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Another Newbee with first IP questions

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  • Another Newbee with first IP questions

    Hi Every one,

    To buy the house or to buy the apartment as a 1st IP.

    Am looking at an apartment at the moment in Auckland city(morningside - kingsland) Real estate reckon it will go in the high 200's.

    Floor area - 81 m2
    rates - $698 per annum
    Body corp $1009.34

    myself and my partner have saved a $100k and have no problem with the deposit. My partner is keen on getting this aparment property with a view to either living in it for a year (building up the capital) and then using the capitol to buy a house in the same area. Or renting it out for a year before doing the same thing (using the capitol to buy a house in the area)

    Is this smart investing?? I have a view that perhaps going after the 500k property is the better bet (most houses around this area go for that amount)

    Another question would be "is this a good time to buy?"

    any and all responses are much appreciated


    morningside for life

  • #2
    Hi arathorn, welcome to the forum

    If you are buying for yourself to live in, then you don't really need to use any investment rules. Just buy something that you can afford, knowing that the interest rates may continue to go higher. If it is an investment property, then make sure you understand concepts such as cashflow, serviceablity, etc. There have been numerous discussions on buying criteria. Please spend some time and read them. You can also use the Search function on this forum.

    As far as where we are in the property cycle, I believe we have gone past the peak and the coming years may be tough. The April 7 issue of Weekly Overview by Tony Alexander of BNZ, if it is still available, (http://www.bnz.co.nz/About_Us/1,1184...9-1567,FF.html) has two charts (house price change and dwelling sales) that you can study to see how the property cycles have been like since 1961.


    • #3
      Shot Fudosan,

      I have been reading other posts on Banks mortgage lending for apartments. The area is central and close enough to town and has transport practically outside the front door. Would it be best for me to use the whole 100k toward the purchase price, and then have some one rent?

      Bearing in mind that I have a focus on purchasing a house in the same area at some stage next year. Would owning a 100k in an apartment put me in a position to refinance with mortgage lenders this time next year and say borrow a larger amount to purchase a new house?


      • #4
        I think you recognise intuitively that leveraged property investment is the only way to make money in this field. Therefor, since property prices in Auckland are likely to be consolidating for a couple of years, the low leverage apartment option would be preferable as it involves the least holding (interest) cost compared to the house.

        When the market starts to move, you leverage up & buy tyhe house - or a second apartment, depending on your taste.


        • #5
          Welcome aboard

          you need to consider Appts Vrs Freestanding

          If it is for you to live in - it does not matter - if it is for investment - you need to decide what will be the easiest to sell when you need to - Freestanding is the answer

          Also I would go to workshops and seminars and gather info B4 you buy. It is worth spending a month learning as you want to start off right - you get only 1 shot at this

          There are different types of properties to buy and hold.

          Here is a list to start with
          1. Buying low cost with higher yeild (cashflow)
          2. New houses that are depreciation driven (generally negative cashflow)
          3. New house with created equity
          4. House with minor dwelling potential
          5. Home and income - high yeld cashflow

          Also if you are starting off in investment do not use all your deposit - leave some for working capital

          hope this helps

          Promise big, deliver bigger


          • #6
            Re: Another Newbee with first IP questions

            Originally posted by arathorn
            - kingsland) Real estate reckon it will go in the high 200's.

            Floor area - 81 m2
            rates - $698 per annum
            Body corp $1009.34

            Is this smart investing?? I have a view that perhaps going after the 500k property is the better bet (most houses around this area go for that amount)

            here is a definition of investing:

             P   Pronunciation Key  (n-vst)
            v. in·vest·ed, in·vest·ing, in·vests
            v. tr.
            To commit (money or capital) in order to gain a financial return: invested their savings in stocks and bonds.

            How much rent are you getting ? What is your return on

            a) your money (100K)
            b) your investment

            I suggest you have a look around this forum, figure out the answer, and then ask better questions.

            Here is a definition of bet:

            Pronunciation Key  (bt)
            An amount or object risked in a wager; a stake.

            v. bet, or bet·ted bet·ting, bets
            v. tr.
            To stake (an amount, for example) in a bet.
            Synonyms: bet, ante, pot, 1stake, wager
            These nouns denote something valuable risked on an uncertain outcome.

            If you reckon that the agent reckons it should go in the high 200, or that 500K houses are just the better bet....

            You are betting your money on this ??? I bet I can give you a 15% return if you give me all your money. PM me and I give you my bank account.

            KNOW what you are doing. Spend some money on courses, join the PIA, THINK....

            The fundamental questions are:

            1) what is my revenue (ie income)
            2) what are my expenses
            3) What is the profit before and after I borrow money (leverage)
            4) What is the Return On my Investment (money $100K, (ROI)

            THEN should follow:

            5) How much is my investment appreciating by per annum ?

            Then most important:

            6) What does this COMPARE TO? A house in Tokoroa, money in the bank, shares, and can I do better or beat this ???

