At first glance, it looks like what many investors want:
- 2 properties for under $1 million
- 5.72% gross yield
- Guaranteed rent of $1,100 a week
Now, I’m all for dual-key properties. And I’m all for Rolleston.
But before buying a property like this, do these 3 checks.
Check #1 – Verify the rent
The first thing I’d do with any property offering a rental guarantee is check whether the rent stacks up in the real world.
Rental guarantees can absolutely be useful. We’ve used them ourselves at Opes in the past.
But remember, a rental guarantee is usually there so a developer can market a high gross yield, rather than to show you the true market return.
After all, the ‘guaranteed’ rent is often set above the true market rent.
In this example, the advertised rent was $1,100 a week ($550 for each home).
So I called Christchurch property managers.
Their view was that once the guarantee expired, a more realistic rent would be around $490-$520 a week for each property.
That’s potentially a $60-a-week drop, per dwelling, once the guarantee ends.
That’s $120 a week extra you might not have been expecting.
So that ‘5.7% gross yield’ is more like 5.1%.
Check #2 – Buy for yield or growth (don’t get stuck in the middle)
Every investment involves trade-offs.
Properties are either growth or yield.
Growth properties – tend to go up in value faster. But have lower rental yields.
Yield properties – tend to have better cashflow. But go up in value more slowly
