For Developers: Is My Project The Right Fit for Opes?

LM b W

Laine Moger

Journalist and Property Educator for 6 Years
Video Intro
Introduction

For Developers: Is My Project The Right Fit for Opes?

Not every development is going to be the right fit for Opes Partners. The investors we work with tend to be highly educated and data-driven. So, they will only invest in properties where the figures stack up as worthy investments. For this reason, the projects Opes recommends tend to sit within quite specific parameters.

This article aims to give you, as a developer, a sense of whether Opes Partners may be the right fit for your project.

Property types

What Sort Of Properties Are Opes Partners Not The Right Fit For?

The projects jumped at by Opes Partners’ investors tend to sit in the lower to mid-price range of most areas.

Simply, this is because anything too expensive is better suited for owner-occupiers rather than investors. When the property is at the upper end of the market, rents often aren’t as high and the yields are too low to justify the investment.

For instance, at the time of writing, one developer had the below property under contract in Halswell, Christchurch with an advertised price of $989,000. We believe this 4-bed, 2-lounge property would likely rent for $650 per week.

That means the property would have a gross yield of about 3.4%.

Development in Halswell, Christchurch. Advertised price $989,000

To be clear, we’re not saying this is a bad property; neither are we saying it’s too expensive. All we’re saying is an Opes investor would consider the yield too low.

Alternatively, a property located in the same suburb, could be more attractive. For example, say the price is $752,000 ($237,000 cheaper) and the rent per week is only about $25 less.

That gives it a gross yield of 4.32%, which is much more attractive.

To be fair – again – we’re not saying the first property is overpriced or a bad property. It has an extra lounge, more land, more house and is probably of a higher spec.

It’s just that renters aren’t willing to pay significantly more for a higher quality of house, and cash flow is a major factor Opes investors consider.

A ‘too-expensive’ property in Auckland (as at July 2021) usually has a price north of $1.2 million.

For Hamilton, this top price is upwards of $900,000, and in Christchurch the cut-off is about $800,000.


Right Fit

So, What Sort Of Properties Are The Right Fit For Opes Investors?

The type of properties that tend to work best for Opes investors vary based on property type and location.

So let’s go through the three most common property types to get a sense of what investors will snap up.

Stand-alone houses

Generally, the stand-alone houses Opes recommends are located in the outer suburbs of a major city, or are located in satellite cities and towns 20 minutes’ drive from a larger city.

This is because prices in these areas are more reasonable and so the yields are more likely to stack up as a worthy investment.

Anything too close to a city centre will usually be too expensive and be low-yielding.

Townhouses

Opes investors prefer townhouses of 2-3 bedrooms, rather than one, which are located nearer the city centre in major cities. These properties usually attract a good mix of yield and projected capital growth.

It’s not a rule that 1-bedroom properties are always off-the-cards. But our research shows they have attracted less capital growth in the past compared with properties that have 2 or more bedrooms. This means there is a more limited market of investors who want to put their money into 1-bedroom properties.

Apartments

Generally speaking, Opes investors tend to prefer apartments geared for high-yield, for example room-by-room rentals and dual keys.

This is because apartments and high-yielding configurations attract lower capital growth. So, investors need to make up for the lower growth with a higher yield.

In central Auckland our investors are usually looking for 1-2 bedroom apartments close to transport links to garner a high rental, which usually sits at a 5% + gross yield.

A high-spec one-bedroom apartment in Ponsonby with a 4% gross yield is not going to be as attractive for these investors because the gross yield is the same as they could gain on a higher-growth property.

Previously Recommended

What Sort Of Properties Has Opes Recommended In The Past?

Here are some examples of properties Opes has recommended in the past. Please note because property prices have increased, most of these properties look very cheap now.

These examples are just to give you an idea of the properties that have tended to make sense for our investors:

140 Leinster Road, Christchurch

140 Leinster Road

In Christchurch, Opes investors bought 12 units in Merivale that were 2 bed/2 bath and were priced between $560,000 to $570,000.

Each property was bought off the plans.

Under contract: November 2019 - January 2020

1797 Great North Road

1797 Great North Road

In Auckland, Opes investors bought 12 units in Avondale that were 2-3 bedrooms and were priced between $640,000 and $750,000.

The developer needed pre-sales quickly and so investors moved to meet this timeline.

Under contract: May 2020 - June 2020

368 Hereford Street, Christchurch

368 Hereford Street

In Christchurch, 8 units based in Linwood, between $480,000 and $520,000, were all purchased in less than three months by a mix of investors and first home buyers.

Half of these buyers were based out of Christchurch.

Under Contract: October 2019 - December 2019

71 Hall Avenue

71 Hall Avenue

In Auckland, 3 units, which were part of a multi-unit first home trust, were purchased.

The properties were 3 bed, 1-2 bath, priced between $699,000 and $709,000 based in Mangere.


Under Contract: December 2019 - March 2020

31-33 Abercrombie Street

31-33 Abercrombie Street

In Auckland, 8 Howick units priced at $837,000 were bought within three months from listing. This was quick for the market at the time, because they were purchased during the Covid-19 lockdown.

Under Contract: March 2020 - May 2020

Why So Picky?

Why Are Opes Partners So Picky With Properties?

As educated investors, the people Opes works with will purchase quickly and are highly financially qualified. So, when they put a property under contract, they are more than likely to go ahead with the purchase compared with the average buyer, because they know what they’re looking for.

The trade-off is, because they know what they’re looking for, they are discerning.

This “pickiness” works in favour of investors and developers. The developer can sell properties quickly and investors are confident and secure their new investment will return ‘X’ amount.

For any developer who is interested in using Opes, and unsure whether their development is the right fit, we will often advise them on how to better configure a project to increase attractiveness to investors ... it’s usually worth a conversation.

LM b W

Laine Moger

Laine Moger has been a journalist and reporter for the last 6 years. She previously worked for Stuff, The North Shore Times and Radio NZ. She has a Bachelor of Communications (Honours) from Massey University and a Diploma of Journalism from the London School of Journalism.