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  1. #1
    Join Date
    Oct 2006
    Location
    Auckland
    Posts
    570

    Default Anyone trading fulltime??

    Hi There,

    Was thinking about returning to do a few trades with the intent on going full time sometime in the future. Any advice on getting started, is it the right time or wrong time?? What are the pitfalls? Finance, settling deals, holding costs, time taking to sell.

    Just a few of the what ifs I have.

    Regards
    FH

  2. #2
    Join Date
    Apr 2004
    Posts
    837

    Default

    I'm trading Shares not property anymore...remember you will be paying TAX 28% ltd GST 15% plus accounting costs fee's if you become a property trader.....great if you have a good amount of capital to hold if harder to sell ...and reduce interest costs
    My last spec build took 14months to sell 80k under valuation and good thing was the fact we lived at the property for the time on market saving 550pw in rent

  3. #3
    Join Date
    May 2007
    Location
    Hamilton
    Posts
    3,684

    Default

    Quote Originally Posted by freezinhot View Post
    Hi There,

    Was thinking about returning to do a few trades with the intent on going full time sometime in the future. Any advice on getting started, is it the right time or wrong time?? What are the pitfalls? Finance, settling deals, holding costs, time taking to sell.

    Just a few of the what ifs I have.

    Regards
    FH
    Be very careful about giving up your day job, as banks love steady income and it is also hard for a family to live on inconsistent trading income.

    I still think the key to trading is buying right. ie not just buying through your local real estate agent mate, and actually finding deals that other people aren't finding or seeing.

    At the moment, it is important to sell in a market that is actually moving and where there is lots of buyers. From all the newspaper articles, middle value homes in Auckland seem to be selling well. But if you decided to do up say houses in Tokoroa, you might find that there is very few buyers.

    Ross
    Not sure where to start, book a free chat for 5-10 minutes https://cswaikato.co.nz/services-pro...s-hamilton/201
    Ross Barnett - Coombe Smith Property Accountants


  4. #4
    Join Date
    Dec 2011
    Location
    Hamilton
    Posts
    135

    Default

    Great comments Ross.................

  5. #5
    Join Date
    Oct 2006
    Location
    Auckland
    Posts
    570

    Default

    I was once told when I started out that if I wanted to trade full time that I would need at least 1 years pay minimum before I left my job. I think the biggest issue I would face is not finding the deals, it would be financing it. As you say banks love to see income & employment but thats not to say that if you have 100k in the bank, that they would not consider loaning money to you. My wife would keep working just in case. It would be great to get access to an investors money at no interest and use it to trade, but then who is loaning money like that.

    FH

  6. #6
    Join Date
    Apr 2004
    Posts
    837

    Default

    Quote Originally Posted by freezinhot View Post
    I was once told when I started out that if I wanted to trade full time that I would need at least 1 years pay minimum before I left my job. I think the biggest issue I would face is not finding the deals, it would be financing it. As you say banks love to see income & employment but thats not to say that if you have 100k in the bank, that they would not consider loaning money to you. My wife would keep working just in case. It would be great to get access to an investors money at no interest and use it to trade, but then who is loaning money like that.

    FH
    100k isn't going go far in trading properties for a living I'd be making sure I put some major time in researching the numbers and keep the dreaming to a minimum ....even though rates are low holding costs could still ruin the profit margin

  7. #7
    Join Date
    Jun 2008
    Location
    Auckland
    Posts
    194

    Default

    It is hard to make money out of property trading at the moment IMO. Here is an example of a project I just canned:



    Land 315000
    Construction 345000
    Non-build costs 70000
    Landscaping 10000
    Total Build 425000
    Total Cost 740000
    Sales Price 820000
    Total GST to pay (on 820K) 106956.5
    Total GST to claim (on $425k) 55434.78
    Gross Profit before tax 28478.26


    Numbers are rough, and also erring on the conservative side (which I think one needs to do to ensure you don't make a loss) but show a miserable $28k profit before tax (also not paying any wages for project managing the build...so effectively $28k for 7 months work at about 20hrs per week. Given the risk and the fact that $28k can be swallowed up very quickly in cost escalation from material increases or site blow outs, I do not think that this is worth it at all. Most project that i run numbers on these days look like this. I am moving away entirely from property to investing in business (buying good businesses). Gareth Morgan would be happy. For example, a business that I am looking at at the moment will cost me $500k and return an EBITD of $190k pa with a manager running it day to day (me spending 15 or so hours a week making sure everything is running well), and it has very strong cash flow. Seems like a better investment to me. My new strategy is to find 4 or 5 businesses like this across varying industries so as to spread the risk across the portfolio. Ok...you don't get the security of the land you're sitting on...but the potential for growth is better and the return is generally much much higher.

  8. #8
    Join Date
    May 2007
    Location
    Hamilton
    Posts
    3,684

    Default

    Quote Originally Posted by Stickman View Post
    It is hard to make money out of property trading at the moment IMO. Here is an example of a project I just canned:



    Land 315000
    Construction 345000
    Non-build costs 70000
    Landscaping 10000
    Total Build 425000
    Total Cost 740000
    Sales Price 820000
    Total GST to pay (on 820K) 106956.5
    Total GST to claim (on $425k) 55434.78
    Gross Profit before tax 28478.26

    What about GST back on land? Or is this $315,000 exclusive of GST as commercial section or purchased from GST registered vendor?

    Ross
    Not sure where to start, book a free chat for 5-10 minutes https://cswaikato.co.nz/services-pro...s-hamilton/201
    Ross Barnett - Coombe Smith Property Accountants


  9. #9
    Join Date
    Jun 2008
    Location
    Auckland
    Posts
    194

    Default

    Quote Originally Posted by Rosco View Post
    What about GST back on land? Or is this $315,000 exclusive of GST as commercial section or purchased from GST registered vendor?

    Ross
    Zero rated transaction, vendor is a GST registered developer.

    Edit: I must be honest...it took me quite some time to get my head around the changes to the GST laws for land transactions...what a nightmare! Would be nice FYI - signed up to your newsletter, so your signature works!
    Last edited by Stickman; 24-05-2012 at 04:35 PM.

  10. #10
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    8,457

    Default

    For example, a business that I am looking at at the moment will cost me $500k and return an EBITD of $190k pa with a manager running it day to day (me spending 15 or so hours a week making sure everything is running well), and it has very strong cash flow. Seems like a better investment to me. My new strategy is to find 4 or 5 businesses like this across varying industries so as to spread the risk across the portfolio. Ok...you don't get the security of the land you're sitting on...but the potential for growth is better and the return is generally much much higher.
    I've often wondered if this is a good thing to do. The returns from businesses are generally much higher, like above 30% but of course you're not buying bricks and mortar. You're buying a business that makes an income stream. So you have to keep that income stream coming in, and hopefully increase it. If the income stream starts to decline (for a million business reasons) then you still have the mortgage.

    And the other thing is that business borrowings are dearer than on property (unless you borrow against a property to buy the business I guess) so that has to be factored in too.
    Squadly dinky do!


 

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