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How would you invest $300,000?

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  • How would you invest $300,000?

    Hi everyone - I would love some advice from the seasoned investors on this forum. I'm living in the USA and planning to move back to NZ in a few years, I have one investment property already (in Napier).

    I have $300,000 from a property sale here in the US, and wanting to invest in a couple of properties. The goal is to put them on 15 year P&I mortgages with rent covering costs, and have cashflow as an income stream in retirement once mortgages are paid off. So capital gains isn't the motivation. I'm aware of the 35% investor deposit requirement and am pre-approved for a total of $850k that I could split over a couple of properties (although not sure I'll be able to go that high and still cover costs).

    Any advice on where to invest, what kind of properties, pitfalls or tips are gratefully received! I also have $100k of equity in my current investment property that I'm considering tapping, so would love to hear pros and cons of doing this.

  • #2
    15 years P&I is quite aggressive, you'll need yields touching 10% at a guess and those aren't really available in most bigger towns. I run an IP agency and in smaller rural towns you might be able to get that. There are rental shortages everywhere now so the risk profile on smaller towns has shifted somewhat, still you want to be within an hours drive of a good amount of jobs and make sure the best PM in the town will manage your properties (so not worst house worst street).

    In bigger areas you're probably going to need to create the outcome or find a property with problems and solve them, rather than buy retail, 10% yields aren't commonly available when interest rates are 4%. Or you could buy and hold one and use the rest of your capital to make some cash and use that to pay the loan for you. I traded for a few years aggressively and retired a lot of debt.

    My strategy for the last 3 years has been to buy big old villas and renovate into nicer flats, by adding rooms you get higher cashflow and I'm over 9% on them all in central city areas - this is Wellington. You need a team. Buy price is at the top end of your range, $850-950K each. Can fund works based on future cashflows with the right bank, broker, preparation etc. I think 15-20 year P&I would work. I'm I/O because I'm trying to build up a RC. I know another guy who buys and relocates properties onto sites to make a second income stream. Those kinds of projects take a while and you need a good team but once you're done the cashflow can be good. Subdivide and sell one is another strategy.

    So some concepts:
    1. Multi-income
    2. Increase income streams
    3. Increase rent on existing space
    4. Consider where you want to own investment properties when all is said and done (in 15 years) and start with "how can I make it work there"
    5. Look at net yields. Remote has higher gross numbers but rates can eat a lot of the CF.
    6. A good team will make you rich. A bad team will make you a lot less rich.
    7. Most (not all) successful investors find one or two approaches that work for them and become very good at those. I probably know through meeting people a dozen different ways I could have done what I have but stuck with the team and approach.

    Hope that helps.
    Free online Property Investment Course from iFindProperty, a residential investment property agency.

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    • #3
      Originally posted by Nick G View Post
      My strategy for the last 3 years has been to buy big old villas and renovate into nicer flats, by adding rooms you get higher cashflow and I'm over 9% on them all in central city areas - this is Wellington. You need a team. Buy price is at the top end of your range, $850-950K each. Can fund works based on future cashflows with the right bank, broker, preparation etc. I think 15-20 year P&I would work. I'm I/O because I'm trying to build up a RC. I know another guy who buys and relocates properties onto sites to make a second income stream. Those kinds of projects take a while and you need a good team but once you're done the cashflow can be good. Subdivide and sell one is another strategy.
      .
      Could you share an example of this please Nick? Interested to hear what suburbs and what you could rent a room out for after Reno near the city

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      • #4
        Wouldn't you be better to buy some homes in the US and put them on 10 or 15 year notes and get them paid off while still being cash positive? Then sell down when you want to retire. You may not get the growth you would in NZ but you'll still create lots of equity through the tenant paying off the notes for you without the stress of low yields in NZ.

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        • #5
          Shoot me an emai, bdub. nick [at] ifindproperty.co.nz Cheers
          Free online Property Investment Course from iFindProperty, a residential investment property agency.

          Comment


          • #6
            Thanks for the replies! Nick, appreciate the advice - I'm looking at Dunedin as prices seem much lower there and buying a 2-unit property for ~$500k seems doable, creating higher cashflow with the dual income stream. Any insights on that area? To me it seems undervalued compared to other cities in NZ and has a lot of growth potential.

            Memphis, the main reason for not buying in the US is the tax arrangement - I have benefited twice from the primary residence capital gains exclusion in the US, but don't want to pay tax on an investment property that I'm planning to hold long-term when I can sell CGT-free in NZ after holding for 5 years. As long as I can cover the costs with the tenant income, I'm willing to put a bit more down on the deposit. I'd also prefer to have my investments in NZD since I'm planning to retire in NZ.

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            • #7
              Sure makes sense. The tax regime here in NZ is far more favourable!

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