Advice on Property

[big1day]

Hi Guys,

I'm new to Propertytalk so I thought I would ask you guys a few things.

I own two houses and a small section in Hamilton. I have repaid 50% of the mortgage & get $640 per week in rent. I brought these houses back in 2007 yet the prices in hamilton havent really gone up since I entered the market in the late stages of the last property boom. I haven't revalued the properties either but have little faith they have gone up in value. I now am interested in getting into property seriously and buying in Auckland maybe?

1) What would be your advice, should I build on the section or should I use future income to buy a property in auckland where I hear the value is going up 10% minimum each year? Are there much do ups in good locations in Auckland?

2) How much loan level is presumed healthy? Should I be focused on repaying as much as I can or should I be trying to buy more and more and bank on capital gains.

Thanks & sorry if my questions are a bit entry level.

[Eljay1]

I'd be interested in hearing people's thoughts re this. I'd heard good things about Hamilton as an area to invest at the moment but I think a couple of people have complained here that they've had little growth over the last few years.

[Pim]

Well, this is just my opinion and I am no expert but it seems to me your timing stinks, Big1Day (just like mine). Looks like you bought at the top of the market in 2007, now you want to buy again and you've pretty much missed the bus in Auckland. It is getting near the top again there. They say Hamilton lags behind Auckland so maybe buy there at this time and hopefully the market will rise on the heels of Auckland?

[big1day]

Well, this is just my opinion and I am no expert but it seems to me your timing stinks, Big1Day (just like mine). Looks like you bought at the top of the market in 2007, now you want to buy again and you've pretty much missed the bus in Auckland. It is getting near the top again there. They say Hamilton lags behind Auckland so maybe buy there at this time and hopefully the market will rise on the heels of Auckland?

Yeah you are totally correct, my timing hasn't been great I guess since I started on the bad end it's taken me a while to get the loans down. Now I'm paying tax on them so have started thinking about it again.

For some reason I don't think the market in Auckland is stable, I believe it's going to need. A correction once the interest rates go up so could be a time to patiently wait aswell maybe??

whatt happend in your situation? How are you situated now? I

[Pim]

For some reason I don't think the market in Auckland is stable, I believe it's going to need. A correction once the interest rates go up so could be a time to patiently wait aswell maybe??

You could be right. I don't know.

whatt happend in your situation? How are you situated now? I

Me? Ha ha. I started off with a tiny deposit and a big dream in 1998. Bought a big old ex state duplex. all good so far. Then I went overseas for 13 years. Came back to 13 yrs of deferred maintenance so goodbye to all my savings which should have been my next deposit (except, if the maintenance had been done the money would have been spent anyway). So, 12 months later I am still not quite ready to buy but watching the market rise and wishing I'd come home a year or two earlier. There is a lot more to the story unrelated to real estate but definitely related to timing.

[elguapo]

I own two houses and a small section in Hamilton. I have repaid 50% of the mortgage & get $640 per week in rent. I brought these houses back in 2007 yet the prices in hamilton havent really gone up since I entered the market in the late stages of the last property boom. I haven't revalued the properties either but have little faith they have gone up in value. I now am interested in getting into property seriously and buying in Auckland maybe?

Buying in Auckland would expose you to the very real risk of buying at the top to the market twice in ten years.

[Rosco]

Hi Big1day,

What do you really want from property?

You haven't purchased at a perfect time, but if you hold for another 20 years, will it matter?

Paying tax isn't a horrible thing. Obviously we want to reduce it as much as possible, but most people think a refund is great. Simply pay $30k in extra interest to the bank to get $10k back! Fantastic aye? In your case you are making $3, paying maybe $1 in tax, but you still have the $2 left. If you can continue to use this profit and your spare cash to pay off the mortgages, then you will be in a great position later!

Why not just keep doing what you are doing?
- build on the section, as currently you don't get any income. Maybe move a house on, or move a simple house on, so that you are reducing your cost and getting a get return on your dollars spent
- keep paying down the houses and section mortgage
- Depending on your risk level, buy again when the time is right. Check out Auckland, but maybe only buy if the right property came along, rather than trying to force it. Otherwise maybe another city like Tauranga so that you don't have all your eggs in one basket.

Just keeping things simple, and doing what you are doing, you can probably end up with 3 or more properties debt free in under 10 years with no risk or hassle. Does this meet your aims and requirements?

