Originally posted by Damap
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Auckland Investment Strategy- Which to Pursue?
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I have no trouble finding them you just have to be diligent. In the last 2 weeks I have found 2 in Howick, one in New Lynn and a BEAUTY today in Remuera. So don't give up it can be done!
You have to get onto trademe by 9AM and get an offer in on the day it is listed. Only look at fixed price or by negotiation listings.
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You're on a very Auckland-centric forum Purple Property, up to you to decide for yourself, no such thing as a stupid question. There's a ton of other strategies, it's not all 'our first home' fever.
Down south here, it's pretty cushy from my point of view and a few others are in the same mindset too. It's not so red hot that you can't pick up a bargain. Low rates are a bonus, not a pre-requisite to it being a good deal. Bought 2 in the last 6 months, buying has totalled $575k inc minor reno and purchasing, revalued less than a month after buying for $715k total . Don't have to wait for my capital gain or an upturn in the market and much better cashflow than anything in Auckland, can take a big hit if the excrement hits the fan. I rent mine out by the room so get much higher returns but even the standard way it'd be floating around the 10% mark. Still very high rental demand, although not the ridiculous amounts of a couple of years back. Looking forward to a rebuilt CBD....
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Originally posted by Damap View PostBuy the best area you can now in Auckland. Then just buy one house every 2 to 3 years using equity. Forget cashflow sh*t boxes they get hammered in recessions buy the best you can and let time make you wealthy.
And also over the next 15 years say, how much do you think they will increase in value per year?
I know it's only an opinion, but you seem quite sure from many of your posts.
Thanks,
GraemeFacebook Property Chat Group NZ
https://www.facebook.com/groups/340682962758216/
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Price points are 450 to 900K. Based on history we should see prices at least double. If the average historical growth curves hold they will almost quadruple. Given housing shortages and the vanishing middle class I would expect them be closer to quadrupling than doubling.
But who knows, as long as you're in a good market and cash positive, who cares :-)
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Originally posted by rocket View PostA simple way to look: Akl on an average is having more than 17 % capital gain + 5% yield= 22% total per annum
Average yield based properties rest of NZ : 5% capital gain+ 7% yield=12%
No Brainer...AKL is the place to be.Buy the best area you can now in Auckland. Then just buy one house every 2 to 3 years using equity.Price points are 450 to 900K. Based on history we should see prices at least double. If the average historical growth curves hold they will almost quadruple. Given housing shortages and the vanishing middle class I would expect them be closer to quadrupling than doubling.
But who knows, as long as you're in a good market and cash positive, who cares :-)
Let's take say $700k then as a place to start as you mention and buy close to the CBD. I don't know Auckland prices at all but just from the 2 properties on 'Our First Home' that sold before reno and after was quite an eye opener!
So, taking $700k for a property now, the interest alone at 5.5% p.a. is about $740 a week. Maybe that's what the current rental would be too, I'm not sure again on that.
Let's say the property as you mention Damap increases at that rate you say, it works out to be approx. 10% p.a. over 15 years to quadruple.
The price to buy would now be $2,800,000 for the same property, and to pay for the loan on that borrowing is $3,000 a week.
Do you think rents will also go up that much in the same time frame?
Now, if we take Rocket's 17% gain each year, the price in 15 years would now be $7,377,000.
To pay the loan on that one would be $7,800 a week or just over $400,000 a year just to pay the interest.
So, let's say Purple Property took the advice of buying one every 2 - 3 years (wanting 6 properties) in these areas and refinancing as you say, how would that look as far as cash flow goes?
Taking Damap's conservative (in Rocket's mind) approach, after the 15 years he would have 6 properties that would now need $18,000 a week just to pay the interest, then of course there's insurance and rates on top of that.
I hope Purple Property has a very good income to be able to make up any difference in what the tenants pay, and what the interest cost would be
If the increase in value carried on for another 15 years again, the prices would then be $11 million for the now $700,000 property in Damap's scenario, and $70 million in Rocket's mind
Somehow I just don't see it, not sure whyLast edited by orion; 14-04-2015, 10:00 AM.Facebook Property Chat Group NZ
https://www.facebook.com/groups/340682962758216/
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You're not making sense (to me) Graham. They aren't going to buy the houses again int he future they already own them.
So let's say you bought a home and income for 700K today as property 1.
Interest and Principal = $733 a week
Rent $800 a week
In 2 years you buy another same property is now 840K and you 100% borrow
Interest is $846
Rent maybe $900 a week
Anything further out is hard to extrapolate because of uncertainty with interest rates.
But even with the above you have 4 income streams in the highest capital growth market in the country.
In terms of growth you anti Aucklanders love to bag the facts are:
My dad bought our first house in Pakuranga in 1962 for 15K
1972 = 30K
1982 = 60K
1992 = 120K
2002 = 240K
2012 = 480K
neighbouring house recently sold for 715K
In 1973 my parents bought a section in Half Moon Bay for 17K and built a house for 47K = 65K
1983 = 130K
1993 = 260K
2013 = 520K
(Exact numbers may be slightly off my mums memory is not 100% anymore)
Same property just had a cash offer at 950K
So yes prices will continue to rise in Auckland just like they have for decades and they will double on average every 8 years, (10% per annum compounding). It is the safest market in the country.
