buying new zealand

Gee I hate to butt in as I know nothing about NZ, but how does 7.5% equate to a good return.??
I mean, what are the interest rates currently ??

For what its worth, I am still buying in Oz where I can get a rental yield of 12% on residential, with an investor achieving around 8.5% yield on their investment.

On top of this it is possible to get an instant cap gain of $70k to $100k per property.

Of course this takes a bit of creating and thinking outside the square, but its nothing special.
We are building houses on vacant land and packaging them up for investors to do the same, or to buy the finished product.

I can’t understand the attraction of going over the NZ or the US to chase pos cashflow property, when you can do the same in your own backyard.
Yes, I have visited the US, yes its a nice place to visit,no I would not want to live there, and no I wouldn’t want to buy over there..I don’t see the point.

kp

Hi Westan,

Interesting reply…[biggrin]

I personally wouldn’t be recommending to anyone that I know to invest in NZ anymore. Especially with the VERY likely interest rate rise. I don’t see the point of being an offshore investor and investing at the top of a boom. NZ could suffer flat or negative growth now for many years, similar to Australia. (If you believe Aussie John).

One property that I purchased in NZ, had been on the market for 7 years – believe it or not![bawl]

At least if you are investing for cashflow, you have no large holding costs while you are waiting for appreciation.[agro3]

Is Buffalo America’s Tokoroa?????[blush2][biggrin][clown]
Sorry, but it seems to be copping the same flack that Tokoroa did a year or two ago.

Cheers,
Del

http://www.nzpropertytogo.com

buffalos a touch bigger than toke, and Westan i agree with your words, I as a Kiwi investing in Buff am doing it solely for cashflow, but there are is a lot of outside investment pouring in and i dont mean from just us kiwis and ozzies, the brits and the US out of staters are already begiing to increase thier investments there.

I however am following the bob Jones philosophy and still holding my NZ Proprties, they are positive cashflow and i have already geared them to take advantage of that.

when the going gets weird the weird turn pro

Hi Nigel,

Are you able to tell us which suburbs you purchased in in Christchurch? I own property there, bought before the current boom.

Thanks heaps
Anne

Hi Guys

wow a fair few replies here.

Wilandel- a CD ? maybe thats just a free plug for an excellent product ?

Kiwiduvet – Del made the coment about Buffalo being another Tok from the perspective that people like to slam Tok. I’m in agreeement with you that its better than Tok. I chose not to buy in Tok, yet i’m buying in Buffalo so thats my response. In regards to Buffalo being a sort after place for investor, yes you are right again, investor from all over the world are chasing opportunities in buffalo right now. Its not just Aussies and Kiwi’s as you have already pointed out. I’m also aware the Poms are big buyers. The UK pound is worth so much these guys end up paying next to nothing for the home (well thats an exageration, but you get my point). Californians and investors from New York city are also big buyers. i was talking to Dan the other day, he is one of our contacts in buffalo- he keeps telling me its amazing the interest buffalo has come under over the past 18 months- its been discovered !

Ozi- i agree with a lot of what you say, but think you are overstating it somewhat
Taxes- a 40,000 home is about $1600, (in NZ i was paying this in Wairoa for example) so its high but not extreme. if you buy in the Suburbs of buffalo then it really gets high (over $3000).
Management- well yes 10%, but thats always an expense with property investing. So a 40k home rented at $8,000 per annum thats about $800 if fully occupied for the year.
Insurance – yes a cost but once again $400 isn’t too bad.
So a 40k home renting at $8000 pa after these costs ($2,800) has cash flow of $5,200(a lot better than the $3000 net you mentioned. This goes towards maintenance, vacancies etc, so there is still lots left over. .
Regarding people being sucked in by the high yeilds, At least these properties are putting money in your pocket, can’t find them in Au or NZ now.
Mortgages- firstly it is possible. we have a guy in buffalo who is expense to set up and interest rates are 8.5%, expensive by US standards (still lower than the NZ floatong rate !)
Then there is Richard Taylor who can also get some finance on NY properties at a better rate and lower set up costs.
Maintenance- yes things in NY can wear out quicker than we would usually expect. But the costs can also be way less than we expect in Australia, materials are so cheap and wages can be also. For example roofs are a big ticket item, if one needs to be replaced it could cost as little as $2500 (if it can be layed over the top of the existing, usual practice in NY). If there are 2 roofs already you need a complete tear down it could cost $6,000). Roofs only last about 25 years so you are right to mention it, i’d go futher and if people are cash poor then they should be putting money aside for future repairs. At least put aside $500 pa.
As far as buying in Good areas i agree 100% there is a real danger in chasing even higher returns and investing in realy low areas. I know in Buffalo the bad areas there i wouldn’t buy at any price. We get a lot of our properties in better areas, One I own in Hoyt st is 4 blocks from a really beautiful part of the city near soldiers place (in north buffalo) and a lot of the properties we have sourced are in the University area (Buffalo has the largest Govt Uni in New York State, Remember the population of NY State is the same as Australia’s).
Nigel-

That suprises me ,that you say that. As for me that is a key factor. I like to make money from day one. The stategy of buying at the bottom of the cycle has proved very rewarding for me. As i mentioned before i’d rather have my money working for me, than sitting by waiting for the market to come back. Assume i invest the money and get 20% PA return on my money then in 4 years i’ve doubled my money. I’m a full time investor so making my money work is important to me.

