Would you buy an Auckland serviced apartment running NZ$165/month negative?

[InezLark]

I’m considering a 2-bed serviced apartment in Auckland. The location appears to have durable demand, but using a conservative rent estimate of NZ$5,262 and allowing for reserves, it comes out roughly NZ$165 per month cash-flow negative.

I can comfortably cover that, but the return then depends on higher rent or capital growth. Would you regard this as a manageable holding cost, or simply an appreciation bet? I’m particularly wondering which assumptions—insurance, vacancy, management, maintenance or financing—usually prove most important once you get beyond the initial calculation.

 

[GreenPost]

At face value it is an appreciation bet, although NZ$165 is small enough that one incorrect assumption could move it either way. Does your calculation include the full serviced-apartment management cost, realistic tenant turnover and vacancy, insurance, rates or property tax, and a maintenance reserve? I’d also rerun it with lower rent and higher financing costs. If that version is uncomfortable, the current shortfall is giving false reassurance.

 

[hugo.lark]

I wouldn’t reject it merely because it starts NZ$165 negative. I would reject it if NZ$165 is the best-case shortfall dressed up as a conservative one. Get every recurring cost into a monthly schedule, clarify what the serviced arrangement covers, and model at least one vacancy or turnover period plus increases in insurance and maintenance. Then compare the annual cash contribution with a genuinely cash-flow-positive alternative. That makes the price of the appreciation bet explicit.