I work out a yeild of 10.83% based on rent of $6,500pa and purchase price of $60,000. Your cashflow will depend on the interest rate, loan duration etc. Hopefully the property has a secure lease in place, is located well, and the current rent is at or below the market rate. Also it would be good if the rent reviews are annual or at least bi-annual. Generally with commercial leases the tenant pays all the outgoings so hopefully this is the case for your potential purchase. To borrow 70% ($42,000) on a 15 year P&I loan @ 8% interest rate you will pay $4,816.44pa giving you $1,683.56pa ($32.38pw)cashflow (plus the capital component of your P&I loan). Your deposit was $18,000 (plus closing costs) giving a cash return of about 9.35% on your deposit funds, while the tenant pays off your loan over the ensuing 15 years. At least this is how it works here in NZ, and I assume it’s not that different in Australia. If you don’t go ahead with the purchase I would be keen to have a look at it, and would be prepared to pay a modest finders fee if I were to proceed. Make sure your lawyer looks at the lease and the title, and do your normal due diligence with regard to having the building inspected etc. Assuming everything checks out favourably I suggest you go in with a low offer, say $45,000 – you can always raise it if you have to. Best wishes, Julian.

I’ve been to a couple of their seminars, and lets just say I haven’t been thoroughly impressed, nor have I bought any property through them. If you like lots of ra ra ra and have some money to burn you might enjoy their seminars. As for the deals, they certainly claim to have organised a lot of purchases here in NZ so some people must like what they have to offer. Persoanlly I enjoy finding and negotiating my own deals thank you very much. No one has my interests at heart as much as me.
Good luck, Julian.

Crocodile, wanna reduce your expenses from around 3% to almost zero %??? Sell your residential props and buy commercial. Your lovely tenant will not only pay all your expenses, but they have a vested interest in keeping the place looking great as well!!!! The only downside for well located commercial/industrial properties is the fact the banks are little less generous with their lending. But that’s just another opportunity to get creative, isn’t it?
Cheers, Julian.

Michael R
Despite Australia’s convict heritage they are usually very welcome as potential NZ citizens, and that might be one way of avoiding paying capital gains tax when returning to Australia. It would be a big step to take, but as NZ and Australia have fairly open reciprical rights for its peoples working and living in each other’s country, you could (I believe) quite easily return to live in Australia (after a time) yet not be forced to pay capital gains tax on moneys earned in NZ when taking those funds to Australia. Just a thought. On the other hand perhaps it’s easier to just pay the tax. Most Aussies I know would rather die than give up their nationality – and that is so very understandable knowing what a fantastic country you have over there.
Best wishes , Julian

Found Rob Kiyosaki’s Rich Dad books to do nothing more than state the obvious, with little practical insite. Many of the seminars out there are more about taking money off you than helping you with your financial journey. Better, I feel, to get in touch with a financial adviser or even a broker and determine where you are now and what money you can borrow. Find some local papers in areas that you can afford to buy and get out there and do the hard yards looking at properties, asking questions etc. Keep living below your means, saving hard, and reading what you can. Become familiar with as many of the financial terms as you can, and develop a system that will rule out most potential purchases if they don’t meet your criterior – such as the 11 second rule. Talk to people you know that have a few investment properties but ignore everything they say if they recommend negatively geared properties. It won’t be some gravy train you can just go out and hop on to without putting in any effort. Your library may have access to newspapers for areas outside where you live. Scan the classifieds. Put in the mileage, get to know a few real estate agents. That $12,000 you were going to spend on a seminar could be the deposit on your first cash-flow positive property. And remember the harder you work at it the luckier you will be. Good luck.
Julian

Phil,
Suppose you paid your dad back and the rent went to $600 per month; assuming that is the market rate – why would you want to have a $175,000 property that only returns you a gross income of $7,200 (4.1% gross). Sell the property to your parents (or anyone else) as soon as you can, then buy only positive geared property in areas with an increasing popultion. If you buy negatively geared property all your hopes hinge on capital gain. Capital gain is a bonus, but it is seldom an effective strategy for those starting out. Usually CG comes in waves and when it does come it comes for all property so you aren’t much better off when you go to buy your next property. With a personal income that fluctuates the banks may be reluctant to loan you more money for properties that are not self supporting. Re-read Steve’s book.
That said, congratulations are in order for getting to where you are, and for your planning and desire to go further.
Enjoy your journey, and don’t be too focussed on a set number of properties that are a long way off where you are at now. Break it down into bite sized chunks and work away at them. Your saving philosophy will serve you well. Continue to live below your income. If you have renovation skills it may be worthwhile utilising them to speed up the process. Good luck!
Julian.

Booboo, if you’ve got $300k why don’t you look at buying commercial. Less headaches. the tenants pay the expenses, long leases, tenants have a vested interest in keeping the property looking its best, better nett yeilds etc etc. Once into commercial I don’t think you’ll ever look back!
Best of luck, Julian

If you are thinking of investing overseas doing so in New Zealand may prove easier and possibly more cost effective than elsewhere. NZ has no capital gains tax, no land tax (apart from rates), no stamp duty, and has a highest personal tax rate of 39c in the dollar. Conversely we have higher GST (12.5%) and higher company tax (33%).
Tax advantages aside New Zealand speaks the same language, has a similar legal infrastructure, has a stable government and has a currency that doesn’t seem to fluctuate to wildly compared with Australia’s.
And finally it can be a great place to visit when you are on company business checking on your Queenstown tenants!
Good luck, Julian.

Land tax, stamp duty, Capital Gains tax – that’s a hell of a penalty you guys pay for investing in your beautiful country. None of the above apply here in New Zealand at the moment. But before you jump on the plane for an investing spree it would be prudent to check out any tax issues when repatriating your funds, should you chose to at a later date. However there has to be a better legal way than to give so much of your hard earned investment income to the government! I know in NZ we pay higher company tax (33% vs your 30%) and higher GST (12.5% vs your 10%) but I still can’t help but feel that your governments, both local and federal are into your pocket in a very severe way, and I have lived and worked in both countries. Mind you, if the deal stacks up, the deal stacks up – and that is all that counts, no matter where it is.
On to another vein, it seems that most of you invest in residential property, which is good if it works, but from my humble experience residential tenants are hard work, legislation is biased towards the tenant, the landlord has to pay rates, insurances and maintenance, and leases aren’t easily enforcable against the tenant. Commercial property, on the other hand is free of all or most of these vices, though admittedly banks are reluctant to loan more than 70% of value. When I awoke to the advantages of commercial investment property I sold all my residential holdings and invested totally in commercial and manage them myself with very little effort. All are on P&I loans over a maximum timeframe of 15 years, and all return good positive cashflow, such that I only work because I want to – not because I need to. I, in turn, now pay rent where I live, which happens to be in a very desireable beach-side location that would cost moonbeams to buy into.
Food for thought hopefully. I enjoy this forum.
Cheers, Julian