Migration patterns of a lemming… Sound familiar?

hi little bee,
the RE agent either advertises the GV openly or will tell you if you ask. The only reason they won’t put it on the ad is if they think it will make people (like me!!!) ask – ‘look, the listing is for 35 but the value is only 29. How can they justify the asking price if most of the other houses in this price range have asking prices on or under the GV and will probably sell for 80 percent of GV, according to my research on the ares?’
see what they say – it might be (in my experience) – ‘yeah I agree – this one is overpriced. That’s because he paid too much for it. Let me go back to the vendor and explain that if he wants to sell this house he might have to revise things”

It’s just a way I use to semi -sound like i know what I am talking about and I’m not just some Aussie investor that doesn’t know anything about prices in the area.

cheers-
Mini

http://www.vocalbureau.com

Hi David

>Just a note of caution about using GV as a proxy for the >market (real) value.

nononononono

what i said was

“I absolutely do this, but I do it on GV versus actual sales price, rather than list price, calculating a GV-to-sales price for that area. My areas have been selling for 80-90 percent of GV.
you use it to work out the GV to- actual-sold-price RATIO for the area –
from data sheets from the RE agent of all the recently sold properties. “

So to explain it a bit better, the GV is not a proxy for the market (real value) – the market (real) value is what someone paid. Get a list of all the houses that real estate agent sold in the last year, and next to the sold price will be the GV. What you calculate is the RELATIONSHIP between sold prices and GVs, and you will find there is a trend per area, that doesn’t really change much even in different price-ranges. THAT is what I use rather than the GV itself.

>GV’s are basically government valuations carried out by local >councils every 3-4 years by use of an almost ‘adhoc >kerbside’ methodology.

Yes – agreed- however, GV’s are at the very least a standardised assessment that applies the same criteria to every house in an area at the same time, more or less – even if all the GV-ers do is drive past, look at the land dimensions, check some boxes re: house class and size, and call it a number,
it’s still data you can use. Sure they’re missing the point that there was a diamond studded toilet seat worth three times the GV which is why that house with a GV of 25 sold for 75….when all the other houses of GV 25 sold for 20….OK…it’s ad hoc…but still, it’s info.

– that benefits the buyer – i.e. me – who wants reasons to buy low, and data to back it up.
Of course the vendor and the RE agent are going to argue with you and tell you that the GV has nothing to do with it -.

When you work out the ratio it is quite easy to spot the trend.
Around Xmas the ratios for Foxton, Manawatu was that houses were selling for around 93 percent of GV. Let’s say Foxton is a hot spot and house prices have gone up in relation to the GV, you might find the ratio has changed to 105 percent, for example. Recent data is what i go on.

So just to recap, I get a list of recently sold properties in the area with the GV and the corresponding sold price. I find the ratio of those two numbers for each property and average them to get a ratio for the area.
The other way to do it is to total both columns and ratio the totals – but I do it individually because you can spot deviations/diamond studded loo seats more easily the other way. The deviation is actually very little, you’d be surprised.

If you don’t use the GV figures what else can you go on?
List prices? Surely they deviate much more wildly than GVs. Why? because people make ’em up. Some are realistic, and others are not!
Agents are always telling you certain properties are overpriced.

As you said, David, in NZ some areas sell for half of GV, and others sell double – and anything in between – and it changes!

<You want recently sold data.
Yeah but this data is no use on it’s own, – only in relation to something. i.e. the GV, or, you saw the properties for yourself.

>They are also known as CVs (Capital Values).

I thought CV meant ‘Current Valuation’. I will find out for sure.
CV is the new term – whereas GV was the old term as far back as I remember. Both are still used interchangeably.

>Please note CV/GVs represent the ‘property value’ at a point >in time; ie at the valuation date
Yep. but they value areas at the same time, so at least it is fair compared to other houses in the area.

>What you will find is that the banks pay NO regard to GV/CV >and will lend based on a RV (Registered Valuation) which >will reflect the current market value.
Yep – partly because GVs are only current every 4 years, partly because the market can change (so then does the ratio!) and partly because of the capital improvements right down to new door handles and….there’s that toilet seat again….

I have never yet used a valuer for my properties, nor paid for data – and as far as $25 for ten recent sales, that sounds like a ripoff- I would need more data than ten sales – anyway I just ask the RE agents to print me the list out for free.

>Currently in the hot Auckland market, properties are selling at >DOUBLE their CV/GV.
>In other less popular areas (ie rural) you will find properties >selling at 50% of their GV/CV. These are by general >consensus ‘depressed’ areas; ie ‘values’ have effectively >halved.

exactamundo – i think you get it even though you sound like you were kinda disagreeing – my point is exactly that the “GV to sold” ratio is different for Taranaki than it would be for Auckland….and if you gave me the data i could tell you what it is to several decimal places.

