Originally posted by genius
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The Worst Wealth Creation Strategy
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Facebook Property Chat Group NZ
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Originally posted by marklowes View PostSo you're buying in Auckland at present using this strategy? And are confident prices in Auckland will be higher in 5 years time than they are now? Based on Benjamin Graham's security analysis (Warren Buffets favourite book ever on investing) your strategy is not investing but is speculation, which over the long run (not 1 or 2 decades, but longer..) tends to result in zero returns as periods of extreme growth are cancelled out by periods of extreme retraction. Benjamin Graham discusses this in depth and talks about 'intelligent speculation' which is an attempt to use anaylsis to essentially predict the future. He concludes that no degree of analysis in 'intelligent speculation' can change the outcome of a sum zero return over the long run when speculating.
His book details the 1920s boom and 1930s great depression that follows. A lot of what he explains is freakishly familiar to what is happening in Auckland right now even though his book was written 60+ years ago.
It all balances out over time and Auckland I think will be in for the biggest shock of all because it has had a rapid increase over such a short period of time. It won't last and once the shit does hit the fan there PT will go very quiet for a while I would imagineFacebook Property Chat Group NZ
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Originally posted by elguapo View PostPersonally I believe the only workable strategy in Auckland is to wait, and focus on debt reduction. Being in a strong cash position when a market dives is key IMO.Facebook Property Chat Group NZ
https://www.facebook.com/groups/340682962758216/
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Originally posted by genius View PostI am very confident that in 5 or 10 or 20 years time, Auckland prices will be higher!
My strategy is not speculation at all - house prices don't have to increase for my strategy to work.
I expect inflation wherever I live all my life. This means rents will go up due to inflation which means my rental income will increase. I will then use this to pay off my P&I.
How long have you been investing, what is your current situation and your debt to equity ratio?Facebook Property Chat Group NZ
https://www.facebook.com/groups/340682962758216/
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Originally posted by orion View PostYes that is awesome Mark Thanks
It all balances out over time and Auckland I think will be in for the biggest shock of all because it has had a rapid increase over such a short period of time. It won't last and once the shit does hit the fan there PT will go very quiet for a while I would imagine
I have really enjoyed your thread and reasoning (even though it has scared me somewhat!). I would like to get your opinion of my portfolio/position, and any advice you have to improve my situation.
18 months ago I bought three units in Auckland for 1 million (this includes cost to reno and add a bedroom and new kitchen to two of them). The rents are 1,400 per week or 70k per year. I manage them myself (time rich cash poor :-)
The mortgage is on an I.O. and will have to remain so for a few more years? I was planning on never paying the mortgage down... right up to the point when I came across this thread... you have got me thinking hard about the 'assumptions' I have made and that I am in effect 'gambling' on the prices always increasing in Aucklnad.
Appreciate your thoughts.
Happi
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Originally posted by Happi View PostHi Orion,
I have really enjoyed your thread and reasoning (even though it has scared me somewhat!). I would like to get your opinion of my portfolio/position, and any advice you have to improve my situation.
18 months ago I bought three units in Auckland for 1 million (this includes cost to reno and add a bedroom and new kitchen to two of them). The rents are 1,400 per week or 70k per year. I manage them myself (time rich cash poor :-)
The mortgage is on an I.O. and will have to remain so for a few more years? I was planning on never paying the mortgage down... right up to the point when I came across this thread... you have got me thinking hard about the 'assumptions' I have made and that I am in effect 'gambling' on the prices always increasing in Aucklnad.
Appreciate your thoughts.
Happi
Thanks
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Originally posted by Happi View PostHi Orion,
I have really enjoyed your thread and reasoning (even though it has scared me somewhat!). I would like to get your opinion of my portfolio/position, and any advice you have to improve my situation.
