Forum Replies Created
Hi Muppet.
Thanks for reminding me. The NZPIF offer has just expired. However if I receive an order in the next 10 days at the discounted price I will still accept it.
Andrew
http://www.rentmaster.co.nz
Software for LandlordsI have placed a copy of kelvinh’s spreadsheet on the internet and you can link to it by clicking on the following link.
http://www.rentmaster.co.nz/propertyinvesting/cashoncashreturn6.xls
Andrew
http://www.rentmaster.co.nz
Software for LandlordsNo Problem Fudge111. Glad to help out.
If anyone else has any other small useful property related resuources they would also like posted on the net, then let me know and I will consider hosting them for you.
For those who have not noticed, the file can be downloaded from http://www.rentmaster.co.nz/propertyinvesting/propretuen.xls
Andrew
http://www.rentmaster.co.nz
Software for LandlordsThanks Fudge111 for this great excel spreahsheet. If anyone else wants it, I have made it available on the internet. Just follow this link.
http://www.rentmaster.co.nz/propertyinvesting/propretuen.xls
Any comments, post them back here.
Andrew
http://www.rentmaster.co.nz
Software for LandlordsIf someone wants to send me a copy, I would be happy to put it on the internet and post an address where everyone can download it from.
andrew at rentmaster.co.nz
Andrew
http://www.rentmaster.co.nz
Software for LandlordsI think KPI are their own worst enemy on this one. If they had run an unbiased and independent magazine in the first place, I doubt anyone else would have created another one. There is enough disgruntled people out there to make another one viable.
Andrew
http://www.rentmaster.co.nz
Software for LandlordsYay! About time too.
Andrew
http://www.rentmaster.co.nz
Software for Landlordsyeah – we gave them the rugby league. We didn’t really want it anyway. We have already got the Tri-nations and the Bledisloe Cup. We were running out of room in the cabinet, and we have to leave room for the World Cup.
Andrew
http://www.rentmaster.co.nz
Software for LandlordsAll 5 properties are owned by a certain NZ property investor who enjoys reading the riddles on property investment forums – good light entertainment. Therefore the fish is in the house owned by the NZ’er.
Andrew
http://www.rentmaster.co.nz
Software for LandlordsCoro St is still on Tuesdays and Thursdays at 7:30. Dont watch it myself though.
Marae DIY sounds interesting. A bit of 4 by 2 and some number 8 fencing wire is all we need
Andrew
http://www.rentmaster.co.nz
Software for LandlordsYou might have to check what the banks requirements are. If you purchase a second IP, and borrow against the first one, then the first one becomes locked into the new mortgage. You may then have trouble selling the first property because I think the bank has an interest over that property.
Not exactly sure about it though. One of the mortgage broker people might be able to clarify this. I am alao interested to know the answer.
Andrew
http://www.rentmaster.co.nz
Software for LandlordsThe internet is a good place to start me thinks.
Find out what rents are available in different areas for average houses. Then do the calculations based on what investment return you are looking for (.e.g the 11 second formula). That will give you a preferred purchase price. Then search for properties for sale in the same area and look at the average sell price. If it is close to your desired purchase price then it is worth looking closer and contacting a real estate agent in the area.
But remember – you are not looking for the average property. You are looking to beat the averages.
Andrew
http://www.rentmaster.co.nz
Software for LandlordsI used http://www.mikepero.co.nz and was happy with their service.
Andrew
http://www.rentmaster.co.nz
Software for LandlordsThe risk of earthquake depends on where you buy.
Draw a reasonable straight line from Rotorua down through Wellington and down the middle of the entire south island where all the muntains are and that is where the fault line runs. Close to fault line = increased risk. They built our capital city in an earthquake zone – who’s idea was that?
We actually dont get that many earthquakes. There was a deep down one a few weeks ago somewhere in the south island but that is the last one I have heard of for a while. The last major one was in Edgecombe (near Rotorua) about 15 or 20 years ago me thinks. The NZ goverment has set up the earthquake commission which pays out for any damage resulting from earthquakes or wars (yeah right). You probably have more risk from bad tenants than earthquakes.
