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First residential real estate trust on its way

Investors are likely to see the first residential real estate investment trust (REIT) early next year, according to Auckland apartment expert Martin Dunn.

Dunn says he is looking at establishing a series of REITs which invests in residential properties in Auckland.

Each REIT will own about 10 properties and there will be strict investment criteria.

These include the types of houses bought and the locations. The target properties for acquisition are three-bedroom, standalone houses, built before 1990 and in certain suburbs.

The suburbs will be what he calls "aspirational" ones. The areas ruled out are places like Otahuhu, Papatoetoe, Manurewa and the like.

He says many suburbs will go through "cultural change" with their make-up shifting.

One example he gives is Mangere. While it has a bad reputation, the area has "boulevards not streets" which are tree-lined and it has good houses which are not expensive.

He says the population make-up will change and it will become a much more attractive area.

Another example he gives is Glendowie. This used to be a "rough area with poor housing. Now it is very sought-after and expensive."

Dunn told delegates at the NZ Property Investors Federation (NZPIF) conference that Auckland is very attractive, as it is built on an isthmus and house prices will continue to increase because there is no more land to build on.

He says the Auckland housing market has shown good growth in prices and rents over the years and he predicts this will continue.

Each fund will also be debt free.

With regards to fees, Dunn plans to charge the normal 4% real estate agent fee when properties are bought and sold, and his property management company will look after the houses.

Dunn has a new company, Dunn Funds, which will promote the REITs. The company is still working on the concept and has yet to issue any offer documents.