hi peter p,

“Acting naive might be fun to catch out shifty agents, but isn’t it better to convey a professional approach? “

I *was* pretty naive (give or take two seminars and a calculator!) when I was looking to buy my first IP so it wasn’t that much of an act!! And as far as a professional approach goes….after overhearing me on the phone, my Dad said I should be more ‘business-like’ , which – if he’d done it, i bet the phone calls would have been brief, and to the point. Very ‘board of directors’. MY style was different – and I was *really* learning that real estate is a people-industry – which was to chat as long as possible in order to get maximum information.
Any bonding kinda stuff you do gets you closer to getting info you otherwise wouldn’t have. Really, you want the RE agent to want that you get the property! I know investors aren’t supposed to get emotionally involved, and we don’t, no matter how ’emotionally attached’ we seem (hehe) – but neither are RE agents – but owner-occupiers selling houses are usually kinda severely emotionally attached!! I think I did say a lot of times how much I ‘loved the house’ to the owner. I guess I didn’t want to appear – to the cute little old lady going blind and into a home – a savvy investor with a calculator seeing how much yield i could squeeze out of a property which just happened to be her home for the last 40 years, where she raised her kids, lost her husband – complete with the walnut tree she grew from a seed.
I just felt – without thinking about it, just kinda doing it – that expressing admiration for the property didn’t make me a soft touch or more likely to pay too much – (which the agent was later to discover back at her office -!!) -it wasn’t for my benefit, but out of respect for the owner.

“But professional must equate to ‘hard nosed and knows the market’ rather than ‘lots of money from the big smoke’. “

I certainly felt that in small-town NZ, someone coming over from Australia with Sydney dollars to buy a little house for a fraction of a year’s wage as an investment does look…can look….kinda exploitational. I *felt* that as a vibe.
The way I downplayed it is by using the dress down hippie card, the ‘i wanna be close to my parents but i can’t afford the city’, the ‘i’m a muso’ card….

>So no analysis software, but a calculator and some property >checklists might do the trick.

I had the checklists, the calculator only came out back home at the end of the day, figuring out how much I was prepared to offer for the property, and what the yield would be at this price, that price. but i have to say looking back on things makes me realise that I played my cards differently to the agent, and in front of the vendor.

Times I’ve just dealt with the agent and where the vendor was an investor, i didn’t have to do any of that other stuff at all.
Again, it’s a people industry,,,it sooo is.

“On one hand I like the idea of stating up-front that I’m buying for an investment and if it’s too expensive (read doesn’t make money for me), I won’t buy. “

I do that in the negotiation phase, basically, I put an offer in lower than what I’m prepared to pay, and then justify it by lots of research I’ve done and print outs of figures of other sales in the area. I walk away from a deal if the vendor doesn’t go for what I think is a fair offer. If there’s another person willing to pay more lined up, they get the deal. if not, i walk away and sure enough after a few days or even 2 weeks, the deal comes back and I get it at the price I want. if I still want it then!

>But that is a dead giveaway that 1. you’re out of town and 2. >have limited time. If you’re not careful there’s a risk they could >be used against you.

I agree that looking in person gives a sense of urgency to things and i have to say i much prefer not being on the spot.
I.e. buying remotely. getting photos and a building inspection and I can do the rest on the phone. OK then they have to know I’m an out of town investor but they don’t get to see the muso dreadlock hippie bridgette jones-style part, so again, I guess that’s a third character I can get away – ‘suave corporate financial genius’. if they can’t see me that is!! the only thing wrong is that my voice sounds really really young on the phone. *note to self: must lower pitch of voice and speak less excitedly.*

cheers all –

mini

hi anch,

“leverage

Definition 1
The degree to which an investor or business is utilizing borrowed money. “

(i’m not ‘leveraged’ at all right now)

“Companies that are highly leveraged may be at risk of bankruptcy if they are unable to make payments on their debt; they may also be unable to find new lenders in the future. Leverage is not always bad, however; it can increase the shareholders’ return on their investment and often there are tax advantages associated with borrowing. also called financial leverage.

Definition 2
What the debt/equity ratio measures. “

also means “gearing”

So basically….if you have 100K you can either buy 3 X 33K properties for cash. no leverage. Or you can use it as a ten percent deposit and buy 1 million dollars worth of properties. Or a 2o percent deposit and buy 500K worth of properties.

what i did is buy the first properties outright (cash) and renovated two before tenanting them. so hopefully now i not only have the increased equity brought about by renovating them (which I am about to find out exactly how much that is, when I get my valuation results!!!) – which I can hopefully borrow against to a certain percentage using a ‘revolving line of credit’ – and as well I have the cashflow from all the rents to add to my ‘yes i can service a loan thanks lender’ factor.

I want to borrow against the three to get a fourth, and then eventually … ‘repeat formula’. The reason i didn’t get finance first is that I wanted to get my regular documentable income on paper up a bit first, i.e. “serviceability” that the banks look for – important for me, as i am a freelance self-employed person in my work. It did take me a few months to find the deals, buy them and settle, and renovate. some people might thing I could go a bit faster, but i’m going as fast as i care to for now.

