Salesman sold on high-rise development

By ANNE GIBSON

Robert Young reckons he knows how to double his money.

The Aucklander plans to turn a paltry $277,000 into $500,000. Sure, he says, it will take a few years but he's young and can afford to wait.

His secret is investing in an apartment on the 19th floor of the new 23-level Spencer On Byron in Takapuna, the tallest new tower outside Auckland's CBD.

Young, 38, married with two young children, has borrowed $170,000 from his bank and will kick in the other $107,000 cash of his own.

The funny thing is, he will never live there. He plans to stay in his city apartment.

The idea is that he leases his one-bedroom apartment back to a hotel operator, Hawaii's Castle Group, which in turns charges people about $200 a night to stay there. Young doesn't get to enjoy the view from level 19, but he doesn't care.

His pay-back is the guaranteed 8 per cent return annually, plus 14 free nights' stay there every year.

His mum, Pauline Young, lives in Palmerston North.

She will come up next Christmas for about a fortnight, enjoy the beach lifestyle, spend time with the grandchildren and retreat back to floor 19 for time out.

Because the apartment comes fully furnished and with a carpark, she can drive up and doesn't even need to bring a teaspoon with her.

Nor will she have to buy food, because the hotel will have restaurants, cafes and bars downstairs near the large new function areas.

If she feels like a game of tennis or a swim, she can duck down to level two for that.

But back to her son's original $277,000. "I'm going to put everything generated by this investment back into it, including the tax refund, so that after about 13 years I'll own the apartment freehold."

The cost of borrowing the money will be covered by the hotel's returns so he reckons he can't lose.

The valuation is projected to be $500,000 by 2015.

That is based on a cautious 2.5 per cent compounding rise in the value of the apartment every year.

Young reckons the return on his money will be nearer a spectacular 33 per cent per annum.

He has worked this out based on the actual income stream generated by the investment, combined with the capital growth of the asset and compounded to give the enviable result. But what happens in 2015?

"Well, I could live in it, rent it out, or lease it back to the hotel again. I'll probably just leave it with the hotel because it's hands-free, so why would I sell it?

"Later on in life, I'll draw a mortgage against it to go on and buy other properties to finance my lifestyle."

Young is paid to be enthusiastic about investing in Spencer on Byron. He works for the developers, Covington Group, selling the apartments.

"It would be impossible for someone like me - who knows so much about the project - not to buy one."

While Young is confident of his investment, the capital gains of the returns are by no means assured.

Rita Haagner, a real estate agent for Bayleys who has sold some Quay West apartments in Auckland, says some are sold at a premium while others are sold at a loss.

Apartments at the top of the building are rising in value, but some lower ones are selling for less than their original price.

However, in some cases this was because the owners needed to sell quickly due to personal circumstances, she said.

There was therefore no rule which could be applied as a general capital gain increase, she said.

It depended on the property.