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  1. #21
    Join Date
    Jan 2005
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    Auckland
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    Glenn,
    If you get up to Sulpher City it would be good to talk property. I'm moving there in April.
    Julian.
    Gimme $20k. You will receive some well packaged generic advice that will put you on the road to riches beyond your wildest dreams ...yeah right!

  2. #22
    Join Date
    Feb 2005
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    Auckland
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    795

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    Quote Originally Posted by Glenn

    If there is one thing that I regret about this property stuff is not doing it 20 years (sorry make that 30) ago.
    My $22000 home that I bought at that time in is now worth a bit more.
    I do recall looking at a little investment flat back then that would not have killed us. The clever accountant (AKA for wife) said we could not afford it and so passed on it. Goodness we could have done with the cash flow that little flat would produced over the years.
    Hi Glenn

    I did start 35 years ago and through the bad advice of my Banker, Lawyer, Real Estate Agents, and the Lack of a mentor who all were not investors themselves, I went from 11 properties by 1979 to nothing in 1994. Thanks to the Richmastery 3 day Seminar I attended with my family in May 2003 we went from 5 properties to 50 in 20 months. (still got a bit of catching up to do).

    Hi Julian

    Hopefully its the complementary set of DVDs from Phil Jones at Richmastery, or better still from the guy that nicked them from your car who after viewing them felt guilty and returned them.

    Cheers Ron

  3. #23

    Default

    Hi Ron,

    Great post and lots of good points; you've obviously done a lot of research and reading and it's great that you're prepared to share your knowledge and ideas.

    Rich Dad Poor Dad's book "Who Took My Money?" pages 48-49, and 141 onwards talks about your points too. I think it was written a year or two after "Prophecy". If that doesn't inspire one to take action I don't know what will.

    However......

    I TOTALLY disagree with your point that NZ needs at least 150,000 - 200,000 immigrants EVERY YEAR! I spend half my time travelling throughout Asia and I can tell you that the last thing we need is NZ with millions and millions of people. And with the risk of sounding racist or 'anti-immigrant', most of these immigrants would indeed come from Asia - I KNOW that they step off that plane in AKLD and their eyes light up, so they'd happily immigrate here. I've been living in Asia for a few years now and I can tell you that the locals here do not care one bit about the environment - they openly throw their rubbish on the street. This goes for every Asian country I go to regulary (except Japan which is quite nice). I do not want NZ to end up like this.

    Who cares if NZ maintains a small population or has an economy that is not growing at greater than x%. Do the readers here want a country where you'll never see a blue sky even when there's no cloud? or have the smell of fermenting rubbish in the street gutters, or severe lack of footy parks to go to and kick a ball, or beaches too polluted to swim in, etc. I see this everyday and I do not want NZ to end up like this. I doubt immigrants from these countries would treat NZ the same way we do.

    Again, I'm not racist or anti-immigrant, we just need control of it. I don't feel that 200,000 immigrants a year is controlled. I come to AKLD about once a year and I'd say that it's 90% 'non Kiwi' to 10% 'Kiwi' down Queen St. Maybe, a lot of them are foreign students, I'm not sure. If you say that all the 'good' tenants will be required in their own countries, I hope that doesn't mean that we get all the leftovers especially for manual labour? - we all know the flow-on effects of that years down track.

    I say, like Swapacrate, lets keep NZ the way it is and not get concerned with overpopulating ourselves just to satisfy business and 'economic growth'. Keep it clean and green and have control over the environment - that's what I miss most about NZ from where I am.

    Thanks for reading this.

    ChiefWigum

  4. #24
    Join Date
    Jan 2004
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    1,545

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    I agree with ChiefWigum on the immigration issue.
    Very slow & steady & low immigration is what I'd like to see, maybe on a as needed skills basis only.

    Look at the big stink over these much needed overhead power cables heading up to Auckland. Our infrastructure is hardly holding out as it is.
    You can't have it both ways. Every 200,000 new residents means what, maybe one new power station, how many more lines will need to be put in Auckland and other parts of the country. Maui gas is running out in a couple of years, and whats going to replace that? Seems like we need to sort out a few basic problems before encouraging more immigration.

    I personally don't see a residential boom within 10+ years.
    Find The Trend Whose Premise Is False - Then Bet Against It

  5. #25
    Join Date
    Feb 2005
    Location
    Tokyo
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    132

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    I agree with ChiefWigum to a degree but its a little alarmist. If immigration were to increase to the levels that Ron suggests then the outcome would have as much to do with community structures/local and national policies as to the people coming. If the government/councils implemented the right policies and employed new technology as progressively as possible etc etc then there's no reason for N.Z to turn into Hong Kong or wherever. 200,000 people a year sounds a little ambitious to me anyway.