As far as Texas goes i’m glad you agree that (city deleted by westan) in Texas is a great spot to invest. I tried to keep it a secret for our investors, obviously someone has blabbed to you, (i know who it was). Now you have been there i will have some competition in sourcing properties. Anyway competition is good for the investors out there. I’m extremely happy with our contacts in (city deleted by westan) and (also deleted by westan). While i like Buffalo, more of my own investing dollars are going into Texas. But I will continue to aquire more real estate in Buffalo. You like my judgement on (city deleted) maybe you should look at Buffalo for yourself rather than rely on what others tell you ?

Just for the record, i think Christchurch will be a good long term investment for your clients (not good short term). But sorry NZ its Texas for me.

Regards westan

Properties in the USA 15-25% returns- email to join our database [email protected]

Hi Westan,

I guess my calculations were a bit rough, so I’ve gone to my spreadsheet for check these numbers [biggrin]

You mention the taxes are around $1600. Does this include water and garbage, or is it just the city, sewer and county taxes? I’ll assume it’s all inclusive. But bare in mind taxes vary from property to property. They are based on the properties assessed value which are sometimes way off the actual value.

Purchase price: $40,000.00

Rent/year: $8,000
Vacancy rate: 10%
Adjusted yearly rent: $7,200.00

Closing costs

Deposit: $8,000.00 (20%)
Legal fees: $1,100.00
Building inspection: $275.00
Appraisal: $300.00
Mortgage setup costs: $4,500.00
Total closing costs: $14,175.00

Annual costs

Management fee: $720.00 (10%)
Letting fee: $666.67 (1 months rent)
Taxes: $1,600.00
Insurance $400.00
Maintenance $360.00 (5%)
Mortgage interest $2,560.00 (8% interest rate)
Total annual costs: $6,306.67

Total net cash flow: $893.36

CoCR: 6.30%

Gross yield 20.00%

As you can see, with a mortgage, would you be happy with this return? This was my point. And the above figures only allow for a 10% vacancy and 5% of collected rents for maintenance (which is a bit low in my opinion).

I was over in NY 3 weeks ago and this is one of the reasons I decided not to buy. I just couldn’t make the numbers work. Sure, these properties may be positive cashflow but for the amount of risk involved I just wasn’t comfortable with the return. I know these returns no longer exist in Aus and NZ, which is where a bit of creativity comes into play [grad]

Please correct me if I have over estimated the above figures, but I think they are close to reality.

People should also realise the “other costs”, such as cross-border accounting, setting up structures in the US, ongoing compliancing costs for these structures + accounting, etc… If you were to buy 1 or 2 of these properties, I really don’t see it as being profitable. If your plan is to have a significant portfolio in the USA, then the numbers start to look better.

I am not trying to be a wet blanket here, just voicing my opinions as these were all issues I faced recently while I was over in the US. I think there are some good buys over there, it all depends on your comfort levels and which strategies you use to make these investments work for you. Personally, if I was to buy over there I would want a greater return on my money given the risks involved.

Regards,
Ozi

Well, given that i love NZ so much i moved there – and to Christchurch, its been an interesting last few months looking at the markets and what has been going on.
christchurch continues to present opportunities – but i am seeing these as renovation opportunities – which are much harder to manage and do from a distance. I am not so keenly buying for the longer term in Christchurch at the moment, unless the right property comes up under value, or with the ability to add value through refurb etc.
I spent 10 days in the US last month with Westan and a group of people looking at investment opportunities. Now, I went with an open mind, but not overly certain that I would invest so far from home – and I came back believing that there are a couple of key areas in the US that I would very happily invest in – and will be investing in.
Is the US market better than the NZ market – that’s a bit broad a question…. certainly there are some very good opportunities in the US in particular states and areas that I will be taking up because I believe they are better than I can get in NZ at the moment.
Everyone has opinions about places to invest. I am still getting PMs from people asking about starting investing in NZ. i would suggest that now is not the time to be starting a property empire in NZ. There are some good opportunities certainly. But there are no big winners in the short term at every corner like there used to be.
I will keep investing in NZ while I live here. But for my money I am seriously looking elsewhere now as well.
that’s my two cents worth….

Cheers
CD
CastleDreamer
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