Newbie Introduction

[Mauro]

Hi there investors.

I'm a 27 years old South American who moved to NZ 4 years ago and I have a day-job in IT. I live in Wellington City but commute to far away.
I've been dreaming about becoming financially independent since I was 18 years old and never done it. I did attempt though. I got so identified with your NZ culture that people say I'm almost a kiwi! Great!

Anyway after becoming an official resident past year, I decided that I should do something different in NZ. I opened a side-business which is not yet giving me any return, invested my time in other possible business that someday might give me money but... definitely decided on Real Estate after reading the book Profit and Property from Joy Thomson.

Also, I'm currently reading the first pages of Dolf de Roos's Real Estate Riches, which I'm aware is controversial.

I still very newbie in the terms, acronyms and mechanics of real estate, but I'm making all my efforts using Google and spending hours reading through this forum.

Still about me:

My salary is now 30k p.a. - you will definitely be wondering why so low for an IT professional, that's because I work as contractor through a sharing agreement and work on a remote area of New Zealand, not a big centre. Plus, I have a verbal agreement with my current employer which I don't intend to break, so I can't expect to get my deserved 80k p.a. on the next 18 months or so, if I will get it (too long, too much time!). It seems unreal for me waiting for more 5 years before I can start something!

So to make it simple, I don't have money, ie. I don't have savings history which I know is essential in order to get a loan. Of course this is a typical situation for first timers but can be subjective.

I'm trying to figure out a way to make a "nothing down" deal.

So to put facts on paper:

• I'm single and don't have any family members here.
• I spend around $1200 a month in commuting and rent.
• I have a $6k personal loan debt with the bank.

I've been analysing, by a distance, some properties nearby my work. It's a small town, but boutique village with many homestays, and holiday homes. It's also destination of young working holiday makers. I've been living there for 3 years before my (bad) decision to move and commute in the hope I get a parallel job and better social life.

So I will try to simplify what my thoughts are:

1. I need positive cash-flow all the way.
2. If today I had my own house in there, I'd immediately stop spending the $1200p.m. in commuting and rent. I earn $2300pm. I'm not a massive spender too.
3. If I bought a property with at least 3 dorms, I would definitely use it as a homestay. Almost like a boarding-house but not quite there. I could definitely get people from all over the world to live with me the year-round and they would be happy to pay instead staying on a common backpacker. There are plenty of them because NZ has the 1-year Working Holiday Visa. I'm young and still have some patience to deal with young people.
4. I have connections with picking contractors, vineyards and people from all over the world.
5. I have IT skills to do SEO and can do a flashy website for my own homestay.
6. I'm quite known on the little town and have good references.

Let's say that hypothetically I convince a vendor to finance my deposit, or I get an investor and convince the bank to lend me the money.

There are a few under 250k properties but they are either 2 bedrooms or just look too bad. I think the place must be welcoming.

Property example #1: asking price 260k. 3 bedrooms, looks quite renovated, tidy and spacey enough to hold an amount of people in there. It just looks fairly tidy. The drawback is having only 1 bathroom.

Say I use one bedroom for myself and the other 2 I manage to get at least 3 other guys, if not 4. Remember, this people don't mind, they are travellers. I also don't mind, I want to be a real estate investor!

Worse case scenario I manage to keep at least 2 extra persons paying $120pw the year-round:
Rental income $240p/w
Annual rental incoming excl expenses: $12480
Annual return: 4.8% (gross)
This situation would be cash-flow negative but I'd be ok to cover

Best case scenario:
4 extra persons paying 120p/w

Rental income $480 p/w
Annual rental income: 24960 excl expenses
Annual return: 9.6%

Property example 2: 4 bedrooms, 3 bathrooms. Much bigger, but doesn't look as tidy as. Still OK. Has already bunk beds and etc, kind of a home-stay already.
Asking price $410.000 but hey, RV is 320.000
I will go straight to a very busy simulation of extra 6 people year-round:
Gross anual return: 37440 which is 11% if closed on 320.000 (not impossible)

Well, that's all I could figure out so far. Not sure what to think from here.

I'm just posting this to see if I got the correct mindset and to catch opinions.

The most challenging part for me is to have courage to start enquiring agents, sellers, friends, bankers etc. I don't feel confident because I always think of myself as a broken guy.

And of course, it's hard to keep motivated and realistic, I wonder if I'm just dreaming too much.

That's why I'd like to know your opinion. I need a reality check but also need to know where to go from here.

Well, sorry the long post and for any bad grammars.

Cheers

[Maccachic]

Welcome!

Is there a property investors network in your area? http://www.nzpif.org.nz/

Don't feel too obliged to your employer if times get tough they could shut up shop and where would that leave you? You need to keep your future in you mind while loyalty is admirable it doesn't pay the bills.

Have you had a chat to a Mortgage broker, they don't charge for their service and could point you in the right direction.