>The danger for a newbie (especially a non-Kiwi)buying in NZ >is that they can take CV/GV as a proxy for real market value >and purchase on that basis.
>This approach is fraught with >danger and can get the >newbie investor burnt in a major way!!!

nononononononono!!!!!!
This approach was not what I was talking about and I have tried to explain it better this time – GV means nothing on it’s own, it’s the RELATIONSHIP to the sold price, per property, with recent sales data for the area, that is the key.

>This is particularly dangerous when paying cash for >properties with the intent of obtaining finance down the >track… one may be in for an unpleasant surprise when the >REAL valuation (RV)comes in…

The real valuation (RV) should always come in at higher than what you paid, whether that is still under GV (as in areas like Taranaki) or well over (cities.) I am fully expecting mine will.

>For example, you pay approx $25 ish to get a report on a >particular property which comes with approx 10 recent >COMPARABLE sales.

comparable is a good word to bring up. -let’s say I am looking at the bottom of the market, I might do the figures/find the ratio for the whole of the market in a town, but also then just pick out only the properties under or within a certain price and see if the ratio varied, and take that into account. Basically if you have the data, you can look at it in lots of different ways.

>This is invaluable and I use this before even thinking about >buying. This assists me becoming an expert in a market in >which I am a relative newbie in.

Well $25 is reasonably cheap price to pay if it assists you to become an expert… I say go for it.

I hope I have explained what i meant a bit better now, anyway, if it was unclear before.

BB!!!!!!!!!!! hi!!

>G’day David U.,
>The thing that worries me about your LEMMINGS
>post is that I might be one of them!!!

you know what…that is so hilarious because I thought exactly the same!!
but……

Anyone with one IP (not their PPOR) is one of only 6 percent of Australians.
i.e. quite special – High Distinction!!

And anyone with 3 or more IPs is in only 9 percent of that 6 percent.
Being in the top 0.54 percent of a population is hardly lemming-like.
Genius, more like it! (or madness….some would say it’s one and the same!)
Anyway – anyone with 3 or more properties – you are SOOO not the average investor. Feel proud!

For that reason, I’m spreading the word hard on the count that if i can do it anyone can. Also, when I am a millionaire I don’t want all my friends to be broke – I want them to be there right along with me.!!

>I’m ready for another interest rate drop, them I’ll be locking in >on fixed interest rates.

yeah I heard about that.
Richmastery the other night said that anything under 6.5 is below the 20 year average, so fix it as long as you can!!!

My risk-avoidance strategy is to not get finance until the properties are not only going concerns with balance sheets that look good, but also that at least 6 months have passed, so the bank do an independent valuation rather than going on what I paid. Also, it should be summer by then, and according to my research, house prices are higher in summer in most areas….plus, have improved capital value… and then I intend to only borrow to purchase more CF+ve properties for a bit longer, which further spreads the risk.

cheers-
Mini

PS I’m exhausted

http://www.vocalbureau.com

Hiya Dave U,

>I already know you have your system down pat

it’s really funny because I wouldn’t have thought that i did,
however the process of writing it down does clarify it, even if only to me! hehe

cheers-
Mini

http://www.vocalbureau.com

hi recovery,
yes I did get your email, sorry, I must have read it and not replied, I will reply later on

>i try and get my friends into this PI stuff
>and it is hard going
>I dont think I am a lemming as ypou poited out .54% of the pop >is not herd following

I agree – I mean, I’m the only person in my circle of friends who has a bookshelf full of materials to try and improve not just my mind but my investing knowledge, not to mention the three seminars I’ve spent $$$$ on

>but I am going over to NZ and getting as many
>of those good PI as the bank will lend
>if interest rates go up tp 10% I will be
>still; covered

good on you! There seem to be less in NZ under 30K these days but there are still many under 40K. In fact what I have learned, from starting at the bottom of the bottom of the market, is that if I had spent a little more I would have (for example) got better houses in better areas that although the yields are not quite as good probably would have been easier to rent to the ‘perfect tenant’. I will eventually work my way up the market into those kind of properties not to mention some cap. gain ones, i’m thinking
>I just look at county OZ PI’s
>and surpised and shoked at the low number
>of PI there and the ones there are under contact
>NZ is looking good

yeah – I felt the same – believe me I looked in Aussie first before resorting to NZ, and found that there was nothing really that I could afford that I liked – I think I was about a year too late for areas such as bathurst, ballarat, etc

>thank you for all your help and the writing
>such huge reply to this disscussion group

thanks, my boys have been away for four weeks so I have had lots of time to do lots of self-indulgent things such as spend and unhealthy amount of time on this forum! Plus I am between deals (waiting for one to settle, etc) so not so busy looking for deals for hours as I was.

>I am a happy PI investor and also profitable one
I am not profitable, yet, but I am sure i will be in the long term. I have figured out that even with a 50 percent vacancy I can still be CF+ even with finance, so I reckon it will all come good in the next month with my three baby IPs.

cheers-
Mini

http://www.vocalbureau.com