For Sale Sign Photo: RNZ / Angus Dreaver
A high-profile property investor and investment coach is taking aim at real estate salespeople advertising properties as "cash flow positive".
"Cash flow positive" is generally understood by investors to mean that the rent from the property will fully cover the cost of owning it, such as loan repayments, rates and insurance, and leave a surplus each week.
But property investor Steve Goodey said he had found instances where claims were made that did not stack up.
In one case, an Auckland unit was being advertised as a "solid home or cash flow positive investment" but he calculated that even at the top of the rent range for the unit, it would need to be bought for $405,000 to make it cashflow positive. He said the salesperson told him the vendor wanted $500,000.
The salesperson told RNZ that the numbers stacked up if an investor had a 20 percent deposit. "But the title should be changed to cash cow investment as it has caused confusion for some investors."
In another case, a property was being advertised as cashflow neutral with a purchase price of $699,000 but Goodey estimated it would be negative by $16,000 a year. Another property going to auction promised to be cashflow positive but Goodey said that was a bold claim to make when the sale price was not known.
The Real Estate Authority said it could not comment publicly on specific situations.
But chief executive Belinda Moffat said real estate professionals must not mislead a customer or client nor provide false information.
"This applies to representation made in advertising. Where a property is marketed as a 'cashflow positive investment' this would need to be able to be verified and substantiated. We would recommend potential buyers ask the licensee or vendor to substantiate this, and take expert advice if required."
Goodey said investors needed to be careful with the information they were supplied when looking for a rental property.
He said it was disappointing that no one seemed willing to tackle this sort of marketing.
"I've had agents come to me and say that a property is cashflow positive if you put a 30 or 35 percent deposit down in cash. That makes anything cashflow positive - are we just making stuff up as we go along now?"
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