Go to open homes and get to know your market, talk to the agents about the property but don't give to much info away about yourself.

Good luck.

[Mauro]

Thanks Maccachic!
There is a network in my area and I will be in touch with them.

I agree my loyalty is killing me. I had only 2 jobs in my 10 year career.

Can I contact basically any mortgage broker with no guilt, or do you have any specific for my case that you could point?

Cheers, thank you.

[Maccachic]

I don't have any recomendations if you post your location someone maybe able to point you in the right direction. Or there will probably be some brokers or people to provide recomendations at the Property Investors meetings. There is no obligation in speaking with them they make their money from the bank once they arrangea mortgage for the customer.

[Mauro]

That's great! Well, the place is Martinborough so I guess anything over Wairarapa area.

[Glizzle]

Don't feel too obliged to your employer if times get tough they could shut up shop and where would that leave you? You need to keep your future in you mind while loyalty is admirable it doesn't pay the bills.

Bang on, i spent my early years from 16-20 with the same employer only to be left redundant and in debt after being offered jobs in japan and England. I moved to Auckland at 20 and for the pass 8 years have just gone to the highest bidder, and now since building up such a array of skills for different company im now very financial secure with housing and contracted work, where i make the hours and workload leaving me free to work more on my own projects.
Plus Meccachic advice on getting out to see open homes is a great idea, i spent 3 years looking for property before i actually dived in and by then i had a nice deposit, but it was coming to grips with talking to agents, ins and outs of types of houses, what im looking for and just the general feel of areas.

[flyernzl]

I have a $6k personal loan debt with the bank.

I'd work on getting rid of that as soon as you can.

[Mauro]

I agree, well at least I get a tax return pretty soon to cover part of that.
Thanks!

[Keys]

I had only 2 jobs in my 10 year career.

JEEZE!

I've had two jobs since 1977!

[Mauro]

JEEZE!

I've had two jobs since 1977!

Let me guess your second job: managing your properties?

[JABlog]

have a verbal agreement with my current employer which I don't intend to break, so I can't expect to get my deserved 80k p.a. on the next 18 months or so, if I will get it (too long, too much time!). It seems unreal for me waiting for more 5 years before I can start something!

How so?

Did he assist you in getting the PR?

Loyalty is one thing - you must look after number 1 however...

[Re@der]

A possible way to get into a place is to buy a difficult to sell place and have the vendor leave some money in it for a set time(maybe 3 years). This becomes your deposit to borrow the rest of the money from the bank.

[speights boy]

My understanding is the banks will treat vendor finance as debt, as it is simply a 2nd mortgage.
It they require the buyer to put equity into the property, this would not qualify.

[ENP]

I have a $6k personal loan debt with the bank.

I'd work on getting rid of that as soon as you can.

x2

The interest on your personal loan would be 15% or more.

It is difficult to make that sort of return without being very astute in what you are investing in or taking on more considerable debt.

Get rid of that first as most mortgage brokers or banks won't lend you hundreds of thousands of dollars if you can't show them you can pay back 6k in a timely matter.

I know all the books say money down deals, etc but the best way to get the ball rolling is to set up a rock soild savings plan.

[Mauro]

Thanks

have a verbal agreement with my current employer which I don't intend to break, so I can't expect to get my deserved 80k p.a. on the next 18 months or so, if I will get it (too long, too much time!). It seems unreal for me waiting for more 5 years before I can start something!

How so?

Did he assist you in getting the PR?

Loyalty is one thing - you must look after number 1 however...

Yes he did assist, but I spent a lot of time there already too. I decided to apply for quite a few jobs this week. Let's see what happens.

A possible way to get into a place is to buy a difficult to sell place and have the vendor leave some money in it for a set time(maybe 3 years). This becomes your deposit to borrow the rest of the money from the bank.

I guess it's the only way to get started for me now.

My understanding is the banks will treat vendor finance as debt, as it is simply a 2nd mortgage.
It they require the buyer to put equity into the property, this would not qualify.

x2

The interest on your personal loan would be 15% or more.

It is difficult to make that sort of return without being very astute in what you are investing in or taking on more considerable debt.

Get rid of that first as most mortgage brokers or banks won't lend you hundreds of thousands of dollars if you can't show them you can pay back 6k in a timely matter.

I know all the books say money down deals, etc but the best way to get the ball rolling is to set up a rock soild savings plan.

I agree. The personal loan is set to be repaid in 3 years but I aim to get rid of it by the end of this year (top).

It's understandable that savings are the way to go but it would take me ages to save what it's said is the ideal: 80k. I got to get started sooner than that. Of course with some reasonable deposit, I admit now, combined with the willing to sacrifice my comfort.

Will definitely get hold with the mortgage brokers and open homes, it won't hurt me anything, it's time to shake it all up.

Thanks guys for the advice