pay off $10-15K per year from the principal. Looking at the attached projection (page 2) that's $61,379 repaid over 5 years. At that point even if interest rates were 6.5 - 7% the property should still break even on a P & I loan, significantly lowering the "what happens when interest rates go back up" risk.
* At that point you will have a total of $228K in equity (assuming a conservative 2% growth rate on average)
University, bus routes into town are nearby.
Licensed Agent - REAA 2008
027 486 6146