I had some really top advice to do it in this order for my particular personal financial situation, so i have. (basically I depreciate my whole life as i work from home, the equipment I own depreciates at a whopping 15 percent PA ….and I have a LOT of gear!!. My accountant is great etc….but it doesn’t make me the cookie cutter mortgage applicant. I’m not like most people with “regular jobs” who can get finance first up easily. Anyway… I’m now at the stage where I’m about to try for finance for the first time ever! doh!

hence the part where leverage kicks in…using the banks money at 7 percent to buy houses returning 15 percent or more….make sense???

a vintage Aloha Hawaii theme!!!

….boys in hawaii shirts, girls in muu muus…sarongs etc…
flowers in hair….

entertainment – firewalking, fire-pois, hawaiian band w. ukuleles (tongan/rarotongan/tahitian band sounds similar..)
hawaiian or tahitian dancing….the MC is ‘elvis goes to hawaii’…
meanwhile on screen at back, old movies and tv shows featuring 70’s and 80’s hawaii screen, sound off…

luau food…roast pig on spit, salads, tropical fruit…other ‘american’ food i.e. baked potatos, spare ribs, waldorf salad, chinese-american food i,e, chinese chicken salad with crispy noodles .tiki-bar, grass hut decor…outdoor patio heaters or braziers…

drinks served in coconuts…

or you could make it more ;island paradise’; themed and not so specifically hawaii.

but hawaii is so gloriously tacky….
volcano pavlova or ice-cream bombe for dessert…
real flower leis on arrival…scented frangipani or jasmine or similar strewn on tables for decoration and aroma….

albert park has lots of nightclub-venues

or just put a huge marquee us somewhere picturesque
torches stuck in the ground to light the way

or you could do a lord of the rings dinner, all medieval food, eating with fingers, open fire-pit and minstrels, dim lighting – all candles
medieval dancing

Hi Anch

so true. If it’s cheaper to buy than rent then why don’t people?

I think 1) and 3) are the biggest reasons, but 2) perhaps?

however if you bought your own home then it’s not giving you any cashflow – however good the deal – it’s taking away . -so people’s own houses are pretty much always negatively geared.

Although of course most people live in capital cities and centres of population, where the rent might be cheaper than to buy. i,.e. The reason I don’t own my PPOR is because it costs us 400 to rent what it would cost 1200 in interest ONLY payments a week to buy (and we’d have to have a spare 100K lying around for a deposit.)

Basically – in central Sydney I am renting some other investor’s negatively geared 2 percent yielding nightmare (at today’s house prices. Of course if they bought it some years ago, they’re probably OK by now..but you get it….)

cheers-
Mini

0.093 seconds – and even a ‘well done!’

muppet!!!

Oh my gahd that is exactly the sort of deal I dream about!!
And if I had cash tomorrow to buy I would definitely check this one out!!! rotorua is a decent sized city,,,tourism…mainly the houses are more expensive than this so this could be a really good deal…especially if already tenanted and renovated….wow!!

Someone should check out this deal!
bridgette….???

Are you looking at it muppet??

You rock!

Hi Lucy, I bought twice under 20 and one under 30. All since April. The one under 30 is ‘delux’ in a grandmotherish way, with nothing to do
except plumbing, the other two were dumps and so i threw a bunch of money at them and they are super-fabulous now, new bathrooms, polished floors, painted, repaired, the works – and total for reno’s included is still for under 30K each. So I think another way to get a good rental property if you want to not spend much cash is to factor in 5-10 k for renovations and maintenance and buy a dump/doer upper. HOWEVER only buy it if it’s structurally sound as per builder’s report otherwise you could be wasting your money. And the area matters too.

cheers-
Mini

Hi Pinit, your bits are in ” “

re “Actually the more I have been thinking about PGP (Positive Geared Properties) the more I agree that there is nothing intrinsically wrong with them! “

nice one!

“Actually in a down market they would probably be the better approach. “

I actually think that all three of the CF+Ve properties i bought this year had been sitting on the market quite a long time – since the last ‘down market’. i think I bought at a time where although the property market in general was going up, the areas i bought in were going to go up *last* – hence prices were very low in comparison to rents. And this has always been the case in those areas as far as i know – according to ktkiwi you could buy a house in these areas in 1991 for 5K and rent it for 20 per week. That same house is now 50K and renting for 130. Do the math and it’s a great deal – whether you buy now, or then!

“However there are some SERIOUS questions one must ask themselves before launching out.
1) How much time do you have?
Finding PGPs takes a lot of time and effort. (This is not stressed enough on this forum)”

True, but if you don’t have time then either a) farm out the inspections or b) use a property finder or bird-dog.

There are a great many calls to make in the due diligence process but to a great extent it can be fitted in to any lifestyle. When I was looking for deals i spent a couple of hours on the net every night looking. Then I made a few calls a day for a couple of weeks. I was also working at the time and fitting calls in either before the work day started or at lunchtimes.

