investing $500k for yield.

[kookaburra]

Interested in any ideas for investing $500k for highest (relatively safe) yield. We've got a ppor unencumbered so really looking for income to support semi-retirement. At a push I could invest a higher amount but would need to sell a couple of 'growth' properties to do this so would have to seem worthwhile. Would love to hear any ideas.

[Jerk]

Time frame before retirement?

[kookaburra]

I'm looking to semi-retire at the end of the year. If I sold a couple of other properties I'd have about $1m to invest but am worried about having all my eggs in one basket (1 commercial property for example). I realise this figure invested would only return a relatively small amount but I can pick up work contracts if needed and we have a small ppor paid off.

[Bobsyouruncle]

Units in a relatively safe place like Palmy or New Plymouth. Somewhere that hasn't gone bananas and has a reasonable population if you just want yield. Palmy would be my pick.

[Nick G]

How much debt are you carrying on your growth properties? Also does 500k mean cash or loan approval amt? Cheers

[kookaburra]

Hi Nick, would be a cash amount. The 2 properties have $750k debt and $260k equity between them. Also have about $150k spread across some cheapies so would scrape together 1m if I sold pretty much everything except the ppor.

[Nick G]

Hi Nick, would be a cash amount. The 2 properties have $750k debt and $260k equity between them. Also have about $150k spread across some cheapies so would scrape together 1m if I sold pretty much everything except the ppor.

Hi there I think you could first look at some financial advice if you're heading into retirement because once you give up your job it can be hard to manoeuvre with property (as a regular investor). Lisa Dudson offers a fixed fee consultancy and can do it via Skype or in person (Auckland). She has a property bent but the advice is as a RFA and looks at your whole situation. (Disclosure, I'm part of iFindProperty however the consultation has little if anything to do our agency business)

Assuming your financial house and insurances etc are in order I would look at every property on your books now and ask yourself if you want to hold it for the next 10+ years. Otherwise I would look to sell and put the cash into something that will provide an income for you, that might be different property or some other type of asset. Once you lower your income the ability to do this reshuffle will be constrained so now is the time.

What are your current properties? 1. Location, 2. Value, 3. LVR, 4. Rent, 5. Rates/Ins/Maint budget?

Cheers

[Don't believe the Hype]

Hi Nick, would be a cash amount. The 2 properties have $750k debt and $260k equity between them. Also have about $150k spread across some cheapies so would scrape together 1m if I sold pretty much everything except the ppor.

what is your projected living costs in retirement - you should be able to deliver a nett 6% on a property portfolio even in this market if you're lookin to yield options so with $1million to invest you can build a $60k nett return.

PM me if you are serious about building this type of portfolio.

[kookaburra]

Hi, I'm trying to get to $60k net but I've got some sorting out of structuring to do. I've already built something of a portfolio. I've got $330k in cash from a dud ip that we sold and have 5 high ish yield ips (Timaru and H/Bay). The total equity in this portfolio, including equity in the 3 low yield ones and cash is approx. 1m. Despite that I'm struggling to bring in more than around $40k p/a net income. So my plan probably is to look at selling a couple of cheapies that have had their run for a while to pay off and hold the best 2 or 3 higher yield and still keep hold of the 2 low yields. I'm 46 but looking at semi retirement so am trying to get a balance of cash flow, but still having some investment going forward.

I reckon poor structuring and advice from the start has meant that my passive income isn't quite enough despite the equity that we saved for years to grow. All but 2 of my loans are on p&i and this obviously has an impact. I set them up that way because it's a safer strategy and I liked the idea of paying down debt over time. I'm now wondering if this was the right idea as I'll be in my late 60s before I see any significant equity purely as a result of this strategy. In the meantime I'm paying P&i, insurance, rates and maintenance on these properties and though it sounds good in theory, and they do cover practically all costs, sometimes, due to a large maintenance issue or vacancy it will cut into the income from the paid off property. Hence I get an income that isn't enough to live on and sacrifice my time for an extra million in my 60s. I realise now that I probably don't need 9 paid off properties at 66 years old, and that it would be better to have the cash flow while I'm in my 40s, 50s and 60s.

[kookaburra]

Thanks Nick. I've got a couple in Aus and 6 cheaper ips in NZ. Ppor is in NZ. My lvr, if I invest the cash back into the ip portfolio would be approx. 50%. I budget around $3k per property for rates, insurance and maintenance as they're in not bad condition but obviously there'll be times in the future when repairs and maintenance go well over this level. Hence new plan is to ditch half of the cheapies.

I'm interested in looking at other asset classes and will have a look at the link. Also wondering about storage containers, similar yield to the cheapies but practically no ongoing costs.

[Rosco]

Hi, I would start with what you have. Otherwise you waste commission, legal fees and possible tax on depreciation recovery.

1). If you were to do a simple renovation on each property. What would it cost? How much more rent would you get? Example from Waikato Property Investors Association last wednesday was that an investor spent $20k to do a 1 bedroom unit. Extra rent $50 (he thinks could get 60) per week, so around 13% gross yield on money spent. If this was borrowed would improve annual cashflow by $1600. If you did that on 9 properties, that isn't too bad!

2). Review your rents? Do you manage yourself? If so I would get two independent property managers to look at each and check you are at market. If you are $20 per week under, over 9 properties that is close to 10k a year

3). Interest strategy and loans in general - this is obviously your biggest cost
- do you have any money sitting earning small interest? Can you use offset accounts such as BNZ total money to make the money work better for you
- do you have floating loans - is fixed rates lower?
- do you have a portion fixed long term, as obviously a risk to you is interest rates rising long term

4). Twists
- can you add a bedroom
- minor dwelling
- duplex's
- subdivide



Ross

[kookaburra]

Cheers Ross, I'll be having a good look into all these options. You never know, pennies make pounds.