I have three CF+ve properties in NZ, yielding 20 percent each, 10 percent after holding costs.

“The houses priced <200K will always increase and demands will always be good and if not, it will only be transient because popn is always growing and people need a place to stay and they buy whats affordable.”

I so agree with that. In the nZ market you could say houses under 100k, or even under 50K. I’ve noticed it, because that’s the bit of the market I’ve been watching. I also see the figures about what capital gain is doing, and I’ve noticed that the lower priced houses have different growth to the middle and higher ones. I guess, anyone who can afford to buy a house can afford the cheapest ones, and as you go up in price, the buyers get less and less. So yes, i think there will always be more competition for the lower-priced properties.

Wherever they get their money from (I think most will be super – it’s only a 5 percent minority who have assets enough to support them in retirement isn’t it?) they will still need a place to live!

> hi SIs,
>
> “Hi Mini,
> actually i was thinking about, offset gearing would definetly suit you, in
> your current position, the reason being is that you have an excellent lot of
> cashflow,

when you say ‘excellent’ it’s about the average NZ wage, about enough to top up a 300K 5 percent yielding Q’land property. And be neutral.

but I am thinking more along the lines of buying some -or work my way up to- some blocks of flats in NZ towns yielding 15 percent or better for the next 2 years, ending up with the equivalent of 8-10 properties in the next 2-3 years, because I still want to grow the serviceability cashflow part of my portfolio up a bit more until I ‘neutralise it down’ – offset it – with some neg geared growth properties. I am feeling the vibe that the confidence has gone out of the property market, because it’s full of people like yack and Billfromoz and other voices, who reckon ‘don’t buy now’ and ‘i’m sitting out for a bit’. That mass sentiment is going to make prices flatten and sure in a year there will be some good deals about compared to now, but they still won’t be magically CF+ve.

>So but some of that can be used to subsidise a -ve geared property,
> which could further fund you more finance and quick asset growth…

http://bulletin.ninemsn.com.au/bulletin/EdDesk.nsf/0/716ca9a406a48fdaca256c170010bf31?OpenDocument

Quick asset growth, eh?

“The new study by property analyst Charter Keck Cramer of the 3000-plus new central Melbourne apartments sold since 1992 shows the average price gain was 1.3% a year after inflation. “

…… the resale market has been characterised by stagnant prices with the majority of resales achieving minimal, if any, capital appreciation over and above inflation,” says the study.

This analysis, covering more than 3000 apartments resold since 1992, shows annual capital growth of 10%-plus only occurred in 6.8% of the sample. So much for marketing promises of more than double-digit growth from day one. “

“A breakdown of the study showed the St Kilda Road precinct did best – although average growth of 2% a year can hardly be seen as earth-shattering – and one-bedroom apartments also scored better than their bigger counterparts.

Of course, as Papaleo points out, the other component of investment return is rental income. “The market for tenants is becoming more competitive. While there is no bloodbath yet, incentives are creeping into the rental market.” He says these “bells and whistles” include furniture, rent-free holidays and more flexible leases. With gross rental returns only about 3.5% to 4%, there is not much room to move. “

So it seems that we haven’t had ‘quick asset growth’ in apartments, since 1992!!! I’m sureprised actually because I did a websearch to try and find out what some actual growth data was for Aus, and got stopped dead in my tracks when this site was the first one I read.

I can only assume house with land properties did better, BUT, I’ll take 10 percent cash return after costs over 3.5 percent yields plus 2 percent growth a year, any day.

And if growth (houses) is so much better than the apartment market, then fine, like i said I’m getting ready to do some growth properties in 2-3 years, just before the next big rise. but I don’t think it will get really good again for a while. This is because the government doesn’t want it to. They *want* the property market to deflate.

So while they are deflating away, people will still need somewhere to live….

So although I like the overall longterm strategy of balanced portfolio with +ves balancing or outweighing the neg’s, I won’t be adding any negatives NOW.

Quick (which is all rather relative in property terms) asset growth is great, but now?