            Answer these and you would have larned a lot. Also look at the thread underneath yours http://propertytalk.co.nz/postt2946.html with someone in exactly the same position. Speak to people, learn to ask better questions.

            My apologies for all and any newbies I might have offended. The message just does not seem to sink in, or as Bob Jones puts it, people just don't think about what they are doing. It ain't rocket science. INS - OUTS = PROFIT. Negative bad, positive good. Bigger positive, more good.

            With all the best intentions to either piss you off or shake you awake. I trust you take this in the spirit it is meant to be.


            Argue for your limitations and sure enough they're yours. - Richard Bach


            • #7
              Thank you fritz,

              for the somewhat enlightening words of wisdom, I have over the past few days been scouring over some of the other branches in this forum and have indeed had time to reflect and "think" If any one else would like to add I would love to here from you also.


              • #8

                My first mentor told me to read all the for sale ads in the papers until I could quess the sale price.

                He was right, you need a good grounding in how to do offers, what to offer on, and what properties in your target area are worth.
                But most importantly I think you need to know why you believe what you believe about these properties.

                What I am trying to say is that you need to be able to justify your decisions based on what you have discovered, rather than on what you have read or been told by an agent or even what another investor has told you.

                Learn until your next move is obvious.



                • #9
                  My two cents worth:

                  Put your 100k in a high interest bank a/c minus a few hundred for a few months. Use the few hundred to buy some books. Take the few months to thouroghly search the market(s) and read the books (and Property Talk of course).

                  After the few months good deals will be slapping you in the face.

                  Oh and Look at following post if you haven't yet - It has some good tips.



                  • #10
                    I completely endorse Chemill's comments.

                    Although there is never a right time to buy there is also never a wrong time to buy. If you can understand my male logic.

                    Most real estate agents (or sales persons) will tell you that you must hurry or you will miss out. So don't wait etc etc.

                    This wonderful piece of advice may be true on a particular house or deal being offered. but not on all of them. I think it was Dolf de Roos who said a once in a life time opportunity comes along every week.

                    Okay so you miss out on that deal. The world won't end. Well not because of that anyway.

                    Tip one

                    Real estate agents are not your friend. They are hard working, struggling people who are in a very competitive industry. Like most of us they have partners and kids to feed. They will tell you what you want to hear to make a deal happen. They need your money. Don't be rushed into anything by them.

                    Tip two

                    You don't need to spend thousands of dollars going to seminars where there will be a lot of motivational speakers who can get you blood racing through your veins, your head fill of dreams and your bank balance sooo much emptier.

                    There are a lot of good books available. Beg, borrow, buy or steal (who said that ) a wide variety of these books to read. Nobody has all the answers but somewhere amongst these books collectively you will be able to come up with a plan that will suit you and your risk tolerance levels.

                    Tip three

                    Talk to lots of other people who are already playing the game. Again their style may not suit you but you can learn things from everybody if you take the time to listen. Pit falls can be shared and avoided.

                    If they are not playing the game and they have what sounds like great. Why aren't they playing the game? How do they know what they are suggesting will work? personnally with these people I would ask what they are trying to sell and then treat them with scepticism from then on. A vested interest you see. trying to separate me from my hard earned cash.

                    And final tip

                    Constantly ask questions on the Property talk forum.

                    There are a lot of good members who actively give good suggestions free of charge on the site. Again what is suggested may not suit your proposal but consider them any way. Other people often think outside the square. Ideas forthcoming can be things you never thought of...

                    Well I like the forum any way

                    Best of luck. Oh and I don't think I would invest in an apartment in Auckland right now. But what do I know
                    Counter cyclic means always swimming against the tide

                    Manawatu Property Investors' Association


                    • #11
                      Hi Arathorn

                      Just a few thoughts to add to Chemill's & Janesco's comments.

                      There is still a huge amount of enthusiasm/excitement in the market from buyers and hence from suppliers of property services. The expectation of price growth by the general public is still very prevalent. I believe this head of steam (expectation) will take 2 - 3 years to simmer down. There is always an innertia or resistance to believe (from the general public) that we are entering a 'different' market.

                      I agree with Chemill and believe a wise strategy would be to put your $100K in a deposit account, read as many property investment/self improvement books as possible and then review your position in 6 months. A timely read for you would be 'Grow Rich with The Property Cycle' - by Kieran Trass.

                      I attended the Property and Investment Expo in Auckland over the weekend and spoke to a number of investors and participents in the finance and property industries. A number of these people were buy and hold investors and were currently in a holding pattern with no intention to buy.

                      I believe the urgency in the market has gone and as a potential purchaser time is on your side!

                      Quote: 'Although there is never a right time to buy there is also never a wrong time to buy'

                      A variation on the above could be:

                      'There are more 'right times' to buy when every one else thinks it is the wrong time.'