    Regarding infrastructure, N.Z needs to modernize anyway, it should be a progressive modern economy not a hippie commune (that's a bit strong but you get the point). Auckland transportation, power shortages etc are problems that shouldn't be. N.Z needs to grow up a bit and start taking pride in being a modern economy and not just a pretty postcard. We should be on a par with Australia/Canada but we are a long way behind.

    So rather than looking at the glass as being half empty (i.e. our infrastructure isnít holding as it) why not look ahead and say lets be progressive and modernize the infrastructure to increase future growth and prosperity. It would take a lot to change New Zealandís small town feel, geography pretty much guarantees that. People shouldnít fear N.Z changing a bit, if the countries half as smart as it thinks it is then it should be able to progress and change for the better with an increasing population.

    It's a fallacy that N.Z is clean and green anyway, our standards are lower than many other countries, its just that the population is so small. Japanese vehicle imports often have emission minimizing technology built in but what happens as soon as they arrive in N.Z? Donít need that mate, you lose 0.7% performance (maybe things have changed?).

    Also why on earth do New Zealanders prefer burning coal to generate energy over safe zero/low emission 2nd or 3rd generation nuclear energy? Because nuclear energy is the worlds great evil?? But the effects of fossil fuels on the environment are a million times worse than nuclear power. Burning coal pumps radioactive material into the environment 24/7, its vital this practice is stopped/minimized and N.Z should be one of the countries leading the way. See:

    http://www.wired.com/wired/archive/13.02/nuclear.html

  6. #26
    Join Date
    Feb 2005
    Location
    Auckland
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    I TOTALLY disagree with your point that NZ needs at least 150,000 - 200,000 immigrants EVERY YEAR!
    I agree with ChiefWigum on the immigration issue.
    Very slow & steady & low immigration is what I'd like to see, maybe on a as needed skills basis only.
    I agree with ChiefWigum to a degree but its a little alarmist. If immigration were to increase to the levels that Ron suggests then the outcome would have as much to do with community structures/local and national policies as to the people coming.
    Hi ChiefWigum, Gatekeeper, & Robot,

    Some very valid points that you have all in common and that is the resistance to change from the Kiwi way of life we are accustomed to.

    So given the wish we don't change then must come the sacrifices to keep it that way.

    Does this mean the Baby Boomers of NZ will be happy to continue working until they are 70 tears of age before retirement while the Australian counterpart is on a Retirement Pension at aged 60 years and loving it on the Sunshine Coast.

    Alternatively what are the consequences of the NZ economy, if the retirement age remained at 65 years. How are we without change support 100,000 retiring people every year onto a Pension costing 1 billion the first year then, 2 billion per annum the 2nd year.......10 billion the 10th year plus hospitalization etc. Also each year if there is no change in immigration how are the reducing numbers of workers leaving the workforce to pay an ever increasing higher taxation bill. And who will replace the ever increasing numbers of vacancies in the workforce to keep the economy growing?

    So what will it be? will it be a balance of immigration together with an acceptable increase of the retirement age?

    Or perhaps will the pension be paid at a reduced rate leave a nation OF OVER 65'S living below the poverty line.....

    And what of the Property Values and Rents?

    WILL THE NEXT PROPERTY BOOM BE THE BOOM OF ALL BOOMS?

    Cheers Ron

  7. #27
    Join Date
    Feb 2005
    Location
    Tokyo
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    132

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    How are we without change support 100,000 retiring people every year onto a Pension costing 1 billion the first year then, 2 billion per annum the 2nd year.......10 billion the 10th year plus hospitalization etc.
    Exactly, how?? Something has to give. I'm sure the solution will be multifaceted with immigration playing a very important role, seems inevitable to me. Thus we should be doing everything possible now to build a more modern infrastructure to A) Cope and to B) Attract immigrants of the highest possible standard. Otherwise some of the fears touched on by ChiefWigum could indeed become a reality (I realise this is oversimplifying the issue but the point is clear). Anyone could have predicted Aucklandís evolving traffic problem years ago and did to a degree but only now after its too late are real steps being taken (and still too little if you ask me), same thing here. Certainly doesnít seem like the current government has a very convincing plan for the issue.