I don’t know.
I know some are, but I’m not prepared to take the risk.

> look at it, as your properties can carry the load of a -ve geared property.
> Hey Mini, heres a link to an old post, but covers most your questions.

cheers-
mini

Hi Kaye,
I paid $26 per square metre. A whole house cost me – ah I can’t remember, was it 1200? 1600? I think with the more expensive one,(the green house) the guys also steamed off the lino in the kitchen and bathroom, which was a heck of a job as it was some pre-60’s weird glue that was sticky and hideous. Also they removed the carpet, nails, disposed of it, and the absolute whole house was done. It was the cheapest and most hard-wearing option which suited the house.

The 1200 house, had had some parts already as floorboards so it was just the hall which had to be done from scratch, the rest just got a ‘going over’.

My Dad’s house already had polished floors, but they were paint splattered and dull and worn with gaps. He had them re-done and sealed and repaired and it was only $680 for the whole house. (3 bdr.)

I so don’t do them myself. the floor sander we use has emphysema from his lifetime of dust and chemicals, poor guy.

There is something really really bogus about SIS, the student with the part time job, who’s cutting down his hours, controlling a 2.1 million portfolio that he built up in 12 months, buying more 300K+ properties like mad, overseas in ‘secret locations’, (of course).

Also, a lot of your arguments are bogus non-arguments anyway, like saying ‘low returns’ or ‘small returns’ are not worth it, but then saying that ‘if the IRR stacks up’, it’s worth it.

i thought we agreed on a previous thread that IRR means yield, or ‘returns’. Now what’s your bottom line on an IRR stacking up? At what point (figure) do you say ‘this works’ or ‘this doesn’t’?

How do you service a 2.1 million portfolio without being positively geared? what’s your safety net if neutrally geared? Is it really your property, or is it your parents’?

thanks kay, actually q’land is not really my area of expertise, although I’m watching it for the future. I guess, even though they have all these people moving there, there has been so much of a building boom that perhaps there is an oversupply of rental accom. I guess it all comes down to supply and demand.

Where I am buying, there is a strong rental demand, there was already when i bought there a year ago, and that demand seems to be 35 times increased in that year.

But it is the opposite of Q’land….

late 90’s = interest rates higher = competitive for rentals = rents high

interest rates coming down = lots more buyers = less sellers = more demand = less properties = rising prices = not as many renters = rents come down.

future –

interest rates rise = media spreads fear = consumer confidence down = not as many homeowners deciding to buy now = prices down = more renters = landlords increasing holding costs demand rent increases = more rental demand = rents rise then skyrocket = yields rise

and eventually….yields look attractive again, and buying season starts again. repeat cycle….

after all of that,
queensland may have a mind of it’s own, if there are more people moving to the area than there are properties to rent…

exactly. Russ.

SIS, the country property bought in 1991 for 5k rented for 20 bucks a week is today worth 50 K and rents for 130. The yield in year one is 20 percent, , and in year 13 it’s 130 percent.
Plus capital gain. Which might not be much as a percentage, but it’s something – I mean, the house is worth 10 times as much as in 1991. Sydney 1991 200K, Sydney 2004 2 million?
maybe. Is it possible the country property not only made a humungous wad of cash returns for the owner, but could have even out-performed Sydney in capital gains? Maybe.

SIS, I know you are against +ve gearing, but I’d be interested on some numbers of what you consider your best performing deal so I can see what you’re on about.

cheers-
mini

freedomfinder,

“how many of you are out there ?”

there’s me, Leigh who’s my bird-dogging partner, and westan who is a good friend, legendary investor, and fellow bird-dogger.

“what areas are researched and how ?”
I specialise in the NZ north island and in high cashflow properties. -basically, the kind of properties that are hard to find in Aus.

do you invest in your researched areas ?
Absolutely!!! it was all my talking about my investments here on the forums that attracted my first three bird dog clients to approach me privately to try and find them something similar, before the idea to bird-dog had even occurred to me.