From todays Herald Head of Tainui:
"The freight hub is designed to take advantage of the rail line connecting Hamilton to the ports of Auckland and Tauranga. The line runs through the site while the Waikato Expressway runs down the eastern boundary.Within 20 years it is expected that upper North Island population and freight volumes will double and that 50 per cent of the country's GDP will be produced in the golden triangle bounded by Hamilton, Auckland and Tauranga, Tainui says."
One of the country's wealthiest tribes is preparing for the first stage of its biggest land development push.
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Originally posted by Damap View PostYou're not making sense (to me) Graham. They aren't going to buy the houses again int he future they already own them.
So let's say you bought a home and income for 700K today as property 1.
Interest and Principal = $733 a week
Rent $800 a week
In 2 years you buy another same property is now 840K and you 100% borrow
Interest is $846
Rent maybe $900 a week
Anything further out is hard to extrapolate because of uncertainty with interest rates.
But even with the above you have 4 income streams in the highest capital growth market in the country.
In terms of growth you anti Aucklanders love to bag the facts are:
My dad bought our first house in Pakuranga in 1962 for 15K
1972 = 30K
1982 = 60K
1992 = 120K
2002 = 240K
2012 = 480K
neighbouring house recently sold for 715K
In 1973 my parents bought a section in Half Moon Bay for 17K and built a house for 47K = 65K
1983 = 130K
1993 = 260K
2013 = 520K
(Exact numbers may be slightly off my mums memory is not 100% anymore)
Same property just had a cash offer at 950K
So yes prices will continue to rise in Auckland just like they have for decades and they will double on average every 8 years, (10% per annum compounding). It is the safest market in the country.
From todays Herald Head of Tainui:
"The freight hub is designed to take advantage of the rail line connecting Hamilton to the ports of Auckland and Tauranga. The line runs through the site while the Waikato Expressway runs down the eastern boundary.Within 20 years it is expected that upper North Island population and freight volumes will double and that 50 per cent of the country's GDP will be produced in the golden triangle bounded by Hamilton, Auckland and Tauranga, Tainui says."
One of the country's wealthiest tribes is preparing for the first stage of its biggest land development push.
I don't bag Auckland at all, just not somewhere I would ever choose to live because of the traffic!!
My parents also bought their first home in Hastings in 1962 and they still live in it
Purchase price was $5,000 and they had a 30 year fixed loan at 3% p.a.
They still live in the same home after all this time and it's now worth about $250k approx. So, it's still approx. 1/3 of the cost of what an Auckland one would be at $750k. So 5k in 1962 compared to $15k for your parents one in Auckland.
To me it's a very dangerous and speculative way of going about things if you are relying on anything outside your control, especially increases in property values. I would rather have the tenants pay for the mortgages without topping them up knowing that in 20 years time they are all paid off with an income to live off regardless of what the prices may or may not be. It is a very low risk way and works in all markets, not just rising markets.
There were many just like you saying the same things in 2003 - 2006, that it will never end and I know of so many that have gone broke now because of it buying in the Auckland market. Things have obviously recovered to more than where they were previously and those that weren't geared to high got through it fine. There will be a big correction at some stage in the next few years and if you are geared at less than 70% you will most likely be okay, but anything over that will most likely wipe people out in the same way as it did in 2007 - 2008.Facebook Property Chat Group NZ
https://www.facebook.com/groups/340682962758216/
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The main point Orion is missing is that rents DO NOT have to increase at the same pace as capital growth.
In many major cities around the world, yields are extremely low and disconnected to home loan interest rates, making properties severely negative geared.
The city my parents come from in India has average housing yields of 1 to 3% when home loan rates are roughly 10%! (Obviously, you can imagine their excitement when they first came to Auckland and saw the concept of cash flow positive properties)
The same disconnect between interest rates and yields are happening in Auckland.
Auckland house prices will continue to double every 7-10 years while rents might only increase say 40% in the time frame.
Also, price to income ratio is becoming a pointless statistic as many have overseas income/don't declare or pay as much tax etc and it skews the ratio terribly.
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Originally posted by genius View PostThe main point Orion is missing is that rents DO NOT have to increase at the same pace as capital growth.
In many major cities around the world, yields are extremely low and disconnected to home loan interest rates, making properties severely negative geared.
The city my parents come from in India has average housing yields of 1 to 3% when home loan rates are roughly 10%! (Obviously, you can imagine their excitement when they first came to Auckland and saw the concept of cash flow positive properties)
The same disconnect between interest rates and yields are happening in Auckland.
Auckland house prices will continue to double every 7-10 years while rents might only increase say 40% in the time frame.
Also, price to income ratio is becoming a pointless statistic as many have overseas income/don't declare or pay as much tax etc and it skews the ratio terribly.
So, the question is, how does the investor top up their mortgages by that much of a shortfall each week? Unless they earn hundreds of thousands per year in their job/business they would only be able to buy one or two properties before running out of cash to service the shortfall in loans.Facebook Property Chat Group NZ
https://www.facebook.com/groups/340682962758216/
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Originally posted by orion View PostSo, the question is, how does the investor top up their mortgages by that much of a shortfall each week?
With average $500-550K 3-bdrm house rented $450/week investor needs to top up just around $6K-$10K a year (which includes rates and insurance and some maintenance), you don't really need hundreds of thousands income to top up 3-4 of such properties. And that's only if all 100% borrowed. If there was genuine 20% cash deposit for each property, there's no need to top up at all.
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