  8. #28
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    Jan 2005
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    Auckland
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    Glenn,

    Having been into commercial pretty well from the begining of my investing life, I can assure you that whilst there are decided advantages it also has its days and problems. In fact in hind sight I should have bought more residential rather than commercial four years ago
    I note that you lamented not buying more residential property - rather than commercial - and this got me wondering, why? Apart from a personal abode, and perhaps a personal holiday home, I wonder why someone would chose residential property if they could afford commercial?

    Julian
    Gimme $20k. You will receive some well packaged generic advice that will put you on the road to riches beyond your wildest dreams ...yeah right!

  9. #29
    Join Date
    Jun 2005
    Location
    Nelson NZ
    Posts
    3,864

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    Quote Originally Posted by Julian
    I note that you lamented not buying more residential property - rather than commercial - and this got me wondering, why? Apart from a personal abode, and perhaps a personal holiday home, I wonder why someone would chose residential property if they could afford commercial?

    Julian
    Now this is a good question.
    If you put my various posts side by side you would see that I have a tendency to back both horses from time to time.

    Certainly what commercial properties I have purchased have all produced 10% or greater net rate of return after all outgoings and management.
    Not that I buy heaps and heaps of them like people buy houses.

    You have got to realise that commercial property rents and capital prices move in a completely different cycle to residential.
    Residential is pushed about by Government subsidies, and other good and bad policies like immigration and so forth.

    However the commercial market is really dependent on bank rates, and business conditions. Houses are all pretty much the same all having bedrooms, bathrooms and kitchens.
    Now get to industrial stuff. You have a very wide range of building types and facilities like stud height wash down facilities, fencing, electrics and so forth, not to mention street location for marketing that limit or attract certain types of industries. If you have a facility that services one type of business and that business is in decline then you have a problem that will not go away.
    The banks know this and that is why they generally make things a bit harder for commercial investors. So yes you need deeper pockets to get into it seriously. After a while one outgrows these problems because the banks "want" to do business with you.

    So to the question.

    Four years ago in hindsight it was possible to buy almost any sort of residential property in Nelson and sell it off in late 2003 at about 100% more than you would have paid for it. Because it was residential it would have been possible for me to buy heaps with no "cash" input from me just a bit of refinancing. However for some areas if the peak were missed then good capital gains would have not been achieved. Also the taxman might have been after my hide.
    Also because the residential market is always vastly bigger than the commercial one, there are more opportunities about. Compare this with commercial where the good deals are few and far between. It is frankly hard to find good commercial investments locally. Most of the stunning deals in commercial relate to buying them at a discounted price due to lack of tenants. Then after they are fully let they are worth heaps more. So this implies that purchasers of partially let commercial properties take more risk and have deeper pockets to take that risk.
    Also rents in many classes of commercial especially industrial have not gone up like the residential rents over the last 5 to 10 years.
    However the ROR has gone down from around 10 to 6% so yes there have been some good capital gains because of buying pressure related to migration from the residential market.

    One should be very careful to not fall into the old trap of saying one is better than the other and that it is simply a matter of time and bank balance. Despite all the heartache that my residential tenants cause from time to time I really do enjoy my residential tenants over the commercial tenants. Whilst I do enjoy vastly better cash flow from my commercial tenancies it is often more difficult to get my hands on their equity.
    I must say though that in the last couple of years the banks have got slightly friendlier. I no longer pay an extra 1% interest on loans that used to be the norm for commercial.
    I did recently find it more difficult to get a certain loan facility over commercial property as apposed to residential so ended up going off to a non-bank building society because the trading banks would only do it over residential property.

    Risk and portfolio growth are related to time. We all firmly believe that properties all increase in value over time. There are a few fallacies in this argument but it is generally true.
    There are well-respected accounting techniques to compare one type of investment with another and I think that residential would have outperformed commercial over the last four years.

    So here is the crunch line.
    Younger investors have a greater expectation of living longer than their older colleagues. So if you are getting near to the end of your working life you should be looking for greater net cash income.
    Generally older people should take less risk and younger people have more to gain by capital increases simply because they expect to be around longer.

    So yes generally a one off commercial investment is generally more risky than residential. They are often harder to relet and can sometimes need significant capital input. After you have several properties then the risk is better spread and the affect of your income stopping for say 6 to12 months is not so serious if it is a small portion of your total income.

  10. #30
    Join Date
    Sep 2003
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    Hi Glenn

    An excellent post.
    Some very thought provoking ideas expressed.

    What chapter are we up to in your book?

    Regards
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx


 

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