NZ Invest

[Julian]

Gareth

Firstly, welcome. And congratulations for starting a post that has had such a comprehensive response.

I am no longer a residential property investor. In fact I only was one once, and it was many years ago. I switched to commercial, but that is of no consequence to this thread.

Many newcomers to property investment, and I was no different, think there is some magic formula to success. A lot of people suscribe to every seminar and guru's preachings, in their effort to find the easy road to success.

The truth is that you have to pound your own turf in order to determine the road you will take. If property is the area you want to specialise in you have to put in the groundwork yourself. It's not terribly difficult, but in order to be a success you will have to immerse yourself in it.

Perhaps you can remain detached and utilise the services of some other entity, but I doubt you will get the full benefit.

That said, the field of property investing is heaps of fun, and there are lots of people on this web-site, and others, that are willing to help, but you will have to do a lot of the hard yards yourself.

My suggestion to every newcomer is to read as much as possible, particularly from NZ authors, determine an area, and research it to death. When you feel ready to make your first purchase you will surprise yourself on how well you have done.

Best wishes,
Julian

[Robot]

I was reading about Merlot and it was actually sounding pretty good and not a bad option for me as I'm overseas but then I read this:

Why are mortgages interest only?
For investment properties, mortgages should always be interest only. This is because tax relief is not applicable on principal payments and it's important to preserve your personal cash flow.

Interest only?? I thought the golden rule was always to have P&I mortgages? I would feel really uncomfortable with an interest only mortgage.

[PHenry]

I thought the golden rule was always to have P&I mortgages?

As far as I can figure out everyone has their own set of golden rules.

Corrollary: The problem with using someone elses golden rules is that the gold might not end up as yours.

:-)

[Greengrass]

P&I or I?

P&I or I only. I think this is a no brainer for a property investor, ie one who buys and holds to take advantage of capital growth over time.
Part of the trick is cashflow, as we all know.
If you are paying principal you are negatively impacting your cashflow without any major benefit other than retiring debt, which admittedly gives enhanced equity regardless of capital growth.
My view has always been to keep as much cash in reserve as possible, and then put it to work when the sums add up.
I'm for interest only, fixed as low as possible for as long as possible, and eventually retire the debt out of the capital proceeds many years down the track.
By the way I asked Merlot about the interest only aspect and their response was that they only advise their clients in this way, what the client decides to do ultimately is between themselves and their mortgage broker, however making recommendations.
Merlot calculate cashflows on an interest only basis and on a P&I basis the investor would need to take into account the larger payments.

[Josko]

I thought the golden rule was always to have P&I mortgages?

As far as I can figure out everyone has their own set of golden rules.

This Rules is very closley connected to your intentions. (I think)

[Rolf]

The 'Golden' rule is not so golden, since it all depends on your personal circumstances. In my case I have a PPOR mortgage, which is not tax deductable. So it would be insane of me not to go for IO loans for IP's until my PPOR mortgage is paid off - But by then I'd propably go for PI loans on the IP's, or R/C facilities. With R/C I can choose to pay as much as possible, and still have access to the funds, very convenient.

Regards,
Rolf

[Josko]

The 'Golden' rule is not so golden, since it all depends on your personal circumstances.

Though when you consider your intentons into acount, it becomes crucial.

Now, I need a Mintie.

[Rolf]

Hi ivi, you old philosopher - Lets derive the famous Property Investors Golden Rule Formula (PIGRF):

If we assume the function of strategy and determination reaches the goal at a certain time then we have

g = r * (p + F(s,d,t))

where g = goal, r = golden rule, p = starting point, s = strategy, d = determination and t = time.

If we isolate r we get

r = g / (p + F(s,d,t))

And we see that the golden rule r is a factor only determining the gradient of F - in other words, the most important factor is F itself, which in turn is determined by the variables strategy and determination.

DISCLAIMER:
I do not take any responsibility for the accuracy of this formula, but the entertainment value should be genuine.

Regards,
Rolf

[Josko]

r = g / (p + F(s,d,t))

And we see that the golden rule r is a factor only determining the gradient of F - in other words, the most important factor is F itself, which in turn is determined by the variables strategy and determination.

DISCLAIMER:
I do not take any responsibility for the accuracy of this formula, but the entertainment value should be genuine.

Regards,
Rolf

Thanks Rolf, all philosophy aside try getting that one past the auditor, but that’s my take on it, but my intentions are encompassing.

Regards, Josko

PS. On another note, Rolf, I will have to make the effort to have a look at these wonderful planets you have taken pictures of, what prediction do you have on the next best view of the planets.