A Backwards step?

[kokoinvestor]

Hello

I am new to Property.Talk and this is my first post on the forum.

I'm the average 34 year old male who is happily married with children and earns a average wage with a desire to start investing in property and trying to secure a better future for my family.

In 2004 I brought my first house for about $70K in a small King Country town which is dominated by a low socioeconomic status and plenty of state housing.

Later in 2007, my wife and I (with no property advice or experience) decided to buy a nice vacant section for $140K in Kinloch, Lake Taupo District. We thought this would be a good investment with a view to build a new house on the section, and also that a "Jack Nicolas" signature golf course had just being built across the road.

We were both working and had a fairly healthy combined income that could sustain mortgage payments for both properties. As with most families the time came for children and my wife stopped working, hence we could not afford both mortgages.

Even though the capital value of our home had doubled to $145K we knew its value would not increase much more. We decided the vacant section in Kinloch would be the better property to keep given we were offered a subsidized work rental in my home town.

So we sold our house, paid the home mortgage and other debts along with part of the Kinloch mortgage.

Recently I read the book "Building wealth through property investment" by Jan Somers and Dolf de Roos.

I cant help but think Ive gone the wrong way about starting investing in property by buying a vacant section and selling our first home.

What I'm asking is what is the best option for getting my foot back in the door of starting to build a portfolio of property. The Kinloch section has dropped almost a third of its value. Is it wise to build a new home(when we can afford to) on the section and make it a rental from the outset?

Also the Jan Somers book was published in the early nineties and now is obviously out-dated with the current property market. Are the strategies for starting your rental investments the same as 20 years ago?, or are there are a whole new host of problems that I need to be aware of in today's market.

Maybe there is a new book out there that someone can recommend for me to read before i make any other wrong property choices.

Any suggestions would be appreciated.
Thanks for your help and look forward to reply's.

[damage]

My advice, dont read property investment books ever agian. They are nothing more than a propaganda machine and they use fictional numbers to make property investment look better than what it actually is. In selling your home, yes a bad move, but you've paid off debt so not all bad and whats to say your king country place did not drop in value as well?

In your case I would be inclined to sell the section as looking at the numbers you'll come out on top
King Country house - Capital Gain $75k
Kinloch Section - Capital Loss - Say $40k

From there I would buy a property which you could either live in, or would provide a decent yeild if you decided to rent it out.

The reason I went against building on it is due to the build cost. You would have a significant amount of capital tied up in the Kinloch property and this would make it difficult to get a decent yield ie 7-8% nett.

[buxlo122]

If you don't have experience developing property I would not bother building on your section. It will be more of a hassle and there is no guarentee you will make money.

My advice would be to cut your losses on the Kinloch section and purchase a cashflow positive rental.

In terms of required reading there are alot of books you could read but I would check out some threads of local PT's:

http://www.propertytalk.com/forum/showthread.php?2637-Ron-Hoy-Fong-My-Story&highlight=ron+hoy+fong

http://www.propertytalk.com/forum/showthread.php?28790-Property-Investment-the-beginning

http://www.propertytalk.com/forum/showthread.php?3173-The-Journey-Chris-Ashenden&highlight=my+story

http://www.propertytalk.com/forum/showthread.php?16366-Spurner%92s-story-%96-Building-Cashflow-and-Equity-in-Any-Market&highlight=my+story

http://www.propertytalk.com/forum/showthread.php?3464-MY-JOURNEY-TO-FINANCIAL-FREEDOM-AND-BEYOND&highlight=my+story+david

[kokoinvestor]

In your case I would be inclined to sell the section as looking at the numbers you'll come out on top
King Country house - Capital Gain $75k
Kinloch Section - Capital Loss - Say $40k

Unfortunately due to poor debt on consumables over the years other debt other than section mortgage had to be paid first. So i wont really come out on top if sell the section for its current value($104K) with a loss of $40K. I'll still be $15K in the negative.

[damage]

I would still sell and start again.

[One]

Have you looked into moving an old house onto the section? That'd be cheaper than building new.

How easy would it be to rent a house in Kinloch? It looks like a holiday home town - is there demand for long-term rentals there?

[damage]

Have you looked into moving an old house onto the section? That'd be cheaper than building new.

How easy would it be to rent a house in Kinloch? It looks like a holiday home town - is there demand for long-term rentals there?

There are likley to be building covenants on it restricting what you can build on it. The norm with most subdivisions

[Perry]

Not a pretty picture. Damage has some good points:
advising against good reading not being one of them.
Yes, I'd guess that you did not start out well, but
that you were also caught by property market value
changes. Don't be dis-heartened. It's not that there
is no way out; rather no easy way out.

As you've got the general idea in your head that some
form of passive income is a good thing, you are part-way
there, so to speak. Read a few more areas of this forum.
Read a few more books, carefully selected and thoughtfully
appraised. There is no one-size-fits-all approach.

The PT Library is a good place to browse. Buxlo's links
will take you to that area of the PT Forums.

Another one will get you to Member Profile. A look around
that thread may be helpful, too.

Keep working on a solution despite the DINK-to-SINC syndrome.

[cube]

My advice, dont read property investment books ever agian. They are nothing more than a propaganda machine and they use fictional numbers to make property investment look better than what it actually is. In selling your home, yes a bad move, but you've paid off debt so not all bad and whats to say your king country place did not drop in value as well?

How come kokoinvestor can't read books, but bon333 can?

[damage]

because bon333 has not read any books at all.
I still dont like them whats so ever, but they do tell you the principles, even if the numbers are fictonal

[kapitibeanman]

Actually kokoinvestor, you are truly an investor - you've started, which is more than 90% of the population. There's no magic rule that says you must make a financial gain right away or first time up, but would you agree that you have already gained some valuable knowledge and experience? Just like Damage, for instance, you don't know everything, but at least you understand that, even if he/she doesn't. If Jan Somers & de Roos got you moving, big ups to them, I too thought their book was great when I read it years ago, plenty of optimism and energy and not too stupid either.
Regarding where you find yourself now, be aware that any asset losses or gains have already happened, and they are immaterial except how they affect your ability to go forward. Don't be suckered by a combination of regret and hope, but be a gnarly sceptic, and above all, keep going. It's not hanging on to your investments that is the key, but being able to continue the journey.

[WGN ex-property manager]

Unfortunately due to poor debt on consumables over the years other debt other than section mortgage had to be paid first. So i wont really come out on top if sell the section for its current value($104K) with a loss of $40K. I'll still be $15K in the negative.

If I'm reading these number right you're saying that you racked up $50K of consumer debt? Ouch.

I'd sell up take my beating, and try to learn the lesson that I just paid $50K for that consumer debt is toxic.