“what condition are the properties ?”
Of *my* three properties, two needed cosmetic renovation and one needed nothing done. For clients, we try and find better quality really nice places that suit offshore investors. They cost a bit more but then our clients tend to have more to spend than I did! At the moment, deals we are finding are between 32- 60K. depending on the property and the town.

We have really good photos of all the properties which Leigh took when he was in NZ last week. You get three small pics in the deal summary, but there are 6-8 large high res photos we can send you when you want more info on a property.

what returns do you find ?
Over 15 percent. that’s our minimum.

what do you charge ?
$1000K or 2 percent of the purchase price if over 50k, capped at $2500.

can you be trusted ?
Yes!!!!

How do you know?
Um, well, we could meet and i can show you some deals, you could talk to a previous client, emails back and forth, i could get some testimonials together (not a bad idea – must do that! ) – there are a bunch of ways you could check me out. Do what you need to do. Ask what you need to ask.

“I have come to the conclusion that employing someone to do the leg work will help me in buying multiples in a shorter period of time.”

yep, I hear ya!! I’m self-employed so I can always be available when I need to be. I know it’s a lot harder for people with ‘normal’ jobs.

Luckily, after having bird-dogged a few deals now, I’m getting more and more organised. Like, Leigh and I now have a lot of information ready to go and already put together. For example, let’s say in the deal summary you like a house in a particular town and want some info about the town. I’d send you a pdf about the town with statistics like population, market rents, property prices for the last 5 years, pictures of the town, maps, etc! We’re also getting lists of valuers, tradesmen, building inspectors together in the towns where our deals are.

Anyway, feel free to PM me if you want more info.
That goes for anyone else too.

cheers-
mini
 

Lawrence, two out of the three houses I bought were crappy. That is, structurally sound from the builder’s report, but needed repainting inside,
a bunch of repairs. like the property westan describes, 18K needing 7 k of work, that’s about right. But the thing is that then you don’t get the “”They don’t mind staying in crappy accomodation, ” kind of tenant. You are still providing cheap accommodation, in the part of the rental market with demand, but it’s no longer crappy. it’s nice, neat, fresh, clean. but still within the price-range. Like before reno oneof my houses rented (crappy condition) for 100 and after reno it was 115. The highest price rental in the area is only about 140 and even if I’d put smeg appliances in i probably still wouldn’t have got it for that house. But that would have been overcapitalising. I didn’t price it out of the market or anything, in fact I let my property manager advise me what to put it up for rent for.

So then I was able to get a good tenant with references who will stay, because the house looks nice.

For seven grand you can do a lot. replace the light fittings, paint, fix the dripping taps, broken windows, downpipes, etc – in fact overdue maintenance is the reason many landlords sell.
The light shades I put in were 8 bucks each. All I did is buy the exact same kind that were in there before, except brand new, clean white and not fly-spotted. if i’d put 30 dollar ones in or 100 dollar ones in, it would have been over-capitalising the house. the idea is not to make a silk purse out of a sow’s ear, but just to attract the best tenant you can.

Polishing the floors is from aninvestor’s point of view an inexpensive hard wearing floor that suits rental properties, but also looks fabulous. Painting with good prep first looks a million bucks, and put a funky feature wall in for an extra 30 dollars worth of paint and the whole thing gives the impression of ‘modern’ and you didn’t really do anything much more than ‘routine maintenance’.!

Houses will last if they are maintained.

We live in a 100 year old villa here in paddington, the kind where the floorboards are kind of bendy and there are 1 inch gaps underneath the doors. really cute though. but this house has lasted a long time already, and my (formerly crappy) houses in NZ were built in the 50s or 60s and are a heap more solid. they’ll last for donkey’s.

houses are actually rugged and do last. Don’t buy if a builder’s report says you have a dodgy roof, AND rising damp, and a whole lot of other things all at once. But sometimes it is worth spending 5K on a 20K house to fix the roof and paint. My dad’s just done that actually. That house will rent for 100 per week no problem at all.

cheers-
mini