Forum Replies Created
Hi again Purse,
Unless you want to become a forex trader it’s best to borrow as much of the investment in the local currency.
For vast amounts you can explore the options of hedging your currency swings but that can be costly.
Cheers
JeffHi Luke,
Yes, both interest on the LOC for the amount of the improvements and the depreciation are deductible. Assuming of course your best option is to borrow the funds in the first place.
Cheers
JeffIt’s commercial, paid $89k in 1991, net rent $12109 pa until 1998, $20k pa until 2001 and now back to $8900 net pa since talk of the roading changes.
It paid itself off and owes me nothing, last valuation was $110k. Great cashflow but lousy capital gain. Without the roading changes I’d be getting in excess of the $20k pa.
Does that help your decision??
Cheers
JeffWezwaz,
The registered valuations are determined by historical evidence, that’s the problem, they’re historical.
The banks and lending institutions require registered valuations as a reputable and consistent benchmark to satisfy their lending criteria – it’s their safety net.
As property investors we have to look at the future and your method of using cashflows to value a property are fine for making your own decisions, hence, Steve’s 11 second rule.
There are other things to consider in valuing such as the age and quality of the improvements.
So all in all your yield method or income capitalisation method of valuation is only one part of the process but one part you can do yourself.
Cheers
JeffAs property becomes further out of reach for first home buyers and the like, there will be an even greater need for rental properties.
I agree on net cash figures – the exception is depreciation as it is non-cash.
If you can determine a net taxable return then you can work out internal rates of return for comparison.
Your money has to be working best for you.
Jeff
Sorry Purse
No it is not all leasehold land and you can get freehold. My uncertainty is what will happen to the township once it is bypassed – it may thrive or it may die. They might even be good towns for wraps.
Ngaruwahia is very close to Hamilton and could well become another suburb. There’s a big dairy factory in Horiutu which is close by.
The Huntly MacDonalds does between $1.6 to 1.8m turnover if that helps – must be some demand out there.
Here’s the site on the bypass
http://waikato.transit.govt.nz/sections/south-ohinewai-to-taupiri.page
Disclosure – I have property in Taupiri (over 12 years)
If you want to get close to Auckland perhaps Pokeno might be worth a look. There’s a big 80 acre subdivision being planned in Pokeno so the area is growing.
Cheers
JeffOlly Newland is publishing a new book due out in June 04 – “The Day the Bubble Bursts”
Look in http://www.empowereducation.com
This will be worth a read.
Cheers
JeffIt’s a liability insurance taken out to protect director’s and officers of a company in case they get personally sued during the course of their employment. Often includes a number of exclusions.
Were you thinking of taking out a policy for yourself?
Jeff
Hi Pursefattener
State Highway 1 is supposed to be bypassing all those towns but I’m not sure on the time frame, check out Transit NZ’s website.
Huntly has a redundant coal power station with some mention of it being re-opened everytime there is an electricity shortage.
This is Tainui country so I’d advise you to stay away from any Maori leasehold land.
Cheers
JeffIt depends who owns the chattels. You can’t depreciate something you don’t own and same for the business owner.
All my properties have the chattels separated from the building value and they are depreciated at different rates, hence a bigger tax saving.
If you do own the chattels such as grease trap etc you will more than likely require a valuation on them.
Cheers
JeffThere’s a bargain in every market you just have to be a little more careful. It’s the people who don’t do their homework, buy overpriced and borrow beyond their means that are the first to get hit.
One point of difference with property as opposed to the sharemarket is people still need a roof over their heads. You can batten down the hatches and still weather the storm.
No need for doom and gloom, just prepare yourself for some opportunities.
Cheers
JeffThe hard part about positive cashflow is it all sounds good on paper however, people need to live.
So you need to create a cashflow in excess of what you need to maintain your lifestyle. Those dollars over and above this should either reduce debt (especially with rising interest rates) or applied to more positive cashflow.
The rule here would have to be diversification, if a local economy was adversely affected and you were heavily exposed to that economy you would need to know you could ride the storm.
So to determine the positive cashflow in dollars you require, begin with current interest and operating expeses, add on living expenses, and then:
For every 1% increase in interest rates you need to be able to reduce your debt by the following – 1 divided by the current interest rate multiplied by your current debt.
eg If rates are currently 6% and they go up 1% and your current debt is $500k then 1/6 x 500 = 83.33You need to reduce your loans by $83.33k to maintain the same cashflow. This figure can be altered by locking in interest rates etc
There are always times when you need to consolidate and it depends on each individuals comfort zone, the more dollars the more comfort.
Cheers
JeffImnteresting topic Philip,
Perhaps a turn in the cycle is due. The interesting thing about investment is that usually, when all men and sundry start jumping on the bandwagon you’ve literally missed the boat.
While eroding capital and even negative equity occurred back in the late 80’s early 90’s there were still bargains to be had. Those who were too heavily geared when demand fell and interest rates rose were forced to sell. Those who were positioned well and had consolidated their portfolios were able to pick up some absolute bargains.
A book on this situation in NZ is “Lost Property” by Olly Newland.
So, in answer to your question – who knows? All I am doing is retaining some cash and liquid assets to pounce if the opportunity presents itself. Aside from that I’m ensuring I have stable cashflows in place.
Be prepared – theres a bargain in every market
Cheers
JeffHi Aussiemike
You failed to take into account council rates, insurance, property management commission and possible repairs and maintenance. These are all cash expenses which effect the cashflow – depreciation is a “non cash” expense, it effects profitability but not cash flow.
Cheers
JeffHi Wezwaz
Most evidence of 10% + yields are going to be historic – the deal having already been done.
Sometimes, or should I say most of the time you have to create a higher yield by adding value or by buying at a significantly low price in the first place.
A property for sale may not be advertised at a 10% yield but by being able to tweak the rent higher and offering below the asking price you end up with a good yield.
Another example would be purchasing a property on a subdividable block at say 8% yield. Then either selling off part of the land or building another dwelling on the extra land so that you yield moves upwards.
It’s not just looking it’s thinking as well
Cheers
JeffThanks for that Mel,
Jeff
Hi Misty1
There is a minimum level of rent you will require in order to settle early and have them stay on as tenants ie to be CF +ve. If the current owners are not prepared to meet that level of rent and you are not putting in a substantial deposit then aim at delaying the settlement for a suitable length of time for you to get tenants etc. Speak to your property manager.
Hope this helps
JeffMonitoring your property assets should be the same as if managing a share portfolio, perhaps not quite as regularly though.
This raises the question of “eroding capital and possibly negative equity”, something that did occur in the late 80’s ie post 87 crash.
As Steve put it you must ensure you have an exit strategy. Constant monitoring would allow timely exits or amendments.
It is good sense.
Jeff
Marissa posted that her computer had detected a trojan, has she looked at this site?
Should probably delete Darkness as well
Jeff