Ross

[Eljay1]

I think you've done really well to accumulate two houses and the section. Now that you have bought the section it makes sense to put a house on it and get some return. You say you've paid 50% of the mortgages, do you mean you've paid off one house fully?

I think Hamilton is a good place to invest, you just might have to wait a while longer for growth. Agree with Rosco that after you've built on the section maybe look elsewhere if you buy again, to spread risk.

[grip]

Yields in Auckland are very low now.
Aucklanders are beginning to look at Hamilton, so I would rather build on your Hamilton section unless a really good deal came up in Auckland. However, do note you have more than 10 times as many people chasing good deals in Auckland, so the likelihood of you beating Aucklanders to the deals is very slim.

[Axel4Life]

I have been investing for 45+ years now and Have made money in small towns as well as Auckland. And yes sometimes timing is critical if your reasons for buying are short term. Hamilton being close to Auckland will move up again as it has in the past...Just as a writer above commented ."When Auckland Gets Expensive and the Yields Drop ..Aucklanders Start to look elsewhere for affordable deals"

Since I am coming up to 66yrs next Birthday I am more interested in Yields versus Capital growth.

I have had a set of investment (Buying) rules that I have used to make many 100's of Millions of dollars from Real Estate and I suggest that you make up your own ones too. They should be based on what you short and long term investment goals are?

Real Estate Is a Business and you Must treat it like that.. Why?

Because I have seen Many so called property gurus come and go because they didn't really have any experience of the cycles.. Yes They made some quick paper fortunes and next thing they were back in a basement flat on the dole..Bankrupt!

Steady is a great way to become rich if you have a plan and stick to it...and stay safe!

There will always be great opportunities to turn a profit for those that are educated in the art of Buying , selling and managing real estate.

[DaveW]

Well said Axel. I want to emphasize the business part....
People here are saying "it makes sense to build on the section".... what!

First of all get valuations for your 3 properties and see where you stand.
Then form your goals...

[Eljay1]

I understand the op needs a goal. Just wondered why it would make more business sense to hold a section with no property on it and thus no return whilst then looking at buying a property elsewhere. Happy to be corrected as I dont hold any empty sections so may well be missing something.

[DaveW]

There are three options: keep, sell, or develop.
And until you've done your homework you don't know which is the best option to suit your goals.

[Eljay1]

I think that takes us neatly back to the beginning where the op was indicating that they'd like more growth and was asking the forum for thoughts on whether or not they should be considering a rental investment in auckland as an alternative to their current strategy. Anyways thats enough from me.

[big1day]

Hi Guys,

Thanks for the great feedback.

1) You are correct

elguapo, entering the market now is going to be unwise and will set me back. I feel building a simple 3 bedroom will give me a life in income. I had in the past moved a old house onto the property but there the costs are only a little less than building so I will stay clear of this.

2) Hi Rosco, thanks for your in depth answer. I am turning 32 this year and I would like to have 5-6 properties by 40 years. I am keen to buy property which has future development prospects (big sections). I think property is safe long term as it doesn't change as much as business income. Property however does not return much short term. Your right, its better to pay tax than just pay more for the sake of a refund. However I thought i could be a signal to add another property to the list. I think it is good advice that I should just keep at it slow and steady, as this is safe long term.

3) Thanks Eljay1, I personally am disappointed but now that I have discovered this forum believe I can do better. I just wish I had something like this earlier and I wouldn't have been part of the growth in auckland.

4) Thanks Grip, I have a friend in Auckland who is a developer and he is struggling to find the land to develop. He has done really well, I am tempted to be part of similar ventures but I think I will need to learn a lot more before I do anything like this.

5) Axel4life, wow that is amazing you have done so so well. You would have started at 21, it would be great to hear your story on how you got started etc. Alex4life, how where you geared in your early days? I take it must get easier with experience and numbers or did you move into development etc?

6) DaveW, thanks yes I understand I should get the properties valued. What do you normally do for this? Call up real estate agents or a proper valuer? I think in this situation its probably ideal for me to build on the section. I could do a 3 bedroom or one of those 6 bedroom studio places (we have 1 down the street). The latter would be more income per week but could be more hassle long term managing tenants etc.

Thanks everyone again, hope you all had a good weekend. I will be sure to get advice from you guys regularly