Tim Calder bought his first student flat in Dunedin's Buccleugh St house in 2002 when he was an 18-year-old student.
Landlords tell Jane Phare that not all student flats in places such as Dunedin are grungy and that, run properly, they can be good, long-term investments.
Property investor Tim Calder learned a hard lesson about buying student flats early on in his 22-year career as a landlord. He was an 18-year-old student at Otago University when he bought his first house on a hill in Dunedin’s Buccleugh St. He’d saved up the 10% deposit needed to buy the $87,000 house by working on his family’s farm in Pikowai, Bay of Plenty, making hay and shearing sheep.
He got four mates in to help pay the mortgage, an arrangement that worked well until it didn’t. The house was a good 20-minute walk from uni and too far away from the party zone. One by one his flatmates left, wanting to be closer to other students.
The lesson he learned was that students want to be within a five to 10-minute walk of the university, and they want to rub shoulders with other students. They don’t want to be in the ‘burbs next to young families who want the music turned down after 7pm.
Calder sold Buccleugh St and bought another, closer to the zone. Now he’s the founder and fund manager of property investment company Prime Campus, which owns 12 student houses, eight in Dunedin and four in Christchurch, all close to the action. And he has plans to buy more flats, all close to the universities, with the help of investors.
“It’s that atmosphere. It’s really buzzing with students and you don’t get that in another suburb.”
Run properly, and by fostering good relationships with tenants, owning student rental accommodation can be a lucrative business, he says, and the flats won’t get destroyed.
Back in February I wrote an account of my first experience of Dunedin student flats after settling my son and a friend’s daughter in the university city. I wrote about the squalor, the broken glass, the grotty old flats in or around Dunedin’s notorious Castle St — party central — describing one flat as “like a set from a grunge movie”.
Based on Snapchat video clips my son has sent me throughout the year of flats he’s visited, things have deteriorated. Holes in the wall have become entire rooms with no jib board left, windows are smashed, rubbish bags have piled up, bathrooms are so damaged and flooded they no longer work, and dirty dishes and food containers are piled so high in some kitchens that no-one can find the sink.
The landlords and property managers in charge either don’t care or have given up. The students will lose their bond and, in some cases, might well be faced with hefty repair bills.
It doesn’t have to be that way, Calder says. He knows students want to have fun, are likely to have parties and there’ll be the odd window breakage or hole in a wall. But he’s never had a place trashed and very rarely takes back any bond. Last year Prime Campus claimed 2% of its bonds back, money to cover intentional damage in one flat.
He even owns two on Dunedin’s notorious Castle St — the Feisty Goat, next door to 660 where the band Six60 was born 16 years ago, and The Last Resort. For the past five years the Feisty Goat has been passed along to mates from Auckland Grammar.
On Clyde St, he owns 27 Steps to Heaven, named by tenants because it took 27 steps to reach a pub, the Oriental and later the Starters Bar, across the road. The pub’s long gone but the flat’s name stuck.
Calder’s on a mission to build up the company’s student housing stock in both cities. Last year he organised his first capital raise through licenced stock exchange Catalist, buying four more houses as a result and increasing the total value of property to $10.74m. He’s raised close to $1 million in capital and is aiming to raise a further $10m of investment by the end of next year.
“It’s a wonderful opportunity for small businesses like mine to be able to raise capital from retail investors,” he says.
Calder argues that investing in efficiently run student flats is virtually recession proof. In tough economic times, the Government more or less guarantees the rent through student allowances and interest-free loans, he points out.
It’s a passion — verging on an obsession — of Calder’s to make the flatting experience as seamless and pleasant as possible for his student tenants. It’s midnight in Hamburg, Germany, where Calder is currently based but he’s happy to talk. His wife Louisa is German so the couple split their time between New Zealand and Germany, with their 6-year-old son.
The company’s first shares listed in March 2023 sold for 41c, rising to 58c in the September quarter, and up to 68c in a recent trading window due to more buyers than sellers.
More than 40 mainly retail investors now have shares in the Prime Campus portfolio, with the first dividend expected to be paid within five years. Some are former student tenants, others are families whose children intend to attend Otago University. The fund has also attracted interest from KiwiSaver funds and institutional investors.
Growth is slow and steady, Calder admits. He’s not one for spending up large on advertising.
“All the money that we receive we want to put towards improving the flatting experience of students. We want to reinvest in the housing. We don’t want to spend the money marketing ourselves to try to raise additional money.”
Neither does he want to waste time and money running the flats, and dealing with issues and maintenance. Instead he’s invested in high-end technology so that tenants have all the information they need on apps, everything from their tenancy agreements to instruction manuals for appliances. And there’s an app on which Prime Campus tenants can report something that needs fixing. The issue is logged directly with the appropriate supplier, be it a broken fridge shelf or an oven that’s stopped working.
One Friday afternoon a couple of students threw a road cone through the bathroom window of one of his flats. The callout from the student tenants went straight to a glazier who repaired it that night.
“It makes us extremely responsive to issues,” Calder says. “There’s no property manager that sits in the middle. There’s no landlord that has to approve it. It goes from the tenant to the supplier.”
That helps make Prime Campus cost efficient.
