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Chapter 1: What is the main topic discussed in this episode?
Hello and welcome along to the Property Academy podcast by Opus Partners. I'm your host, Stephen Knight.
And I'm Andrew Nicholl.
Chapter 2: What are multi-income properties and how do they work?
And this is the show that helps Kiwis go from zero to five investment properties so you could be financially free and stick around for the next 15 minutes because you're going to learn the properties that tend to have the highest yields, multi-income properties, the pros and cons revealed, and the five different types of multi-income properties.
Now, if you have never heard of a multi-income property, this is where you've got one property that gets two or more rental incomes from it.
Chapter 3: What are the five main types of multi-income properties?
And that could be because you might be able to rent it out to multiple different families or different households. And when you do that, it tends to get a higher yield. But Andrew, just so people can wrap their heads around multi-income properties, what are the five main types?
So first, you might have like a dual key where you might have one unit or one apartment with two separate sections where you can, you know, you might have a shared entrance, but they can be locked up and rented out separately. But the key thing there is that they're on one title.
Then you might get a duplex where you have two units side by side, often with two titles, but sometimes with one as well. Then you might have, say, a granny flat or a minor dwelling.
Chapter 4: How common are multi-income properties in the market?
So you might have your house And on that same bit of land and that same title, there might be a secondary dwelling and it might be small. It might have a kitchen.
Chapter 5: What benefits do multi-income properties offer investors?
It might not. It might have a bathroom. It might not.
That's basically the same thing as a home and income property, right?
Yeah, basically. Although often they might be more structured like duplexes as well. Then you've got dual occupancy where you've got two homes on one large section.
Chapter 6: What are the hidden downsides of investing in multi-income properties?
And again, this is normally one title, sometimes two. And then the final one that we see quite regularly is room by room rentals. And a good example of that might be student accommodation. I remember we did some units a wee while ago in Hamilton where there were five separate bedrooms and each bedroom had its own kitchenette and it had its own bathroom and then you'd have a shared living space.
And if we think about these multi-tenancy properties, one of the big questions you might wonder is, well, how many of these are really on the market? Well, we jumped on realestate.co.nz. Of the 45,000 properties that are online, only about 365 appear to be genuinely multi-income.
Chapter 7: How does capital growth compare for multi-income versus standard properties?
It's about 1% of the stock in total. If you search multi-income on TradeMe, you get about 1,300 properties, just under 3% of the 49,000 listings on there. So they're not massively common, but they do exist. Now, if we think about the benefits of these, Andrew, and why some people buy them, what reasons do people typically give?
Well, they have a higher yield. So if you're chasing a higher gross yield, often two incomes from the one property are going to be somewhere between 6%, 7% versus kind of a 4% to 5% for a standard property. I think another big thing, like if you're retired and you're really wanting to live off the income, often spreading the risk of not having just one tenancy can be quite useful.
So for example, if you've got that room by room rental, five tenancies within one house, and someone gives notice, well, now you've only got 20% vacancy rather than 100% vacancy. And I think kind of one of the third ones, and I'm yet to kind of see this really play out in any meaningful way in practice, is this idea of multi-generational living.
So I know there are a lot of people in Rolleston that are plugging the, oh, you can have a three bedroom house and a two bedroom house all on the one title. And the great news is your mother-in-law can move in. Now that all sounds good in theory, but who the hell wants your mother-in-law living right next door?
And just on the higher gross yield thing, if you think about renting a one bedroom apartment, for instance, that might cost you, if you're in Auckland, $550 a week, depending on how nice it is.
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Chapter 8: What are the risks associated with multi-income properties?
Now, if you want to rent a two bedroom apartment, that extra bedroom might only cost an extra $100 a week, say, or it might only add $100 a week to the rent. And so what we tend to see is that people are willing to pay a lot more rent, or you can charge a lot more rent for the first bedroom, right?
Because having the kitchen and the bathroom and the bedroom all together, that's what people will pay a lot of money for. Each extra bedroom might not add lots and lots and lots more rent. And so if you have the option of We'll use the example of a dual-key apartment where you walk in the door and then there's usually two more doors. Behind door number one might be a small studio apartment.
Behind door number two might be a one-bedroom apartment. Now, collectively, they might just take up as much space as, say, a three-bedroom apartment. But because it's split into two, two separate tenants, you get way more rent compared to if you just had a bigger living area and an extra bedroom because people will pay more for the first bedroom and everything that needs to come with it.
Now, one other question I really wanted to answer is what about capital growth? So you get a higher yield, but do those houses increase in value more quickly? Do they increase in value more slowly? I've always been of the opinion that because these properties really only appeal to investors, they're more a yield property. They're not going to increase in value as fast.
So I tried to call up all of my data nerd friends to say, hey, mate, do you have the data for me? The first call, ring, ring, was to Kelvin Davidson. He's the economist at Cotality, a friend of the show. And he said, look, it's really hard to identify these niche properties within their formal pricing data because they only make up about one to two, maybe 3% of properties.
So he said, look, I can't really do much more than that. And it's not like in the council records, one property is listed as a room by room rental, and they're all listed as multi-tenancy or anything like that. The data's not as clean. So I thought, oh, that's okay. Calvin, I'll call up my other mate at Velocity, Wayne Shum, another friend of the show. So I call him up. Oh,
And he says, oh, look, unfortunately, we don't have data for that. We don't have capital growth data comparing homes to multi incomes. I thought, oh, geez, geez, geez. OK, OK, Wayne, I'll call up my third friend. I'll call up Emma and Vanessa from realestate.co.nz.
And they said to me, look, we can tell you what they sell for, but we can't necessarily give you data about whether they go up in value more quickly because nobody's really got the data on this. Now, I'm always of the opinion that unless you can get the data, it doesn't exist, right? Unless you can find evidence of something existing, it doesn't really exist in my mind.
Tell that to the US about their aliens.
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