There can be hands-on time if you need to renovate or repair, but I’ve done two complete house reno’s this year in a total of four days of my time. How? by paying other people, in a nutshell.
the four days were mainly spent setting that up.

“Think about it. The people who have the most properties on this forum are the ones that make the most posts.”
not necessarily – i,e, Pinky.
I only have three properties but I post a lot! ( i feel like I’m still in some kind of ‘still learning and needing to discuss’ phase….)
” If they make so many posts it is because they have the time”
– it’s because they want to and enjoy it. If you enjoy something, you make time. if you don’t, you’ll find that you are ‘too busy’….

“2) Do you realise that getting a PGP will put about $1,000 per annum in your pocket, therefore you will need about 20 or 30 of them to make it worthwhile’. “

True, kinda, let’s say, true if it was the first year in which you’d bought all 20-30. But the point is that you CAN go on and buy 20 or 30 of them as fast as you can find the deals (in theory.) and if the asset itself grows in value over time (land appreciates) and there are tax benefits (buildings depreciate) and the rents are indexed for inflation, i think what happens over time is that the cashflow gets better and better and you can pay down the loans (which seem smaller and smaller over time) ending up with the entire rent as cashflow (less expenses of course) and your portfolio freehold.

“3) What does dÿworthwhileE? mean to you? What are your goals? How many properties do you want?”

If someone wanted to ‘store and grow’ some capital and was looking for something ‘safe and secure’ to do it with – i think CF+ve property is great. i.e. no matter what happens to the economy, people still need somewhere to live – if real estate is considered a ‘safe’ investment, then residential real estate somewhere around or just below the median is considered really safe. it holds its value unlike cash deposits which are eaten by inflation, and the income itself is increased in line with inflation. Basically the more you look into it the more sense it makes. using the banks’s money is considered to be the way people ‘leverage’ real estate – so if you have a neg. geared property you are actually risking your lifestyle. Positively geared property is less of a risk to lifestyle.

“So now that you realize you need 20 or 30 PGPs this means you need even more time”

Yes, I do think that time is a big factor in successful RE investing. But what are the alternatives – Working for a wage or salary and saving it? stocks? Building businesses? All of those have a time factor.

“PGPs do have an advantage and that is they will probably rent easier in a declining economy because the rent is low. When things get tough and people loose their jobs they will have to rent cheaper properties (that is if they where already renting).”

totally.
” However I am VERY wary of PGPs in *** rural town *** because if people start leaving town, then there will be NO ONE to rent your place and even worse NO ONE to BUY it!! “

true, and if you buy in a mining town (say) and the mine closes, then that’s a real risk. However….the world has a growing population and so far shows no sign of slowing down. I’m banking on there being more and more people coming in to the Sydneys and Melbournes, and more and more people trading their city pad for a house and some land in the regional towns later in life. And we have an ageing population…so I think that there will still be demand in the long term.

“Steve has not bought a property in a rural time yet, “

I don’t believe he’s into rural as in ‘farms’ but I think he’s bought quite a bit in regional towns which some would say are ‘in the country’.

“Yes I agree that good people live in country towns too “

i think there is a difference between a rental house in a country town and a ‘rural property’ (i.e. sheep station.) Rural properties even have their own drop-down menu on real estate sites I look on.

“What happens when they leave town and no one is there to rent your place???”

tasmania and invercargill had declining populations for 12 years but I heard the yields were really good because the house prices were so low. I personally wouldn’t purposely buy in a town with a declining population though. well not more than half a percent, say.

.”The only reason he has been able to accumulate so much is not just due to his property strategies on their own, but because he has MULTIPLE income streams (selling books and seminars.”

no that came after. he and dave couldn’t have taught about it unless they’d proven the strategy worked, first. I’m not saying they don’t have multiple streams of income now – of course they do. But they didn’t then apart from that Dave was still working in the accounting practice. You *still* haven’t read the book have you???????

*wags finger*

just do us all the honour of reading it first. most of your points are answered in it.

cheers-
mini

sorry to harp on back to richmastery, but they do use spotters nationwide, and maybe that’s one place where you could pass your deals on. i mean become one of their spotters. i’m not sure what cut they give the spotter but it might be worth finding out.
richmastery.com.au

i would say that as a generalisation, the cheapest houses in NZ are in the highest risk areas.

Either that or they need a lot of fixing up.

I heard that the higher the yield with investments, the greater the risk. I would say yeah that sounds about right.

Like the areas I’ve been buying in, sure they have great cashflow returns but the banks don’t really love lending against them as much as city properties. If it’s usually 20 percent then it’s 30 percent in those areas, if you can get it at all.

get hold of a broker and ask them for the list of suburbs that you need 30 percent deposit for. I’ll bet you it’s where the best cashflow deals are found.

yeah mangakino, I think that would be a bit risky myself. however today’s risky is tomorrow’s opportunity. Tasmania is a case in point…i think NZ is going the exact same way…

cheers-
Mini