Property Investment Different Strategy

[ENP]

Hi Elliot!!

Haven't heard from you for a few years Have you and Michelle bought anything in Auckland?
The units here in HB are mostly 2 brm, not many 3 brms at all. The 2 brm ones at the moment are too low in yield here so not suitable.

Hey Graeme yes we bought in hauraki corner/belmont area jan this year. 2 bedroom unit.

[orion]

Good to hear Elliot, are you renting it out or living in it?

[orion]

Have now set up a new trust to do these 10 properties in, and have purchased the first property of 10 last week.

Purchase price was $127,000 bought through an agent. It was on with 2 agents, the one I bought it through, and the other agent which was going to sell it as a mortgagee sale at auction.

Original asking price when it went on the market was about $170,000. It will value to $160,000. Once that happens, I borrow the 80% of $160k and that gives me back the initial 20% deposit.

Initial deposit will be $25,400 and this as mentioned will come back after getting a valuation in 3 months time.

Mortgage will be $127,000 over 20 years at 5.8%p.a. 2 years fixed.
Payments $206 a week plus approx. $50p.w rates and insurance = $256p.w.

It will rent for $275 - $280 a week therefore covering these costs plus property management.

[donna]

Do you factor in maintenance Graeme?

cheers,

donna

[orion]

Hi Donna,

Not so much as it can vary hugely.

The one I mentioned above is quite tidy and is fairly low maintenance which helps, although yes there can be things that come up unexpectedly, also loss of rents maybe for a week or two a year can happen.

I worked out the figures to cover expenses etc if interest rates were at 6.5%p.a. on a 20 yr P&I loan which gives a bit of leeway, with rates currently a bit lower than that. Also rents may increase slightly as well which would help, but there are many unknowns which can happen from time to time. If I was just starting out, it probably wouldn't be a strategy I would be that comfortable with, however it's more as an experiment as mentioned above, just to see how it tracks over 10 years.

Regards

Graeme

[orion]

6 Month update: -

Have now bought 8 properties in the new trust, the last 2* are still to be valued, but been given an indication of what they will value to.

Overall purchase price for the 8 properties is $934,000

Valuation (approx*) $1,180,000 - the bank will lend 80% of this which is $944,000 (10,000 more than they were purchased for)

Rent total p.w. is $2,165

Rent per month minus expenses (includes mortgage, rates, insurance and property management, but no maintenance allowed for) is $6,770

Mortgage payments are a total of $6,425 (so slightly cash flow positive) and all mortgages are on 20yr P & I loans

Equity gained by buying below value approx $250,000

Also another approx $2,150 equity gained each month (which increases slightly each month as each loan amount decreases)

Locations purchased - 7 in Hawkes Bay, 1 in Whakatane


Graeme

[Davo36]

Wow that's pretty impressive Graeme. I have a few questions if I may?

1) How many of these did you do a reno on? i.e. did you do all of them up or were some of them just bought well?
2) How are you finding the deals? By looking really hard yourself? Or through agents calling you with deals? Or both?
3) Are you using one bank or multiple banks for this trust?
4) I had thought that banks wouldn't accept a new higher valuation for say 6 months? Or is this not the case?

[orion]

Wow that's pretty impressive Graeme. I have a few questions if I may?

1) How many of these did you do a reno on? i.e. did you do all of them up or were some of them just bought well?
2) How are you finding the deals? By looking really hard yourself? Or through agents calling you with deals? Or both?
3) Are you using one bank or multiple banks for this trust?
4) I had thought that banks wouldn't accept a new higher valuation for say 6 months? Or is this not the case?

Thanks Davo, yep has been good getting back into things again, doing quite a few renos etc as well so has been a good year.

1) Only 1 was a reno which I spent 15k on.
2) Two were from another investor and paid a commission to him to buy them (was added to purchase costs in above figures), 2 normal sales through agents, 2 mortgagees and another 1 that was being sold as a mortgagee but bought it prior through another agent and 1 bought privately
3) Just one bank for these as that's where the new trust bank account is set up
4) Often that is the case (6 months), however they are doing it within 3 months, or sooner if any reno's have been done

[marklowes]

Great effort. I'm doing a scaled down version of this in palmy. Had looked in hawks bay (based in welly so either just as convenient). Can easy get 8% gross yields in palmy. I like buying 700 sq m plus properties, so dont mind getting slightly less yield for future potential development on the 350 sq m per dwelling district plan rules. On a number of different measures and approaches, and in light of the price moves in auckland, both HB and PN should see decent capital appreciation over next 5+ years, which as has been said, is a bonus considering 2k profit per month is put into your pocket from the positive gearing.

