Can't find great deals ~ check that you're breathing!

[Dean@Massiveaction]

Hi all. I'm finding things really softening up at the moment. With the help of Heg, we have a South Auckland deal under contract at 595K, valuation of 700K. Pakuranga deal under contract at 300K valuation of 375K. I have several sections in Taupo under contact at about 25% below RV. And one of my students in CHCH sent me an email thanking me for assisting hime with creating 280K equity on a million dollars worth of property by buying well in the current market. Another Pakuranga deal RV 1.3mill, under contract at 950K. Cashflows vary on all the above but the point is, if there was ever a time to be building your portfolio it's now.
Get out there and take some action today!!

[Emblaze Pete]

Hi Dean - Might there not be even richer pickings if one waits until the slump really kicks in ? Might the deals today look average compaired to the deals in 6 months or a years time?..Im not sure whether to launch or hold back.. What do you recon ?

[Dean@Massiveaction]

Hi Pete. Many may disagree with me but my public position on this is:
Waiting always has an element of risk. Those people who say wait till things are really really bad have to decide when "really bad" is and then hope that it lasts long enough for them to buy enough property. I say why not do both. Buy good deals now and if things get "really bad" then buy more deals then. It's a lot easier to buy a property every 3 months than try and buy 8 in 3 months.
Combined with "really bad" also always comes "really hard to get money" so by waiting for the height of the slump only well financially qualified investors can move. Another good reason to NOT wait.
A good deal today is better than hopefully a better deal that may not eventuate in the future.
Incidentally on the finance front my solicitor told me yesterday that some of the trading banks have in the last month had edicts issued to review all major mortgagees and they have been instructed that heavily geared traders and investors are not to be approved outside of strict guidelines. I know of a couple of people who had preapproved loans declined recently due to this.
So buy now AND buy later in the slump. Get as much property under your belt as you can before the next boom.
Because I am risk averse i am not going to gamble on the severity of a downturn. I'm going to enjoy building my portfolio today and buy any great deal I can, fix the interest rates for 5 years and get on with the next one. I strongly encourage all other investors to do the same.
Now I'll wait for all the oppposing views to proliferate under this post :-)

[Emblaze Pete]

Thanks Dean - That makes perfect sence to me and has clarifed a point that has been bugging me for a while. cheers

[Playachicken]

Just wondering, why would you fix for five years when it's virtually guaranteed that interest rates are going to go DOWN in the next five years?

[Dean@Massiveaction]

G'day. Nothing is "virtually guaranteed" in this country anymore. I am risk averse so I prefer to not have to think about what might happen. If the numbers work today then fix it as long as possible is my motto. It was guaranteed that rates would fall and not go up again yet that is exactly what has happened recently. Until NZ gets over it's love affair for economically inept governments I don't assume anything going forward.

[whitt]

Just wondering, why would you fix for five years when it's virtually guaranteed that interest rates are going to go DOWN in the next five years?

Many reasons:

*If you are to hold at the moment on a higher floating rate then wait for a lower rate etc.The holding costs may well be more than if you had of just fixed now.

*Security. No person can 100% guarantee what rates will do and fixing lets you sleep at night with minimised risk.

[Gatekeeper]

Who guaranteed that? My take is that rates will be going up (worldwide).

[RentMaster]

Who guaranteed that? My take is that rates will be going up (worldwide).

I was talking to my mortgage broker a few days ago. He thinks that rates have peaked already, and will come down slowly over the next 2 years or so.

[RentMaster]

I agree that now is a good time to be buying a property. However I think there should also be a word of caution for people who are already over extended, or will be if they continue to purchase with a high LVR. If prices do drop, some of those people could be in trouble.

So my opinion as to whether people should buy or not is dependent on their current situation. Now is not the time to buy everything you can get your hands on. Buy wisely.

[cube]

Just wondering, why would you fix for five years when it's virtually guaranteed that interest rates are going to go DOWN in the next five years?

Have just re-fixed for 5 years with BNZ at 7.25%. Even if rates 'crash down', they won't go below 6.5% (IMHO), so it won't make a huge difference to the cashflow.

Qualification to that opinion - rates in Japan have been 0% in order to drag the economy out of a 10 year recession - if we manage to stuff the economy up that much, I'll be living in Aus, anyway!

cube

[Volatile]

This topic has made me rethink my plans, thanks Pombaa.

I am currently looking for a PPOR to purchase, i'm 21 and finishing University with a Job secure and signed at Deloitte starting next year. I'm currently living at home with my parents.

Instead of buying a PPOR should i be looking to rent a house/bedroom and start buying investment properties with the money i was going to use as a deposit for a PPOR.

what do you guys reacon?

[Edinburgh]

Cashflows vary on all the above

Dean

What are the cashflows? If the properties not paying for themselves even at the discounted purchase price, are they still good buys?

Also - what is an accurate valuation? As this website has shown, valuations can vary wildly and in this market I am finding that even your average Joe is looking to buy under valuation for their family home. Value is only what someone is willing to pay for it.

If the market is flat or even recedes, those great buys may be worth no more in 2 or 3 years time than what they were bought for today.

Interested in your response to these points Dean.

[Gatekeeper]

Poomba, the deals you have are apparently 15-25% under value. My take is, that this is their value, it is the sale price, ie" what you can get for them". Soon the banks may be asking for new valuations, and people may lose equity. Leverage works both ways. The last few years have been easy sailing, but, the other side of the hill can be a very nasty place (ie: UK 90's).I'd be interested to know, of the guru's in here, how long have they actually been in PI, how many cycles?I know Kieran's been around for a while, but what of Roy and yourself, and others (you know who you are)? :-)

[Dean@Massiveaction]

Hi Volatile. Absolutely is my advice. Rent and get some income producing property under your belt. You can buy for yourself later on when you're using free money!!

What are the cashflows? If the properties not paying for themselves even at the discounted purchase price, are they still good buys?

Depends on your rules. In the current market buying well below value is the safest thing to do as it protects your borrowing ability through a slump. Cashflows will always be marginal in this phase. Depends on your overall position as to what is a good deal!!

Also - what is an accurate valuation? As this website has shown, valuations can vary wildly and in this market I am finding that even your average Joe is looking to buy under valuation for their family home. Value is only what someone is willing to pay for it.

Plenty of comments on this in the forum elsewhere Edinburgh. I'm interested in RV rather than market value as I'm a buy and hold investor. For flips and trades I make sure I'm buying well below resale value

If the market is flat or even recedes, those great buys may be worth no more in 2 or 3 years time than what they were bought for today.

So what. Why not buy them now?. Someone else will have bought them by then and I'll have 2 years of tax benefits i wouldn't have had otherwise!!

I'd be interested to know, of the guru's in here, how long have they actually been in PI, how many cycles?I know Kieran's been around for a while, but what of Roy and yourself, and others (you know who you are)? :-)

As my bio states Gatekeeper I've been fulltime since October 2004 but I get lots of advice from people like Kieran and others who have been through several cycles. But if you have a clear strategy and rules you won't get into trouble in a slump. I'm geared at 60% in under 2 years. It would take a depression to affect me, and that would affect everybody. I am the most risk averse person you'll meet, so my advice is always conservative, but you have to take action to make any progress.