Interest Rates

[PTILoveYou]

You purchased another rental? Would be keen to understand the details of your latest purchase. Thanks

Two three bedroom houses with separate garages, fully fenced, separate power water, on one title. 931m2 land, mixed suburban.

Te Atatu Peninsula

pp $1.3m

rent total $1030/wk

gross yield 4.1%

reasons to buy:
- capital gain area
- unitary plan future development potential
- last purchase before I leave my full time salary job
- higher yield with two incomes

[Judge]

According to my calculator, at 4.5% interest rate with no maintenance allowance and no property management costs this purchase will be $912 a month cashflow negative (assuming $4000 rates and $2000 insurance per annum). A good move before you leave your full time salary job? Interest rates are going up very fast. At the moment only the long term, but if you do not lock long term now, once the short term rates start going up it will be too late to lock long term it will be too high. So its reasonably safe to assume that interest rates will only go up. At 5% its $1453 clashflow negative a month. And you are out of your full time salary job. And you bought at the peak of the market so any capital gains are years away (in the near future a small capital loss is more likely than capital gain).

Is this a good buy?

[PTILoveYou]

According to my calculator, at 4.5% interest rate with no maintenance allowance and no property management costs this purchase will be $912 a month cashflow negative (assuming $4000 rates and $2000 insurance per annum). A good move before you leave your full time salary job? Interest rates are going up very fast. At the moment only the long term, but if you do not lock long term now, once the short term rates start going up it will be too late to lock long term it will be too high. So its reasonably safe to assume that interest rates will only go up. At 5% its $1453 clashflow negative a month. And you are out of your full time salary job. And you bought at the peak of the market so any capital gains are years away (in the near future a small capital loss is more likely than capital gain).

Is this a good buy?

Based on your assumptions, nothing is a good buy for the past three years aye haha?

[Judge]

The main numbers are your actual numbers, not my assumptions Garry. Over the past three years i added 5 properties to my protfolio. Last three i added this year yield 8.4% with cashflow of $4,120 per month (assuming $100 a month maintenance). The two i added last year yield 8.64% and give me $2,617 cash per month. Cashflow figures pre tax of course and based (like yours) on 100% borrowing of the purchase price. So, plenty of opportunities in the market in the last three years, and right now. Have a project for next year which will yield approximately 7.7%. Haha?

I do not criticise your approach Garry and i do wish you the best of luck. But i think that as an educator you owe it to your students to say in your signature something like:
Gary Lin,
Property Investment Coach With Experience only in a market that goes up at record rates and with record low interest rates

[PTILoveYou]

The main numbers are your actual numbers, not my assumptions Garry. Over the past three years i added 5 properties to my protfolio. Last three i added this year yield 8.4% with cashflow of $4,120 per month (assuming $100 a month maintenance). The two i added last year yield 8.64% and give me $2,617 cash per month. Cashflow figures pre tax of course and based (like yours) on 100% borrowing of the purchase price. So, plenty of opportunities in the market in the last three years, and right now. Have a project for next year which will yield approximately 7.7%. Haha?

I do not criticise your approach Garry and i do wish you the best of luck. But i think that as an educator you owe it to your students to say in your signature something like:
Garry Lynn,
Property Investment Coach With Experience only in a market that goes up at record rates and with record low interest rates

My name is Gary Lin.

[Judge]

That changes everything!
(apologies for misspelling - fixed in my original post)

[PTILoveYou]

That changes everything!
(apologies for misspelling - fixed in my original post)

If you have no respect for me, don't bother reply me or ask me questions.

[Judge]

Got nothing against you Garry. Really do wish you the best of luck. Worried about your students though. That's the wrong thread to keep this discussion though so over and out.

[big fella]

Judge out of interest do you mind saying which areas you invest in please ? looks like you are getting some very good yields

[McDuck]

That changes everything!
(apologies for misspelling - fixed in my original post)

You are right, there are whispers coming from the global grapevine that interest rates may be edging up soon.
But in these black swan days it's difficult to measure the exact trajectories.

[Judge]

biig fella, i am in Wellington. But i do not just invest in existing properties. I develop. I buy properties with subdivision potential and add houses or demolish existing and build a couple new instead for rent. On this forum i have read something that stuck with me forever. Someone here said "you do not buy cashflow positive properties, you create them'". Once this message sunk in i stopped looking pure investment properties. I only look for properties with development potential. I was also lucky to start in 2007-2008 when rates where 9%. My fist loan was fixed at 9% for five years. It was an unpleasant experience, but at the time people thought interest rates could got up to 12% (until the GFC struck). But this sort of experience does make you stronger and a lot more prudent. It happened before, it can happen again. Do not invest in cashflow negative properties (if you want my advice) unless there is potential to turn them into cashflow positive. No matter how high capital gain potential is.

[Don't believe the Hype]

biig fella, i am in Wellington. But i do not just invest in existing properties. I develop. I buy properties with subdivision potential and add houses or demolish existing and build a couple new instead for rent. On this forum i have read something that stuck with me forever. Someone here said "you do not buy cashflow positive properties, you create them'". Once this message sunk in i stopped looking pure investment properties. I only look for properties with development potential. I was also lucky to start in 2007-2008 when rates where 9%. My fist loan was fixed at 9% for five years. It was an unpleasant experience, but at the time people thought interest rates could got up to 12% (until the GFC struck). But this sort of experience does make you stronger and a lot more prudent. It happened before, it can happen again. Do not invest in cashflow negative properties (if you want my advice) unless there is potential to turn them into cashflow positive. No matter how high capital gain potential is.

well said!!

[big fella]

thanks for your feedback Judge.

[Cpt707]

Better thoughts...lead to better actions. You make your own rules....great insight Judge...thanks.

[Perry]

Interest rates are going up very fast. So its reasonably safe to assume that interest rates will only go up.

Uh-oh - I smell another prediction.