[orion]

Great effort. I'm doing a scaled down version of this in palmy. Had looked in hawks bay (based in welly so either just as convenient). Can easy get 8% gross yields in palmy. I like buying 700 sq m plus properties, so dont mind getting slightly less yield for future potential development on the 350 sq m per dwelling district plan rules. On a number of different measures and approaches, and in light of the price moves in auckland, both HB and PN should see decent capital appreciation over next 5+ years, which as has been said, is a bonus considering 2k profit per month is put into your pocket from the positive gearing.

Thanks Mark, sounds like a good plan buying the bigger sections and putting another house on, as long as you can increase the overall yield by doing so.

I bought property number 9 yesterday which settles next week and just worked out the yield overall on the 9 properties and it works out to be 11.97% gross. So financing at 100% of purchase price that gives just a slight positive cash flow on a 20yr P & I loan at interest rates just under 6% p.a.

I'm not concerned at all about any gains and would prefer the prices to stay where they are, especially in relation to rents. But yes as you say the equity (profit) per month is a bonus, and after the next one (number 10) it will be approx. $32k in the first year and increase from that each year.

[Pegasus]

Thanks for the update Graeme - always inspiring to hear about.
I had just been re-reading your chapter in your book co-incidentally - it is always good for extra motivation and I am often recommending it to friends. For me your use of the mental side of things, goal setting and affirmations fits well with our approach, along with the watching of Survivor! wouldnt go as far as Big Brother tho I have to say...!

[orion]

Thanks for the update Graeme - always inspiring to hear about.
I had just been re-reading your chapter in your book co-incidentally - it is always good for extra motivation and I am often recommending it to friends. For me your use of the mental side of things, goal setting and affirmations fits well with our approach, along with the watching of Survivor! wouldnt go as far as Big Brother tho I have to say...!

Thanks Pegasus,
Has been a long time since that was written, about 12 years now I guess and haven't watched those programmes for almost that long

Glad you are still getting something from the book too, thanks.

[House Hunter]

Hi Graeme,

A few questions for you if you don't mind answering:

1. You have obviously been very successful in property investment over the years. When do you get to the point where doing a buy, renovate, sell for $20k profit is not worth it? You must have enough income coming in each week to do what ever you want in life but you continue to buy properties in Hawkes Bay for renovation. Is this because you enjoy doing this more than anything in the world or because you want to accumulate more money?

2. Has your desire to create a real estate empire effected other parts of your life for the worst? In your book (which I've read several times, a great book I might add) you mentioned property investment has had detremental effects on your health and family relationships at times. Do you feel like the time and devotion you put into your property ventures has distracted you from these other things in your life?

3. What are your plans going forward from here? With property investment and life in general?

4. Outside of property investment, what do you enjoy spending time doing?

This might be a bit personal so not problems if you don't feel comfortable sharing things but would just like to know.

Thanks.

[marklowes]

My 2 cents as someone who also devotes a lot to investment in general, only recently property investment being a focus..

Investment into assets that generate income and appreciate over time is different to investing in other things, such as career for example, or specific skills, or even relationships. The later all take constant attention and a let up of attention means any accumulated 'goodwill' can easily be lost.

The thing I like about investing in 'assets' (finding true assets being the key) is you can take a break, and the good decisions of the past keep putting money in your pocket. Most other things in life, if you take a break, you lose value. A lawyer, or IT engineer cant take a few years off then expect to come back as the law and technology changes so fast that the time off leaves you irrelevant, and all the good work you have done over decades counts for little as some young graduate now has more relevant skills than you do.

With property investment, the opposite is true. Equity gained over decades puts you in a position where no 'graduate' can compete, no matter what flash new app they happen to be using

[House Hunter]

My 2 cents as someone who also devotes a lot to investment in general, only recently property investment being a focus..

Investment into assets that generate income and appreciate over time is different to investing in other things, such as career for example, or specific skills, or even relationships. The later all take constant attention and a let up of attention means any accumulated 'goodwill' can easily be lost.

The thing I like about investing in 'assets' (finding true assets being the key) is you can take a break, and the good decisions of the past keep putting money in your pocket. Most other things in life, if you take a break, you lose value. A lawyer, or IT engineer cant take a few years off then expect to come back as the law and technology changes so fast that the time off leaves you irrelevant, and all the good work you have done over decades counts for little as some young graduate now has more relevant skills than you do.

Great points but doesn't quite answer the question of why keep doing after you have set yourself up already.

Is it to accumulate more money or do you enjoy the process of it more than anything else you could spend your time on?