Hi there,
Whilst I understand the ’11 sec solution’ is only a filtering tool, from what I have experienced, in NZ with the current interest rates, they are barely cash positive.
Several agents seem to list properties at the 10.4% mark and they seem to get snapped up.
When I run the numbers through at different gross yields and borrowing amounts etc etc, I do start getting cash positive amounts around the 11,12,13% marks, but still the overall CoCR is wayyyy too low. Am I doing something wrong ?
I see deals being snapped up at agents around this price range, but given the analysis I have in front of me, I still wouldn’t want to touch it with a 10 ft barge pole – there is no margin of safety in it given the cash returns are so slim.
Are aussies investor just madly rushing out at buying at 10.4% in NZ because it meets the 11 sec rule???
andrew[cap]
Hi aptam,
This is a good point. The 10.4% is most likely a gross return. Hence, the net return and CoCR could be lower.
However, there are other factors you have to take into account as well, for instance ways of increasing the rent by renovating, subdivision potentials, capital growth potentials(at last).
Remember the formular, annual rent/purchase price x100=yield
Here is an example:
(150×52)/75000=10.4%You might want find the “Getting Creative” forum interesting too.
https://www.propertyinvesting.com/forum/forum/28.htmlAll the best
Dmitri
[exhappy]Aptam
My experience in NZ is that you can no longer buy +CF proerties with decent net returns. You have to do something a bit more creative to get them to be viable.In answer to your question, A lot of peopple are buying them at about 10% in the hope of capital gains. Speculators. Over the last few years that strategy has been quite successful. But it is risky.
Good luck
JJ
You are right. +CF is difficult in NZ, but not impossible (especially with some creativity).
Prices have gone up a lot over recent years, but rents have not increased with the same pace. So margins have been dropping. But that cant continue. If it keeps going, nothing will be +CF, and a lot of investors will be loosing money.
As is normally the way, those areas with the best cash flow, tend to be the ones with the lower long term CG, and areas with better long term CG tend to have lower cash flows. Those that have been hoping for good CG over the last few years will have done well, but the property cycle will not continue like that.
Andrew
http://www.rentmaster.co.nz
Software for LandlordsHi everyone,
thanks for the replies. I think its clear that in even in NZ a stock standard ‘buy & hold’ cash positive properties are a lot rarer. Yes, yields are higher than in Australia, but so are interest rates.
RentMaster you mention that you either go for CG or CF+. Its interesting that even in some regional areas, CF+ properties are getting hard to come by – and they have had the CG’s to boot!
(If anyone would like to dispel that, please contact me. The numbers on the properties that I have run through so far are barely positive)
Its clear that you really have to be creative in order to get your CF+’s…
Cheers,
Andrew.Hi Aptam – agreed, they are a lot harder to come by, but as RentMaster suggests, not impossible. It is a matter of finding a property that can be turned into +CF.
I have purchased a house in Wanganui in the last month that didn’t meet the 11 second rule, but will be Cashflow positive once renovated.Regards,
Barry.Hi….. to quote Steve…… Cashflow is created not found. In the market now the deals are still there yet a more creative approach needs to be used. Its like seeing the diamond in the rough. I am finding with small cosmetic reno’s I am increasing the cashflow, going against the grain of ‘most’ investors also helps rather than staying in the conventional places where everyone is trying to make it happen. Not familiar with the aussie market only hearing the specualation of the slowed cashflow NZ seems to be an easy target. Keep digging and you will find the gold…. stand back and look from a different angle… a lick of paint can do wonders so I found out first hand in Auckland which is predicted as one of the tricker places to find such deals
Have a MOST OUTSTANDING Day
Hi all
CF+ve = you can hold the property painlessly
CG’s = you make money if the property goes up in valueidea – buy CF+Ve where it will go up in value.
it is no more speculation to buy for capital gains in a town that is experiencing growth as it is for Statistics NZ to predict future growth for the next x years.!
(well then they’re speculating then too! But with good reason! Same reasons as we’re buying for!)
Statistics NZ tell us that Queenstown, NZ will have 76,000 people by year *whatever*. 2025 I think. (it has 20,000 people now.)
Do you think that lakefront properties will go up in that time (even if they’ve gone up, up until now?) Sure I do.
Okay?
Now about that capital gains, it is SOOO RUBBISH that high CF don’t get capital gains, it’s like saying groceries don’t cost as much in smaller towns.
Do you see?
Hmm, I don’t have time to really write so much about it now because I actually have about 6 deals to put out tonight. i.e. ten percent returns, in top locations, in top towns (45000 plus, 3 hours from wellington, or auckland) with subdividable sections, hah!see the bird dog thread for deals we have found!
There are always going to be people who sort of don’t get how it works, are too scared, don’t know any property investors doing it, get talked out of it by others who yell louder or have stronger personalities, and so on. Those people are still sitting here justifying why it’s too dangerous for them to be in the market right now, the market is not quite perfect for them. they are victims.!others like myself and my crew at nzpropertytogo.com are buying like mad and doing better than ever, at a time where it’s supposed to be harder than ever! Well it’s not! It’s easy!
So easy!!!!!anyway, I don’t expect you all to believe me, that’s been the trend of the last 2-3 years here. A few saying, give it a go! it works! and 98 percent saying ‘what about this, what about that, it’ll never work, the market’s too unsafe’ and then basically doing nothing.
Yah, well, see ya!
I’m off to do more dealscheers-
MiniRemember one of Steves quotes….it’s what you do after you buy that is important.
What is your stategy?Andrew.Dane
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