Argent Hall makes a fantastic case study for how property investment can grow your wealth, says Aaron Tunstall
Why is it that we like property investment? It’s risky, it’s expensive, it’s time-consuming. But when you want to increase your wealth, property has been hard to beat over the past decade. If you are prepared to invest your time and money researching the market, you can sometimes find a deal that outperforms the market. That kind of deal can help set you up for a better retirement.
It’s not always easy to find those deals, but it’s not impossible. I’ve long been an advocate of looking at opportunities like leaky buildings and even leasehold apartments, as well as short-term rentals. The trick is to thoroughly understand your local market so you can recognise a good deal and move quickly when you see one. I do tell people about great deals, but obviously buyers don’t always believe me!
Recently we’ve had a great example of the longer-term pay-offs of thinking outside the square: Argent Hall, a small apartment building in Auckland. In February 2014 I wrote a column about what a rollercoaster ride it had been for owners, dealing with weathertightness problems and a complete reclad. At the time, I said that buying an apartment there, right before the Code Compliance Certificate was issued. Back then we were selling one-bedroom apartments for between $195,000 and $240,000.
This year, we’ve listed several one-bedroom apartments in Argent Hall, with asking prices of between $440,000 and $490,000. That’s a gain of around $250,000 in only four years. What an outstanding investment. We also manage apartments in this building: one-bedroom apartments rent for around $460 a week. If you paid $240,000 and you’re getting $460 a week, you’re in a superb cashflow position.
Look out for recently reclad properties – often owners are completely fed up after years of recladding and weathertightness problems and they don’t necessarily want top dollar, they simply want the property off their hands and a bit of cash in the bank. We have one on the market now that I think is a great buy. The CCC will be issued before settlement date, the whole building has been reclad, and it’s a bit like buying a new apartment at the price of a second-hand one. It’s a two-bedroom, 48m2 property in the Auckland CBD that will rent for around $550 a week, on the market for $448,000.
Something else that’s been coming to the market more frequently is inner-city carparks. This is an odd little market, but it does have its fans and its success stories. If you use Realestate.co.nz, you might have noticed the site upgrade now includes a search option for carparks – a sign of this burgeoning market. (TradeMe doesn't yet have this function, so agents are often forced to list them as ‘1 bedroom, 1 bathroom, $80,000’.) Carparks range from about $60,000 to $100,000, depending mainly on location. They rent for between $100 and $450 a month. You could buy a Wilsons park in Hobson Street, for example, for $75,000 and rent it for $340 a month for a gross yield of 5.3% - but the net yield is almost the same because obviously the ongoing costs are virtually zero. You don’t need to worry about a tenancy agreement and I can’t imagine it’s hard to maintain a concrete rectangle. Considering the traffic in Auckland, I don’t see much of a problem with demand for carparks in the future, either.
I’m not saying this is the next sure-fire investment, but I do believe this is another example of an area where you shouldn’t be too quick to write something off. Do your research, get to know the market, and find out whether there could be an opportunity there for you.