An Auckland real estate agency has set up a buying service that will locate and manage residential investment properties on investors' behalf.
Called City Sales Investment, the fee-based service has been set up by Martin Dunn, the principal of real estate agency City Sales which specialises in the Auckland apartment market.
However it will be focused on locating stand alone houses and home units in the suburbs for its clients, rather than apartments.
The scheme will charge investors using the service a "buyer's agent" fee of 2.5% plus GST (2.875%) of the purchase price of any property deals it concludes for them, with a minimum fee of $12,500 plus GST.
City Sales Investment will then manage the property on the investor's behalf for a minimum term of one year, charging a management fee of 8.5% of the rent.
Clients who participate will pay an upfront fee $3000 plus GST, which is deductible from their first buyer's agent's commission.
They will then receive details of about five properties a day which City Sales Investment believes could be as suitable investment properties.
Once the investor chooses a property they like, City Sales Investments will handle the purchase negotiations on their behalf, and if a deal is struck, the investor will own the property themselves, and City Sales Investment will be the property's rental manager, dealing with tenancy issues, collecting the rent, arranging maintenance, undertaking property inspections and so on.
Because it's an investment property, the buyer's agent and ongoing management fees will likely be tax deductible.
Because residential rents are relatively low compared to capital values, in Auckland, the scheme is likely to suit people looking for long term capital gain rather than a high income stream.
Dunn said it was likely that the properties purchased for investors would be providing gross rental yields of about 4.6%.
Once management fees, rates, maintenance and other expenses were deducted the net yield would probably be around 3%, so depending on their tax situation, people may get an after tax return of about 2%.
However he believes the price of houses in Auckland will keep rising by about 8% a year, and in most cases that capital gain would be tax free, so the total net return to investors could be around 10% a year.
Dunn said he expects most of the people using the service will be local, professional people who want to own their own investment properties but don't have the time to be hunting for them themselves and don't want the hassle of managing them.
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