A positivly geared purchase?

[Scott Miller]

Hi ya
I have spent the last 12 years in the UK.London to be precise,there the rent structure was very different to NZ
(Chch anyway).In London the rent you pay is not only dictated by the area you live in, but the value of the house itself. ie. A terraced 4 bedroom house in west 3 ( five miles from the west end), is not worth half what a 4 bedroom terraced house is worth in west 2 (1 mile from the west end).
So, doing what I was told was "the right thing to do" I purchased a house in Chch freehold on my arrival. Strangely I have always
thought there must be a better way of doing things .I was somehow aware that this is not the BEST way forward.
After finding and reading PT the flood gates have opened,WOW this is it, this what I want to be doing.
I have paved the way and found a broker, who in turn has found me several ways to achieve a line of credit, some good,
some I need to look into some more.
Now its down to me;Learn learn learn... and I am.( pooomba thanks for all your help)
The biggest problem I am facing seems to be getting close to, or achieving positive gearing on my purchases (which are none to date).
Now, I have read the article from Sue at Richmastery .Awesome, but I get the feeling that being the freshie that I am,the inside information required to get a DEAL LIKE THAT IS YEARS OFF. And so it should be. I realize the seas will not part on my command immediately.
On the other hand I am a great believer that you will get something out of, what you have put in.I do not mind hard work or time spent learning a trade.
So herein is the question:
It seems to me (through my crude calculations) that positive gearing is a thing of the good old days.IS this the way things are now in general(Highish house prices versus lowish rental returns), for all the working out in the world, my calculations seem to come up with a negative geared answer.
Any pearls of wisdom or calming thoughts are very welcome.

[moovet]

Not that I have walked much of the walk ( more like dawdled!!) Scoob but on the whole I think you are right. But the deals and yields are out there. A lot of people on this forum find them but often they are "created" through some lateral thinking and experience. Eg adding or relocating a minor dwelling onto a section. Trading properties to give you bigger deposits and of course buying under valuation and/or renovating to improve the yield. You are definitely in the right place for advice. The fact that these guys give it so freely is both refreshing and inspiring. Good luck!!

[moovet]

Initially you may want to build up your portfolio by buying from experienced property finders like Robyn (NZGEMS) and Derrck and Robyn Masters (GoDoIt) that consistently have positive cashflow properties advertised. But make sure each experience is a learning one. You can never know enough!!

[Scott Miller]

moovet
just off to bed .....but had to have one last read. Thanks for the tips, more knowledge gained.

[Monid]

Hi Scoob

The first thing to remember is that markets move in cycles, at the moment it is hard to buy cashflow positive, as it has been in the past but this won't last forever, and yeilds will return. (And then disappear again and then return and so on)

So don't panic and buy a bad deal just because you feel you need to find something anything... There have been several recent PT success stories where people held out and have now achieved buys that frankly I am envious of.

And Moovet's point is good, cashflow positive is often now made, not bought straight away. (Ah the good old days)

Things to look for:
Possibility to add value
Under-rented
Subdivision possibilities
Poor but easily and cheaply rectifable condition
badly advertised properties
urgent sales
Ability to add minor dwellings

As you can see the list goes on and on...

David

[[email protected]]

Scoob there is a fundamental truth that many investors never really understand and live out. That is this: you will get the deals you believe are out there.
It really is true. If you believe that cashflow positive deals are out there, you will find them. Yes it's hard work but is it impossible? Absolutely not. It is nonsensical to believe that everybody wants fair market value for their property. There are a thousand reasons why someone might sell their house below valuation. Way below!! Look for cashflow and you will find it. Sometimes you can create it through subdividing a section off and selling it or creating a second income stream on a property. But pursue it till you find it. It's not a case of does pos cashflow exist? The answer is absolutely yes.
The question is do I believe I can find the cashflow deals that are lying around all over New Zealand!!

[David_W]

Think, commit and achieve

Totally agree with Pooomba. Works with equity too. If you have a goal of looking for a property with over $150K equity in it, for a purchase just over $500K your commitment to expanding your network of agents and deal providers will deliver. Case in hand, stressed deliver can't pay his bills and is getting called in on a medium sized subdivision. Give him the solution and save him from bankruptcy proceedings and charging orders and pick up the property worth $760K for $608K. Nice equity creation.

Then if you want cashflow - take a bit of time to advertise it right and know your market. Sell it with the registered valuation at an abundant price of $710K. Pay the tax and GST and you have cashflow now!

You are the master of your own destiny. My advice is to think outside the square and challenge your own beliefs. You can also convert equity into cashflow by trading.

[ActionMan]

Hi Scoob

To get deals you have to believe that you will get them now not in the years to come.

What you believe will ultimately dictate your action and therefore your results.

but I get the feeling that being the freshie that I am,the inside information required to get a DEAL LIKE THAT IS YEARS OFF.

In the height of the boom 2 years ago I bought 2 properties in Otahuhu, Auckland. And this was when I was new in the game. You should be able to get better deals now in a flat market.

1. 105k - rent $220
2. 89k - rent $190

Yeah believe you can get them now and work towards them with your strategies.

[SuperDad]

Every property in NZ is a potential CF+ property

Hi Scoob,

You wrote:

I get the feeling that being the freshie that I am,the inside information required to get a DEAL LIKE THAT IS YEARS OFF. And so it should be. I realize the seas will not part on my command immediately.

I couldn't disagree more. My very first (and only) deal recently involved a property like Sue's, with a high yield, positive cashflow, and good equity (once renovated). And remember, Sue found her property on TradeMe! As someone pointed out on her thread, this property was available to all of us here. No inside info required, just an inner belief in one's own ability as an investor.