Auckland is safe – except for the volcanoes. But we dont have poisonous snakes and spiders!
Andrew
http://www.rentmaster.co.nz
Software for LandlordsHere is a simple example of how negative cash flow can be better.
House 1 (positive)
Price $50k
Cash flow +$5k
Capital gain 10% = 5k
Net return = 5k cashflow + 5k CG = $10kHouse 2 (negative)
price $200k
Cash flow -$5k
Capital gain 10% = 20K
Net return = -5K cashflow + 20k CG = $15kThis is a very simple example. Cash flow includes depreciation and tax refunds/payments.
On the other side of things…
If you had a surplus income from your work pay less every day living expenses of $10k per year, then after you had purchased 2 of the House 2’s you would not have any money left to purchase any more and still pay off the mortgages. (Remember each property had a cash flow of -5K). There is no limit to how many House 1’s you could purchase.Andrew
http://www.rentmaster.co.nz
Software for LandlordsExcellent post Bukti1.
Some good comments, and I agree with it in general.I think the main issue with NGP is the servicability if you have too many of them. As o2bfree points out the best portfolio I believe consists of some of each so they balance each other out. Starting out with PGP and adding some negative ones later.
An increase in interest rates will make your NGP even more negative and increase the strain even more.
Properties with good capital gains can well and truely outstrip any short term cash gains you can get from your PGP. e.g. a $200k property with 10% capital gains will get you $20k in one year. How many PGP can do that? (less your negative cash flow of course).
The trick is to spot the areas where capital gains will happen and to maximise the balance. e.g. a $20K capital gain sounds good, but not if your cash flow is -$30k.
Andrew
http://www.rentmaster.co.nz
Software for LandlordsKia-ora AussieRogue.
My properties have about 75-80% mortgages on average (based on purchase price). All are in suburban Auckland NZ.
It is possible (in suburban Auckland) to get a $200k property with positive cash flow and about 8% return. Need to do some hunting though.
I suppose the general perception is that the cheaper the property is, the better the return and better cash flow. This is possibly true on average. But I have found that cheaper properties also tend to have more hassles. Maybe the important ingrediant to avoid this is the location.
Andrew
http://www.rentmaster.co.nz
Software for LandlordsBig mortgage brokers are very large organisations who effectively give the banks many millions of dollars of mortgage business every month or week. The banks will bend over backwards to keep these brokers happy otherwise they will take their millions elsewhere. For that reason they will give the brokers VERY good deals.
In NZ they normally drop the startup fees, reduce the interest rate by about 0.25% and even contribute towards my legal fees. If you go to the bank yourself with your $100k mortgage requirements they dont tend to be quite so generous. $100k is chicken feed in comparison.
I would always go to a broker. They should cost nothing but can save heaps.
Andrew
http://www.rentmaster.co.nz
Software for LandlordsI must admit that the Australian tax schemes do seem to be quite harsh.
The highest tax bracket in NZ is 39%, and companies are taxed at 33% regardless of their income. No CGT and no stamp duty.
However if you are negatively geared, the tax refund can be a lot better than over here.
Andrew
http://www.rentmaster.co.nz
Software for LandlordsI personally think that negative gearing still has its place.
Generally speaking good cashflow properties tend to have not so good capital gains. Properties with good capital gains tend to have bad cash flow.
If you have a good cash flow from other income e.g. you day job or other positive rental properties, then the capital gains from a negatively geared property could be very worth while. The value of the property may go up $20k, while you negative cash flow is only -$10k, which means that you have gained over all. The difficulty is that the gains in this example are not in the form of cash (unless you refinance) so in cash terms you still loose out by $-10K. If your other income was 35K then you could only own 3 properties before your maxed out your cash.
Which is correct depends on your circumstances at the time. Are you cash rich? If yes then consider negative, otherwise go for positive.
A combination of 2 or 3 positives to 1 negative may give you a good combination with neutral cash flows (and tax refund after taking depreciation into account).
Andrew
http://www.rentmaster.co.nz
Software for Landlords