18 months ago I bought three units in Auckland for 1 million (this includes cost to reno and add a bedroom and new kitchen to two of them). The rents are 1,400 per week or 70k per year. I manage them myself (time rich cash poor :-)
The mortgage is on an I.O. and will have to remain so for a few more years? I was planning on never paying the mortgage down... right up to the point when I came across this thread... you have got me thinking hard about the 'assumptions' I have made and that I am in effect 'gambling' on the prices always increasing in Aucklnad.
Appreciate your thoughts.
Happi
Hi Happi,
Thanks, yes has been a good thread so far
So after expenses you would be about break even if you borrowed the lot, is that right?
Why do you say it will have to remain on I/O for a few more years?
Yes, you are correct you have made assumptions, but you’re definitely not alone.
At least you can now see they are assumptions, most people can’t!! Well done for seeing it nowFacebook Property Chat Group NZ
https://www.facebook.com/groups/340682962758216/
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Originally posted by Happi View PostWhoops forgot to add... registered valuations on 3 units was 1.5 million in March
Thanks
Without selling your properties now, how does that help you?Facebook Property Chat Group NZ
https://www.facebook.com/groups/340682962758216/
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Originally posted by orion View PostHi Happi,
Thanks, yes has been a good thread so far
So after expenses you would be about break even if you borrowed the lot, is that right?
Why do you say it will have to remain on I/O for a few more years?
Yes, you are correct you have made assumptions, but you’re definitely not alone.
At least you can now see they are assumptions, most people can’t!! Well done for seeing it now
I thought I would remain on I.O. for a couple of years because I want to build up a small/medium buffer in a revolving credit facility to 'insure' me against any unexpected costs or sudden increase in interest rates etc... I am really not very clear about this need of mine to have a little stash of credit available in case I need it, just feel comfortable knowing it will be there. As you can tell I am very new to being a rental property owner and manager :-)
I do see the great risk in remaining on I.O.
I have an opportunity to relocate 2 native timber homes onto my home for approximate cost of 500 to 600k they will return a weekly rent of 500 each. After reading your thread I am not sure if i should go ahead?! Whats your thoughts? Thanks again for taking the time to share your knowledge :-)
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Originally posted by AMR View PostThey sound expensive for second hand relocatable homes. What's the cost of a new build?
thats 500k for everything... council fees, development contributions, engineering, right of ways, etc etc...
New builds (just building) would be at least 500k
Thanks
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Originally posted by Happi View PostYes Orion, I did effectively borrow the lot (20% deposit came from the equity from my home and the rest from two different banks) and yes I do just about break even after expenses.
I thought I would remain on I.O. for a couple of years because I want to build up a small/medium buffer in a revolving credit facility to 'insure' me against any unexpected costs or sudden increase in interest rates etc... I am really not very clear about this need of mine to have a little stash of credit available in case I need it, just feel comfortable knowing it will be there. As you can tell I am very new to being a rental property owner and manager :-)
I do see the great risk in remaining on I.O.
I have an opportunity to relocate 2 native timber homes onto my home for approximate cost of 500 to 600k they will return a weekly rent of 500 each. After reading your thread I am not sure if i should go ahead?! Whats your thoughts? Thanks again for taking the time to share your knowledge :-)
If you can do the move and get $1,000 p.w. income from the 2 properties and it all costs you less than $600k then I think it would be a good idea to go ahead. Your yield on those two would be around 9% p.a. As long as they don’t need renovating or have ongoing high costs that a lot of the older homes can have.Facebook Property Chat Group NZ
https://www.facebook.com/groups/340682962758216/
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This thread has been interesting reading, I just wish I'd found this whole forum earlier, so I was reading all the good threads as they grew, rather than sitting down and playing catch up in one big hit .
Can I just ask, for those that do use I/O, is this solely to allow you more cashflow through smaller repayment amounts, or is there more to it? I've personally never understood the value in I/O, as i have just always wanted whatever I buy, eventually paid off, so wondering if I'm missing something .
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