“Right now I’m not dealing with issues from tenants. Right now I’m trying to buy properties because the technology we’ve developed takes care of it.”
Students pay a premium for the rooms — between $240 to $245 a week when the average Dunedin rents for students are around $200 — but Calder says he has no trouble renting them.
All 12 properties are rented out for next year with a rental increase of 9.7%. The company charges a 5% management fee.
Calder says he’s rarely had an issue with intentional damage, or had to take bonds off tenants. In his experience students will respect the property if the landlord or property manager respects them.
“If you manage the properties carefully and you create great relationships with the tenants you can work with them, because they also want to have great references for the next year.”
Dunedin landlord John Willoughby agrees. He doesn’t rate many property managers, particularly in Dunedin. His two daughters had poor experiences when they were flatting in Castle St 20 years ago, with property managers ignoring requests to fix things like a broken heat pump. It was the reason Willoughby began buying his own student houses and running them himself from Auckland, using trusted contractors and tradespeople.
“I still hear terrible stories about property managers. They just treat the kids with disdain which is unacceptable. Here we are, 20 years later, and it still hasn’t changed from when my kids were down there.”
Willoughby has sold some of his flats now, relying on the remaining few as extra retirement income. He’s tended to buy more modern properties, steering away from the traditional colonial villas that need more investment to bring them up to Healthy Homes rental standards.
His flats come fully furnished, including beds, with extras such as a dishwasher and flat-screen TV, and usually two bathrooms. Not all students want to live in a grungy flat, he says, or if they do, after the first year they’re sick of it.
“They are fussy. Coming out of Auckland where there is a lot of money around and they’ve come from a comfortable home, they don’t want to be roughing it.”
Willoughby says successful landlords need to be prepared to reinvest in student flats to keep on top of maintenance and make them attractive to new tenants.
Calder, too, provides furniture, dishwashers and flat-screen TVs. He doesn’t provide beds because some students want to bring their own. Instead he’s done a deal with The FlatPack Co, started by Otago University mates Cameron Leigh and Angus Syme, to buy beds on behalf of students who need them. The bed is erected by the time the student arrives and they pay it off over a year — $14 a week added to the rent. Calder doesn’t add a mark-up or interest.
Similarly he organises power and internet connections at good rates because of the company’s longstanding property portfolio, passing on the cost directly with no mark-up.
Unlike Willougby’s houses, Calder’s are often older houses with colonial architecture he doesn’t want to destroy. Instead of installing aluminium windows, he retrofits double glazing over the existing window frames, effectively making it triple glazed. And he’s reinvested in plenty of insulation in both the Dunedin and Christchurch properties.
One of his previous tenants, Megan Diment, fondly remembers the year she spent flatting with four friends in the Feisty Goat in 2013.
“Having the power, internet, gardening and even the furniture sorted just made everything in our first year of flatting easy. It meant we could focus on getting the most out of our time at university rather than being overwhelmed with admin. Tim was always incredibly responsive. He’d reply to you the same day.”
She was so impressed with the way Calder ran the flat she asked for a job, becoming his Dunedin property manager for two years, helping with flat inspections, signing up tenants, and dealing with any issues.
Diment, 31, now based in New Plymouth, works for a US-based neuro-optometry company but is also a director of Prime Campus Capital Management Ltd, helping with digital innovation and strategic marketing, and various projects to accelerate growth.
“The flats are really nice and the fund itself allows people to get into student property investment without needing to put a huge amount of capital into it from the outset.”
Calder says being a proactive landlord is the key. He puts effort into keeping the outside of the property looking good, hiring gardeners, and helping to take excess rubbish away. His theory is that if he looks after the outside, the tenants are more likely to take care of the inside.
He’s learned from experience that too many restrictive roles can backfire and anyway, landlords can’t legally ban tenants from having parties. His tenants in the Feisty Goat have hosted parties in Flo Week and O Week in the past but damage has been minimal.
“You’ve got to let go a wee bit. As a landlord you can’t interfere with the tenant’s peace and enjoyment of the property.”
Instead he encourages tenants to register on the One Good Party app (applicable in both Dunedin and Christchurch) which alerts the university, the council and the police that a party is planned.
“It just means if anything goes wrong they have got support right when they need it.”
He also suggests tenants get in touch with Prime Campus after a party, to check if a cleanup is needed or anything needs fixing.
Willoughby says people think owning student flats is a good cash cow but he says owners need to keep spending money on the properties to keep up with the market.
He’s nicknamed one of his five-bedroom flats on Dunedin’s Grange St, a three-minute walk to the university library, The Hotel, “because it’s got everything that opens and shuts”.
He’s predicting a couple of good years ahead having heard that the university halls are full for 2025 with a waiting list. All those first-year students will be looking for a flat in 2026 and beyond.
And increasingly those students will shop around. He’s heard property managers complain that rundown flats are not their fault, that the owner landlords don’t want to reinvest any of the rent on upkeep.
“And there are some miserable landlords around in Dunedin. They won’t spend a cracker on keeping it maintained.”
Jane Phare is a senior Auckland-based business, features and investigations journalist, former assistant editor of NZ Herald and former editor of the Weekend Herald and Viva.
OPINION: Don't go rushing into grabbing those lower interest rates just yet.