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**xris** · 08-06-2006, 10:11 PM

Hello James,

It is interesting that you feel that the problem with share trading is the market volatility. I believe that managing ones mind and controlling ones emotions is by far the greatest problem facing traders.

But back to property. In my opinion, traditional buy and holds now make little sense – the yields are too low. There are a few out there but from what I can see most of them are the pits which will only bring the owner nothing but ongoing problems in the not too distant future. This will be especially true if you are new to the business with no experience in managing rentals.

There does still appear to be good money to be made in property though if you get involved in the other property ideas talked about endlessly here, such as trading, do-ups, adding a minor dwelling, subdividing and so on. But that is a different game from long-term investing.

The yields will rise, they always do, and if you are familiar with equity trading then you will need no advise in this respect.

This probably is not much help, but I thought I would write it anyway.

xris

**Dean@Massiveaction** · 08-06-2006, 10:29 PM

Hi James. Like you I explored businesses, shares, forex and property. Property has outshone them all for me.
As for the market I believe if there was ever a time for buy and hold strategy's it's now. I'm buying quality brick and tile properties in areas like pakuranga with the same yields I could only find in South Auckland six months ago!!
Yes property is more expensive and high cashflow is hard to find but we are out the end of a boom which means after the slump another boom is coming. So buy and hold is the strategy for now. Flipping is VERY RISKY at the moment. Great strategy but you have to buy very well to stay safe. It's easier to find reasonable cashflow in Auckland anyway than great trades because the resale on trades is so uncertain.
You will get many contrary voices to mine but this is what I think and it is what I am doing.

**MaryJ** · 09-06-2006, 12:24 AM

Originally posted by pooomba

So buy and hold is the strategy for now. Flipping is VERY RISKY at the moment. Great strategy but you have to buy very well to stay safe.

Hi Dean, I have a question for you:
Using a buy-and-hold strategy at the moment means accepting low yields, i.e. deals that are not CF+. That means that to hold them you would need to be geared low, i.e. have a lot of own equity in each deal. What I don't get is - doesn't cash run out then?? I mean, don't you get stuck because you can't recycle your equity?

I really want to have plenty of buying power when the market drops further. I don't want to piddle about now and then find I haven't got what it takes to BUY BIG

Are you using other investment strategies to 'top up' your cash so that you can keep on going?
Cheers
Mary

**David_W** · 09-06-2006, 12:35 AM

No need to be disillusioned

Hi James

There is no need to be disillusioned in property at the moment. Basically you need to identify whether you are going to be a trader or an investor, or both like me.

Agree that by simply investing you do have to be patient to get the positive cashflow and equity you want. Or do you? This is where you can do something a bit smarter and create positive cashflow. Whether you do this thru lease options (or variant) or by looking at purchasing or creating multiple income properties there is still positive cashflow in the many areas of the property market.

I view the most superior strategy to be buying 3 or 4 properties, trading 2 or 3 and from the profits paying down the loan on the property you keep. I call this the Fuzo wealth wheel. At the moment we encourage our clients to create cashflow from trading (in a trading trust) and selling the home and income properties or subdivided properties we have assisted them with to have a maximum 50% geared home and income property or maximum 30% geared single house property to keep for a long term investment with massive cashflow. It is working really well for me and many of our clients.

To me the key to investing and the hardest part is to take action. The rewards are definately there James - I understand that over half of the billionaires in this world have earned their fortunes using real estate as the dominant vehicle. The gearing (leverage) is the crucial accelerator you need, and with only a mere fraction of the risk that sharemarket gearing provides (in terms of options, warrants et al).

Wealth Wheel it for the win!

**Monid** · 09-06-2006, 04:11 AM

Hi James

Just to back up the others, don't get disheartened, there is still money to be made in property. But also don't feel that you have to get into the water immediately at this time in the property cycle there are plenty of sharks...

David

**Volatile** · 09-06-2006, 07:51 AM

Originally posted by Monid

Hi James

Just to back up the others, don't get disheartened, there is still money to be made in property. But also don't feel that you have to get into the water immediately at this time in the property cycle there are plenty of sharks...

David

Yes this is the pressure I am feeling, if I’m not in the game my money is idle, and thus I feel I am missing out. I’m 21 and time is flying by very quickly.

I have worked so hard to build up a decent amount of money to start with and i want to get it moving

I really appreciated the replies, and think that I will keep learning/researching/knowing a couple of areas so when the time is right i can buy.

Initially my strategy needs to be buying and holding long-term, I do not have enough time for do-ups especially over the next 3 years as I’m completing my professional exams for NZICA/ICANZ.

Keep the thoughts coming, and thank you, this site is a great resource.

Cheers
James

**Dean@Massiveaction** · 09-06-2006, 09:11 AM

Hi Mary. No it doesn't mean that. It just means you have to buy well. Pioneer recycled my deposits back out in 6 weeks on my last deal because I had bought so far under value. This strategy of waiting till things get "really bad" is a nonsense in my opinion.
A: You have to decide when really bad is.
B: Really bad may not happen
C: Really bad may not last very long and then you have to try and buy a lot of property in a few months.
You will have fewer funding problems if you buy regularly, say 1 good deal every 3 months, until you die. Then you have time to recycle your equity out and the lenders can see that you know what you are doing.

