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  • Profile photo of raymondoraymondo
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    March 23, 2004 - 9:00 am

    Just wanted to register my chuckle [laugh4] at Chan$’s undoubtedly deliberate reference to “wethers” in this NZ thread.

    Ya killing me!!

    Raymondo

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    March 19, 2004 - 4:09 am

    Hi Everyone,

    What a wordsmith our Kay is!! Your Monopoly analogy said it all about the two sides of this debate.

    I find myself in the Yack and Kay camp. More by good luck than good management (as well as the passage of time) I’ve found my 2 IP’s – which were poorly researched and backed up by little logic -have become CF+ve [tongue]. Jan Somers approach makes sense to me too, and after the first plunge into the RE pool you realise her approach is reasonably painless, even if you are putting a few dollars in.

    Because I limit my contribution to around $50 a week after tax, I’m not finding many opportunities in the current market. So I plan to look around, but expect to wait a while. The wheel will turn.

    Raymondo

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    March 11, 2004 - 1:38 am

    Westan and Rod,

    You both suggest +ve CF props as the solution to the concern I raised about not being able to claim the losses on a NZ IP against my Aust income. But isn’t that exactly what you have to do to make an IP CF +ve??

    I understand a +ve CF prop to be one in which the income exceeds the costs. That income is made up of the rent PLUS the tax return , based on the “book” loss you made and your taxation level.If you’re not allowed to claim the losses, you never get the tax return that makes the deal cashflow positive.

    Am I missing something here??

    Raymondo

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    March 10, 2004 - 4:58 am

    Hello All,

    This is probably as good a thread to raise this matter on as any – and there have been a few similar threads! Most such discussions are filled with positive views about Aussies investing in NZ.

    My interest in doing this was killed by a NZ accountant who pointed out to me that I would not be able to offset taxation losses on any NZ IP against my Australian income. He quoted and forwarded a copy of ATO interpretive decision ID2002/177. This decision is quite black and white about this matter.

    To me this says that unless you have separate income in NZ against which to offset your losses, a NZ IP is not viable. I suspect this even includes those +ve CF ones in the back of Bourke (wherever that is in NZ!)

    My question to all those Aussies who DO have a NZ IP is “How do you get around this matter?” Surely you all haven’t bought them without a loan?

    Raymondo

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    January 23, 2004 - 8:20 am

    Yack,

    I like the fact that you have a plan[:)], but I reckon there are some flaws in your logic[B)]. They relate to the growth assumptions built into your figures.
    It seems your proposal is something like:

    year 0 Buy PPOR at $300k
    year 1 Buy 1st IP at $300k
    year 3 Buy 2nd IP at $300k
    year 5 Sell all three for $1500k

    If that’s right, then I make the implied capital gain about 14.5% each year.

    Most people would doubt that the next 5 years would deliver this level of growth after the high levels of recent years.

    Worse still, even if you do get this sort of gain, the dream home itself will appreciate at the same rate. It will be worth $1380k, so you won’t have made much of a dent in the mortgage you’ll need to buy it. I figure you’ll still owe most of the $900k you borrowed because you’ll be servicing two reasonably heavily negatively geared IPs. That means you won’t be paying down the debt too much, so you’ll have $480k equity (ignoring capital gains tax). That leaves a new PPOR debt of $900k, for a house you could now buy for $700k

    I know I’ve made assumptions about your situation. That’s because there wasn’t much detail in your proposal. If the assumptions are wrong the numbers will be wrong. But the principle will be right

    Profile photo of raymondoraymondo
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    January 9, 2004 - 4:20 am

    HousesOnly wrote:
    “8 years of 15-20% CG’s p.a. which are 10-15% above the long-term trend should mean a very large correction is required. The above translates into 160% increase in prices over this period or 120% higher than the long-term trend. In order to return to a normal CG situation, prices would need to at least halve. I dont expect price to halve though but rather expect a 20-30% downward adjustment.”
    Without entering the hurly burly of this topic, I’d like HousesOnly to consider the ramifications of compounding on the (unchallenged) data presented. Even at the 15% end of the range, the CG over 8 years would be over 200%.(An unimaginable CG of 330% at the 20% end.) The correct calculation for the CG at the long term average that you quoted later of 2% would be 17.1%. So the correction you are really forewarning us about is really about 63%- from 300% down to 117%. At that rate I’m looking for a bomb shelter!

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