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Thread: Now What?

  1. #11

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    Vacant land always gives the greatest total return, but it offers the ultimate in negative gearing as well.
    Land investing gave me the capital to start landlording for a career - so it can be done.
    You wouldn't want to pay very much for the land, so that ideally you can diversify into different areas & markets.It will be hard to find well-priced sections in the current market. However, don't let this discourage you.
    Its as simple as identifying sections & asking yourself "What will this neighbourhood look like & be owned by in 10 years time" & "If an economic tsunami arrived during my holding period, would my financial structure be strong enough for me to hold on n o matter what?"
    They aren't making more land, but population increases & so does national productive capacity. Vacant land , well purchased, can offer returns of 40% p.a. + average compounding over 5-15 years if you do your homework well & buy at the right time in the cycle.
    There are a lot of holding costs & a lot of research & plannning work to be done. It's only for those who are sincerely interested. Read Napoleon Hill's "Do you sincerely want to be rich?" (Hint: Emphasis is on "sincerely" rather than "rich" )
    Your situation is unusual in that I have found most women don't have the taste for vacant land investing, & often end up seling when things get tough - which is usually the wrong time to sell. Some of the things that happen, which you have to take in your stride area) Council puts rates up in double digit rises, (b) Council asks you to dispose of some rubbish someone has dumped on your land overnight (c) Council asks you to mow regularly and/or eradicate noxious weeds (d) neighbour(s) ask(s) for a 50% fencing contribution (e) Council tries to rezone your land downward & money must be spent on solicitors , research & submissions (f) Neighbour builds a deck right below a large overhanging branch from one of your trees - then asks you to cut the branch off ( costly, because the branch is 30 metres up & needs a cherrypicker) because if it falls on his deck or himself , you will be liable ( it turns out he is correct) (g) Water supply or sewage is introduced to a developing area, but cavant land must pay the connection fee as well as homes. I could go on... but you will get the idea.
    Wouldn't a straightforward rental be simpler? Or maybe you could compromise & do both?

  2. #12
    Join Date
    Mar 2004
    Location
    Thames, NZ
    Posts
    477

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    Wow !! Great feed back everyone. Really appreciated.

    I will let my wife read the info and she can perhaps get a clearer picture. Often it helps if your spose is not giving you the "facts".

    Cheerio

    Lawrence

  3. #13
    Join Date
    Jan 2004
    Location
    Whangarei
    Posts
    5,867

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    Hey Austin,

    Your wife's reaction sounds like a very emotive one rather than one based on understanding of property investment. I'd have to say that while a marriage is a team thing, if she's not prepared to learn about it as much as you have been, then she either needs to make the effort or leave it to you! Harsh I know but that's the bottom line no matter what you decide to invest in.

    Risk is relative... risk of making a real cashflow loss? You'll do that every year sitting on dirt and making repayments yourself, no matter what the capital gain. Buying land is speculative... ie; gambling. Sure, you may get it right but I'd rather have tenants making the payments for me.

  4. #14
    Join Date
    Jun 2005
    Location
    Mt Maunganui, NEW ZEALAND
    Posts
    1,463

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    To me the biggest risk of all is taking the gamble that there will always be a welfare system capable of taking care of me when I am too old to work.

    And as one sits pondering whether or not investing in their financial future is a safe option, they are losing a precious asset that can never be reclaimed.

    Time.

  5. #15
    Join Date
    Mar 2004
    Location
    Thames, NZ
    Posts
    477

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    I follow your reasoning Drelly, cheers for that. Only prob is that if I do any bulldozing and any thing goes amiss in my decision making with the investment...you can guess what may happen..... kapow kapow... hahahha.

    I have been looking around northland and have kinda figured that you need to spend at least 100k to buy anything worthwhile. ouch!

    So say I have no option to buy a rental but land which is better than nothing I reckon (perhaps this is not the right part of the forum for this discussion at this point but can always be moved I guess)

    Anyway.... if say I bought 5 acres or moreand leased the land out, apparently I can claim expenses on mortgage.

    Say I borrowed $100,000 @8.5%.

    Payment in year 1 $9662.76
    Interst Paid $8453.62
    Principal Paid $1209.14
    Lease Income (10acres) $1000.00

    So effectively what I will pay in year 1 is:

    $9662.76-$8453.14+$1000 = $2209.14 = $84.97per fortnight.

    Well it woudl appear to me that at least in the earlier years it would be cheaper to own land than become a chain smoker .

    Be a savings plan anyhow i guess.

    Feel free to pull me apart folks. But do mention any good bits you see.

    Cheery

    L

  6. #16
    Join Date
    Jan 2004
    Location
    Whangarei
    Posts
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    Hey Austin,

    Yeah you are right but someone always has to carry the can for any decision. Is your wife prepared to carry the can for decising to invest in land? After all, it is her plan and not yours...

    Your calculation is fair enough I guess but I'd still rather pay nothing, depreciate the building and get a paper loss and tax refund! Also, you still have the potential for problems by owning and leasing land. If you want a hassle-free investment, buy bonus bonds!

    "A good plan violently executed right now is far better than a perfect plan executed next week." General George Patton

  7. #17
    Join Date
    Jun 2005
    Location
    Auckland
    Posts
    925

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    Quote Originally Posted by AustinWong
    Say I borrowed $100,000 @8.5%.

    Payment in year 1 $9662.76
    Interst Paid $8453.62
    Principal Paid $1209.14
    Lease Income (10acres) $1000.00

    So effectively what I will pay in year 1 is:

    $9662.76-$8453.14+$1000 = $2209.14 = $84.97per fortnight.
    I am not sure about your calculations.

    Income 1000.00
    less Expenses 9662.76 (includes interest and principal)
    Yearly Loss 8662.76 (or $333 per fortnight)

  8. #18
    Join Date
    Jun 2005
    Location
    Mt Maunganui, NEW ZEALAND
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    1,463

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    Thanks Andrew,

    I thought it was just me .

  9. #19
    Join Date
    Jan 2004
    Location
    Whangarei
    Posts
    5,867

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    He is calculating the repayment of principle and regarding it as savings... the interest repayment is ignored.

    Buying land can work but if you wanted to do anything else financially, you'd be buggered as the repayments on the land would stuff your cash flow.

    I'm stumped as to why anyone who didn't want to invest in a rental property would consider buying land to be easier Financially it's a damn sight harder than having tenants pay the mortgage!

  10. #20
    Join Date
    Mar 2004
    Location
    Thames, NZ
    Posts
    477

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    Quote Originally Posted by RentMaster
    I am not sure about your calculations.

    Income 1000.00
    less Expenses 9662.76 (includes interest and principal)
    Yearly Loss 8662.76 (or $333 per fortnight)
    I used a free programme off the internet to do an atomization ( I think it means a detailed financial braekdown or something...an american word maybe)

    What software do you use to give a detailed breakdown?


    Thanks

    Lawrence


 

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