**SuperDad** · 09-06-2006, 09:29 AM

Hi James,

I'm starting out like you, and am also having difficulty finding good cashflow. I don't see this as a problem however, but as a challenge - how can I create good cashflow investments. David-W mentions a combination of trades and buy-and-holds, and also suggests creating multiple income properties. There are ways to get cashflow.

However, this is not my main point I want to make. You wrote:

Originally posted by Volatile

Yes this is the pressure I am feeling, if I’m not in the game my money is idle, and thus I feel I am missing out. I’m 21 and time is flying by very quickly.

I've recently responded to another newbie like us (waiopehu), who has similarly expressed concern that he is missing out. My response here, as it was there, is not to buy simply because you think you will miss out. I think that the concensus amongst investors is that more deals will start to come on line as the market turns. Hold on - I am.

You fear that your money is idle if it is out of the market. I'd say it is better out of the market than locked into the market in an underperforming property purchased just because you wanted to be in the market.

And I'll say what I'm sure is on everyone else's mind - you're only 21!!!!! I'm 32, still young by my standards, and I'm in no hurry. The deals will come around, if we work for them. But they might not come around for 12 months. Nevermind - by that time you'll still be young.

Paul.

P.S. Don't neglect your tertiary studies!

**Propoholic** · 09-06-2006, 10:26 AM

Hi Mary

Hi Dean, I have a question for you:
Using a buy-and-hold strategy at the moment means accepting low yields, i.e. deals that are not CF+. That means that to hold them you would need to be geared low, i.e. have a lot of own equity in each deal. What I don't get is - doesn't cash run out then?? I mean, don't you get stuck because you can't recycle your equity?

pooomba wrote:

Hi Mary. No it doesn't mean that. It just means you have to buy well.

Or in 24, 36 months you can buy 'not so well' to get a better deal that meets your buying rules.

pooomba wrote:

This strategy of waiting till things get "really bad" is a nonsense in my opinion.

I dont hear 'really bad' getting mentioned a lot but we are now entering the normal softening of the property cycle where this asset class will become less and less popular to the general public. Do your buying when there are plenty of sellers and not many buyers....pretty simple.

pooomba wrote:

A: You have to decide when really bad is.

No you dont, you just have to be aware that the property cycle traditionally tracks down (following a boom) over 2 or 3 years and be prepared to position yourself for an easier & more risk averse buying opportunity.

pooomba wrote:

B: Really bad may not happen

Personally, I havent seen really bad in the last twenty years but we are now entering the cyclical softening that follows a boom market. All good things must come to an end.

pooomba wrote:

C: Really bad may not last very long and then you have to try and buy a lot of property in a few months.

I'm not counting on 'really bad' happening at all but there will be a 12, 24 month window where residential property is the least preferred asset class to the general public.

pooomba wrote:

You will have fewer funding problems if you buy regularly, say 1 good deal every 3 months, until you die. Then you have time to recycle your equity out and the lenders can see that you know what you are doing.

Buy every three months during a sliding market so the lenders can see that you know what you are doing?

MaryJ wrote:

I really want to have plenty of buying power when the market drops further. I don't want to piddle about now and then find I haven't got what it takes to BUY BIG

You're onto it Mary, stick to your plan.

**Monid** · 09-06-2006, 06:09 PM

Hi again James

To back up what Paul (SuperDad) says you need to be patient and buy the property that is right for you and makes sense...

Don't jump in simply because you are feeling like you are missing out, in the short term prices are likely to either remain steady (Thus deflating in real terms) or trend downwards.
Its a risky market to purchase in so you need to make sure you purchase very well.

The worst performing property we have bought we bought when the market in Rotorua had suddenly just hotted up and we panickedly bought a 'bargain' because we were afraid of missing out... Net result, its performed okay, but really has just tied up equiity and not really made us that much money, although that may have something to do with a very repair prone property manager (When repairs were fairly unnecessary).

I would concentrate on building up your cash reserves, so that once the property market has readjusted you will be in a good position to get several worthwhile properties!

As Paul says, 21 is still very young, and I am sure most of us here at pt wish we had started thinking about this as young as you.

**Volatile** · 09-06-2006, 07:41 PM

Originally posted by SuperDad

P.S. Don't neglect your tertiary studies!

Thanks paul once again an informed reply!

No never, personal money making is just some much more interesting than corporate accounting and information systems

**Volatile** · 09-06-2006, 07:43 PM

Originally posted by Monid

Hi again James

To back up what Paul (SuperDad) says you need to be patient and buy the property that is right for you and makes sense...

Don't jump in simply because you are feeling like you are missing out, in the short term prices are likely to either remain steady (Thus deflating in real terms) or trend downwards.
Its a risky market to purchase in so you need to make sure you purchase very well.

The worst performing property we have bought we bought when the market in Rotorua had suddenly just hotted up and we panickedly bought a 'bargain' because we were afraid of missing out... Net result, its performed okay, but really has just tied up equiity and not really made us that much money, although that may have something to do with a very repair prone property manager (When repairs were fairly unnecessary).

I would concentrate on building up your cash reserves, so that once the property market has readjusted you will be in a good position to get several worthwhile properties!

As Paul says, 21 is still very young, and I am sure most of us here at pt wish we had started thinking about this as young as you.

Thanks i will keep saving, maybe look into a few more car dealings while learning more about my local markets!

lol im 22 in 7 weeks

**David_W** · 10-06-2006, 02:25 PM

Best of luck James

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