I keep thinking that I have been lucky, and that my deal is a freaky deal. Well, maybe it is a freaky deal, but I now realise that luck had very little to do with it. I have committed to learning, and that learning helped me realise how good the deal was and gave me the confidence to take quick decisive action. I have committed to forming quality relationships with key people, and the RE agent I'm working with put this deal on my plate. And I have committed to having a "no problem is too big" mentality. While problems arose in the course of getting the deal, no problem was so big that it made me lose sight of the numbers. The only element of luck invloved anywhere was that I was lucky enough to marry someone who is fully supportive of, and interested in, property investment.

I'm not daft enough to think that properties like this will come along every couple of months, unless I go looking for them (or have someone looking for then on my behalf). Like others, I am currently working out strategies for creating positive cashflow in this (or any) market. This will involve creating equity, be it through trades or development.

Here is how I think of it Scoob. Every property in New Zealand is a potential CF+ property. The only variable is what size deposit you will need to purchase any given property so that it is CF+.

Go forth and make your deposits Scoob.

Paul.

[Monid]

Scoob there is a fundamental truth that many investors never really understand and live out. That is this: you will get the deals you believe are out there.

Okay, now I am no doubt going to be hounded for the negativity that I'm about to display (So devotees of positive thinking... you have been warned...)

But surely this simply isn't true.

I mean there is an important point here, namely you have to have your eyes and mind open to spot good deals where others only see bad deals. This however isn't a matter of wishful thinking...

It's a matter of having better knowledge of the market than other sellers and maybe the vendor as well, mixed in with a bit of luck and a lot of gumption.

But you will get the deals you believe are out there? Indeed and you will get the winning lotto ticket you believe is out there to...

I'm afraid you can only get the deals which are actually out there, and that isn't affected by what you believe.

David Hunter

[SuperDad]

David,

I thought I had the monopoly on negative thought on this forum .

Seriously, while I'm not one for warm fuzzies and wishful thinking, I can see the point in what Dean and others are saying. What I take Dean to mean in the passage you quote is this: the deals are actually out there, and in order to get them you have to believe that they are out there.

In a slightly more formal mode: it is not the case that believing that the propsition "the deals are out there" is true makes that proposition true. Rather, it is the case that the proposition is true, and that in order to access the deals one must believe the proposition to be true.

Why would this be the case - why do we need to believe that the deals are out there if we are to have any success finding them? (What is the point of "positive thinking"?) Well, just think about what we would do if we believed that the deals are not out there. We would not bother looking - after all, what would be the point of looking for something we do not believe exists. (I don't waste my time looking for the tooth fairy.)

I'm on a role - I think I've made three positive posts in a row.

Paul.

[[email protected]]

Hi David. No you are totally incorrect in regard to my post. Lotto is something you have no control over. I'm not talking about telekinesis or ESP. I'm saying that your belief system affects your investing ability. I regularly get contacted by students who say how impossible they thought it was to find great deals and then suddenly they get their head in the right place and find them everywhere. It's not a matter of luck or wishful thinking, it's tapping into the principles of sowing and reaping and self belief.
Whether you believe it or not I can't help, I can only tell you that it is a truth that I have proven in my own life and the lives of others.
I honestly find more great deals than I can deal with. Why? Because everyday I expect to find one. Most days I find 2 or more!!

[moovet]

Go forth and make your deposits Scoob.

Paul.

Sorry Paul, couldn't help myself. Must be the vet in me but somehow this sentence gave me a vision of a Great Dane crapping on everybody's lawn!!

[Scott Miller]

My thanks to all,
All the advice has been great, and with more networking in place, I'm sure I'll get a better feel for what's good and what's not.
I will be meeting many of you and others on July 29th, at Monkeyboys get together.It will be nice to put faces to names.In the mean time, keep an eye on your lawns ,as according to moovet I'll be crapping on it.

[Monid]

David,

I thought I had the monopoly on negative thought on this forum .

Well maybe its just the weather here making me cranky, who would expect 36 degrees! On the north coast of Northern Ireland?

No doubt you can reclaim your crown shortly

Seriously, while I'm not one for warm fuzzies and wishful thinking, I can see the point in what Dean and others are saying. What I take Dean to mean in the passage you quote is this: the deals are actually out there, and in order to get them you have to believe that they are out there.

I see and understand this point and think it is correct and important, thats why I said this:

I mean there is an important point here, namely you have to have your eyes and mind open to spot good deals where others only see bad deals.

I think thats a good message to take from Dean's post, but it doesn't seem to me to be the most straightforward one, I just get a bit bothered by the focus on positive thinking, which occasionally sounds like this will change reality in someway...

Dean fair call on the lotto example I realise it was pushing what you actually meant in your post, but it seemed to me to be consistent with what your post seemed to be saying. I was hoping the outrageously foolish example would get you to clarify your position, which thanks it has:

Hi David. No you are totally incorrect in regard to my post. Lotto is something you have no control over. I'm not talking about telekinesis or ESP. I'm saying that your belief system affects your investing ability. I regularly get contacted by students who say how impossible they thought it was to find great deals and then suddenly they get their head in the right place and find them everywhere. It's not a matter of luck or wishful thinking, it's tapping into the principles of sowing and reaping and self belief.

So sorry for the cheap shot, glad to see we are on the same page then. Believing that the deals may be possible is a neccesary precondition of being able to find them, otherwise why as Paul says would you bother looking? Human perception is a funny thing, we tend to only see what we want (expect) to see, and if you think something is impossible like a positive cashflow property then you are unlikely to see it!

David