INVESTMENT PROSPECTS

In considering the exciting prospect of purchasing an apartment suite in the Ohope Beach Resort complex, one would undoubtedly want to give careful regard to the potential return on such an investment. It may also be that any one of the following situations provide the circumstances wherein you would look for an additional return on your investment above capital growth: letting the apartment before moving in for retirement, letting the apartment between holiday or weekend visits, or letting the apartment as often as possible. In respect of the later, long-term tenancy is an alternative option, but probably lacks the level of return letting for short-stay accommodation should provide.

The following INCOME PROPOSAL gives a projected indication of feasible returns on your investment from letting.

INCOME PROPOSAL

ESTIMATED INCOME AND EXPENDITURE FOR INVESTMENT APARTMENTS
All figures include GST

GROSS RENTAL INCOME:

High Season	6 weeks at	$2100 per week ($300 per day) 90% occupancy	$ 11,340
Mid Season	12 weeks at	$1750 per week ($250 per day) 80% occupancy	$ 16,800
Low Season	34 weeks at	$1400 per week ($200 per day) 50% occupancy	$ 23,800
		TOTAL INCOME	$ 51,940

EXPENSES:

Letting Fee	11.25%	$ 5,845
Cleaning and Servicing	9.5%	$ 4,935
Electricity and Telephone	4.0%	$ 2,080
Administration and Marketing	4.0%	$ 2,080
Body Corp Annual Fee	7.0%	$ 3,635
Rates and Contents Insurance	5.0%	$ 2,600
Equipment and Capital Improvements Reserve	1.5%	$ 780
TOTAL EXPENSES	42.25%	$ 21,955
NETT INCOME: (GROSS INCOME – EXPENSES)		$ 29,985

NOTE:

These estimates have been based on current tariffs and projected occupancies within the Bay of Plenty and as expected for this resort. The vendor cannot make any warranty or accept any responsibility in any way arising from the use of this information. Prospective purchasers are advised to make their own independent inquiries.

While predicting occupancy is not a precise science, your confidence can be placed in the desirability of Ohope as a holiday and recreational location, the shortage of quality accommodation in Ohope, the scope of this resort's facility (making it a highly desirable venue), the potential for small group conferences (small business R&R conferences), and the growing tourism industry developing in the Whakatane district.

In addition to returns generated by letting, the capital gain through general appreciation of highly desirable beachfront property (as historically sustainable) will ensure your overall return on investment is maintained at a very favourable level.

When the primary objective of your apartment is to yield an investment return, there is a range of taxation issues to consider depending both on how you use the apartment and the entity through which you buy it. You may want the apartment primarily for your own use with some letting, you may prefer predominantly to utilise the apartment in the letting pool, or you may prefer to enlist long-term residential rental. While there exist a diverse range of entities under which you can purchase an apartment (e.g. company, trust, personally, joint venture, etc.) and each has its own set of taxation implications, there are a variety of mechanisms that can be employed to increase the financial return.

We recommend you obtain independent accounting advice to explore the GST and tax alternatives available when letting your apartment. For further information please contact us direct.