How much should I spend on an investment property?

What can I expect to pay in Auckland? what are real investors spending on properties in Auckland?

Let’s begin in Auckland, the country’s largest city. Let’s start by talking about new-builds and then transition over to existing properties that you can renovate.

If you’re starting out as a property investor – or haven’t purchased in a while, you probably want to know – “what should I spend on an investment property?”

Obviously – property’s range in price and it depends … on a whole bunch of things. But if we left it at that, this would be a very short report.

That’s why, in this article you’ll we’ve compiled a list of what real investors are paying for properties in today’s market – and the key opportunities we see.

This is to give you a rough idea of what you should be aiming for, when considering the right investment for your portfolio.

What can I expect to pay in Auckland? what are real investors spending on properties in Auckland?

Let’s begin in Auckland, the country’s largest city. Let’s start by talking about new-builds and then transition over to existing properties that you can renovate.

New builds in Auckland start from around $750,000 – $800,000. That’s typically enough for a 2-bedroom townhouse with a car park (no garage). These are typically found in south or west Auckland.

In the middle, you have 3 and 4 bed townhouses.

A 3-bedrom townhouse with a car park will start around $850,000 and head up towards 1 million. The exact price depends on how nice the property is (the spec) and the location.

For example, the following 3 bedroom, 1.5 bathroom with a carpark, has recently been purchased by investors for $859,000, and it’s renting for $700 per week.

A 4-bedroom townhouse in Auckland is typically between $1 and 1.2 million.

On the other hand, if you are looking for higher yielding properties, dual-key apartments sit at the higher end of the scale starting from $950K and up to 1.2m. These tend to earn higher rental income and are found in the central suburbs like Newmarket, Ellerslie and Parnell, where the rental demand makes sense for them.

Deposit wise, to buy a new build investment property in Auckland you’ll generally need a minimum deposit of $150,000.

If you are a BRRRR investor and renovations are more your thing, then home-and-income conversions are the main opportunity we currently see.

This is where you convert a single property into two legally separate dwellings. That means you can rent the property to two different households and earn significantly higher rental income.

This is imperative in today’s market since investors in existing properties will soon face higher taxes, and the purchase price in Auckland is higher than around the rest of the country.

The sorts of properties that can be cost effectively converted tend to cost around $1 million, plus or minus $50K.

You’ll most likely find this sort of opportunity out west in places like Ranui, or down south in Manurewa.

As an existing build, your deposit is 35%, which means you’ll need around $380K plus renovation costs.

Aren’t these prices low for Auckland?

The average house value in Auckland is $1.5 million according to QV. So you’d be forgiven for thinking the prices we’re talking here are low for Auckland.

However, investors do tend to invest in more affordable properties on average.

This is because some people can afford to (and will) spend 3 to 4 million dollars on larger, high-priced homes in high-end suburbs. This pulls the average price of all properties up. But no investor is going to purchase one of these as a rental. Why?

Because there aren’t many tenants who want to or can afford to rent a. The reality is, a person who is able to afford the rent on one of these mansions, is most likely going to have their own home.

So the average value of an investment property tends to be on the more affordable end.

What can I expect to pay in Christchurch? what are real investors spending on properties in Christchurch?

Next up is Christchurch, one of the country’s most undervalued cities.

Here is the scale of what you can expect to pay for a new build in the garden city.

At the lower end, a 1 bed, 1 bath apartment in Christchurch starts at $499,000.

Sitting in the middle is the 2-bedroom townhouse, which is very popular and commonly found in Christchurch’s inner city, places like Addington. These properties are usually priced between $610,000 and $660,000 and rent for $500 a week.

If this townhouse was further out of the city centre, in say Waltham, it would be ever so slightly cheaper.

However, if these townhouses have garages they tend to be priced around the $700,000 mark.

However, if you prefer to invest in standalone houses the price tends to be higher. A 4-bedroom standalone property is generally between $800,000 to $1 million.

The properties on the more affordable end tend to be in Christchurch’s satellite towns like Rolleston, Rangiora and Kaiapoi. These are typically a 15-30 minute commute from central Christchurch.

The standalone houses that are priced at the higher end are typically found around the outer suburbs within Christchurch like Halswell.

This means the bare minimum deposit you’ll need to invest in Christchurch starts at about $100,000. That’s if you are going in at that entry level.

Renovations-focussed investors can expect to pay a minimum of $450,000 for your classic 3-bedroom property that you can then renovate to increase the value and the rent.

As an existing build, your deposit is 35%, which means your deposit starts at around $180K, plus your renovation costs.

Aren’t those figures pretty wide?

In Christchurch, you’ll likely spend somewhere in the region of $450,000 to $1 million.

Yup, that’s a wide range. Here’s why we’ve included all of them.

A 1 bed/1 bath isn’t going to appeal to every investor. But it would be a great fit for an emerging investor who wants to get on the ladder – but who also has limited lending potential.

2-bedroom townhouses are affordable but may not be suitable for an investor looking to diversify their portfolio (e.g. if the investor already owns lots of townhouses). That’s where a more-expensive stand-alone could be well suited.

So, yes it’s quite a range. That shows you the span of what investors are paying right now.

What about some other areas?

Hamilton

Here at Opes, we aren’t recommending a lot of New Build properties in Hamilton because prices are often too high compared to the rent.

In our view, investors are better off taking that money and investing it in an Auckland property.

However, we do still see opportunity for existing properties within Hamilton.

Again, the opportunities tend to be focussed on home-and-income opportunities. Similar to Auckland, this is because the combination of high house prices in Hamilton and new taxes for existing investors mean the need for yield.

The sort of properties that can be cost effectively converted start in the $750,000 region. That means you’ll need to have $300,000 deposit, plus your renovation costs.

Whangarei, new plymouth

It’s a similar story for areas like Whangarei and New Plymouth.

There aren’t many opportunities for new builds right at this moment ­– in our view. But, there are opportunities for BRRRR investors to purchase a 2 to 4-bedroom house to renovate.

These areas have a similar price point to Christchurch, starting from $450,000.

That means the deposit starts at $180,000 plus renovation costs.

So, how much money should I spend?

It depends. The figures we’ve thrown at you in this article are just examples of what range you could realistically be faced with in today’s market.

And because they reflect what is happening at the time of writing, these will go up and down over time.

The bottom line is, these are just a ball park to work from and an idea of what real investors are spending in today’s market.

It is important to note that there are heaps of factors that impact how expensive a property will be – it’s location, the spec of the property, the opportunity within the property, the yield and lots of others.

So when answering the question “what should I spend?” the answer is: it depends.

So, don’t take this article as gospel. There will be properties either side of these ranges and that doesn’t mean these will be bad investments (or better investments).

For example, we’ve said in Auckland you should expect to pay between $750,000 - $800,000 for a 2-bedroom townhouse.

But Opes Partners managing director, Andrew Nicol had one of his investors recently buy a $1.2 million 2-bedroom townhouse in St Heliers.

In this case that’s because the property was in a premium location and appropriate for what this investor was looking for.