Grant Hoey is an avid New Zealand Apartment investor and mentor. His knowledge and experience investing in Apartments is put to good use in our Apartment mentoring program and Grant shares a lot of his experiences in our free eBook – Cashflow and capital gain from Apartment Investment .
Apartment Property investment is on the rise especially in Auckland and it pays to do your due diligence and learn all you can about the market. We ask Grant Hoey questions on how he has succeeded in building a 36 property portfolio – access the interview here
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Grant Hoey – meet him in March….
The following post is based on the book “The 15 Million Dollar Man” by Sean Wood, to read more click Property Investment and download 2 free chapters.
It happened that I attended an Apartment Property Investment marketing event, where the property in question was a block of high spec apartments on the waterfront in central Auckland.
The idea of buying such a property interested me because the values of top-end apartments in Auckland are incredibly low compared to the rest of the world and I could see the apartment market developing in the next 10 to 15 years. The apartments had not yet been built, making it a ‘buy off the plans’ purchase. There were only two apartments in the complex that would be built with three bedrooms.
The one I was keen on was 97 square meter and although it didn’t have a sea view I agreed to pay $463,000 for it, knowing that an equivalent apartment in Sydney, Hong Kong or London would be worth $3 million.
Now comes the interesting part. I used a deposit bond to secure the deal, which cost me the grand total of $5000. Normally, a deposit would represent 10% of the purchase price, i.e. $46,000. However, for a few thousand dollars, a deposit bond company will write a cover note to the developer securing the deposit against the equity you have in other property; this equity needs to be twice as much as the deposit the bond is covering.
In my case it amounted to $96,000, which I easily had in my portfolio. Even better, this was equity that was otherwise unusable (banks will lend 80% of the value, so there is 20% you can’t use, and this 20% is what secured the deposit bond).
Remember that holy mantra: leverage, leverage, leverage. So for $5000 I secured $463,000 worth of property. I knew that in the two and a half years before I had to settle in full it would pick up major capital growth, and I was proved right. I settled on the deal in October 2007 and as the valuation is now $665,000 I effectively created $200,000 in equity, which is the same as buying for a 30% discount! The apartment is now rented out for $650 per week.
Although this only equates to a 7.3% yield, remember that this is normal for a capital growth property and my other properties subsidise it.
PropertyTutors Review of the Apartment Market is available at the Apartment Masters Event held every year.