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Also it depends on whether the yields are net or gross, I haven’t read the book but it would be entirely possible to have a gross yield of %30 and still be losing money…
Why not do both?
Reduce the amount of your LOC by $50000 then borrow to buy an ip (or two or three depending on how cheap & country you want to go…) using your newly generated equity
thats what I’d do…
cheers David
Thats very interesting Westan
He was the very chap we dealt with originally though the property is managed by someone else, their name slips my mind at the moment whats more in the last month or so they have taken over management for
my mother in law’s property in Wriggly rd which I would characterise as the bad end of Fordlands.I know they have recently lost the member of staff who managed our place, perhaps they aren’t taking on any new properties till her replacement has been broken in…
I know they discourage buyers from looking in the area, and fair enough to, it was a foot in the door but we certainly wouldn’t put many of our eggs in that basket if you’ll pardon the mixed metaphors[biggrin]
well good luck finding out whats going on
DavidOn and on the being cashflow positive front the best thing to do is to budget out all the expected costs and all the expected profits (How you calculate these is upto you and your level of risk aversity, we wouldn’t usually take depreciation or capital gains into consideration… but we would count the principal repayments) if there is more expected profits than expected costs well done thats cashflow positive…
Cheers David
Actually if you take a close look at your mortage agreement with the bank you will find they can pretty much sell it whenever they want to by simply asking you to repay the loan right now! Now I agree that in general they won’t because a mortagee sale is the last resort of a bank but they do happen, and are a great way of picking up bargains…
BTW I have heard in NZ banks are coming to see investment loans as better business than PPOR loans, it turns out that there is a lower default rate on IP loans.
Cheers David
Depends on how you calculate your yeilds, if it is simply rent x 50/purchase price then at least in NZ there are still plenty of deals out there, in the last year we have purchased 4 properties with the following yeilds:
Rotorua 4 bdroom brick house 170 rent & $50000 cost = %17 yeild
Rotorua 2 x 2 bdroom unit 300 Rent & $130000 cost
= %12 yeildKakaramea (Taranaki) 3 Bedroom wooden house 120 rent & $39000 cost = %15 yeild
Eltham (Taranaki Huge old villa, done up & rewired etc and divided into 3 x 2 bedroom flats
$200 rent & $64000 = %15 yeild
(We settled this one about 2 weeks ago.SO the places are still out there, and we have a very restrictive set of buying criteria
So now you Aussies, go out and increase the value of our properties by buying the ones next door
[biggrin]David
Hello All
For instance one area of Rotorua calleed Fordlands is a no go areaIn defence of Fordlands, it isn’t all a no go zone, whilst I would be loath to buy on Wriggly Rd, some of the back streets are down right neighbourly, with good prices & returns. We bought an IP in Ewert St (Nominally in Fordlands) 4 bdr brick house for $40000 spent $10000 doing it up and it is currently rented with wonderful tenants for $170 a week. (How wonderful? They have built us a very nice fence when we supplied the wood…) I think the trick in difficult areas is to get a good property manager, in Rotorua I would reccomend Rotorua Rentals.
& yes land values are impressively low in some parts of the country, we just bought a property in Taranaki with a land value of $1500, $1 per sqm…
Cheers David
Okay now here is a question for you all especially those who negatively gear. Do you take into account inflation when you work out whether you have made a profit?
Secondly what do you do with the profits?
Do you put them back into housing?
If so do you think that your house beat the market, and you are now going to buy another house which will also beat the market? (By beat the market I mean appreciates faster than other properties)Looking forward to your replies
David
There seems an odd presumption that the +ve involves having lots of properties paying you very little. Why not pay off your properties faster than the 25 year mortgage? Especially with cheap properties this can be easy to do and increases your return from those properties exponetially. Better stil it doesn’t have to slow you purchasing more ips since you can leverage against the properties you have paid off.
Hi Rnat
Now I haven’t read the book either so I might not get the context but I have seen gross ROI used to refer to the total rent for a year divided by the cost of the property. Or alternatively you divide by the deposit to determine the rate of return you are getting on the cash it cost you.I have also seen net ROI used to refer to the the same sort of equation but instead of just dividing the total rent for a year you first take away the expenses giving yourself a net figure
Hope this helps
David
