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Hi Guys
Just to enliven PT up a bit came across this statement from another forum. Please feel free to pull it to bits or agree with it.
"I've studied buy-and-hold investment models for fifteen years. The mathematics of them are inherently flawed. Over time you can't make money faster than inflation or the percentage increase in population even if you pick the best area and the best property and both of those are difficult to do.
Do the math on any investment property over a ten, twenty, thirty, fifty year or whatever period and you come to the same conclusion.
Use some common sense. On a real estate investment, it is quite easy to make 30% in the first year after a quick rehab or improvement. Do you think you can make 30% year after year on the same property? When do you think your yield gravitates towards the median gain of all other similarly situated properties? It has to, it is unavoidable.
How do you earn spectacular gains holding property decade after decade? You can't. All income properties will all appreciate at the same rate in a given area. The only way to earn high yields with rentals is to IMPROVE THEM and build equity yourself. Otherwise you are counting on marketwide appreciation and increases in rental income to make you money and how fast do you think that will compound? ONLY AS FAST AS OTHER SIMILARLY SITUATED PROPERTIES or in other words, at the market rates.
Again, use some more common sense. The longer you own a property, the higher your maintenance and repair costs. As a building gets older, it needs more work. It wears out and the owner needs to fix things to keep attracting tenants and maintain the current rental income. Which property is going to appreciate at a higher rate? The new property with a lower expense ratio for the owner or an older property with a higher expense ratio? Every dollar in added expense per month per unit using a cap rate of ten is $120 in lost equity PER YEAR.
It doesn't matter how you look at this question. You can use theoretical mathematical models. You can use empirical statistical studies. You can just use plain common sense. The bottom line is you can make more money faster, with less risk, and earn higher yields buying properties, quickly improving them to add value, and selling them to pyramid your equity than buying a property and holding it for years or decades for market appreciation and gradual increases in rental income."
There it is, in it's entirety.
Kieran Trass I would love you to comment on it in regards to the Auckland market please.
Regards
Just to enliven PT up a bit came across this statement from another forum. Please feel free to pull it to bits or agree with it.
"I've studied buy-and-hold investment models for fifteen years. The mathematics of them are inherently flawed. Over time you can't make money faster than inflation or the percentage increase in population even if you pick the best area and the best property and both of those are difficult to do.
Do the math on any investment property over a ten, twenty, thirty, fifty year or whatever period and you come to the same conclusion.
Use some common sense. On a real estate investment, it is quite easy to make 30% in the first year after a quick rehab or improvement. Do you think you can make 30% year after year on the same property? When do you think your yield gravitates towards the median gain of all other similarly situated properties? It has to, it is unavoidable.
How do you earn spectacular gains holding property decade after decade? You can't. All income properties will all appreciate at the same rate in a given area. The only way to earn high yields with rentals is to IMPROVE THEM and build equity yourself. Otherwise you are counting on marketwide appreciation and increases in rental income to make you money and how fast do you think that will compound? ONLY AS FAST AS OTHER SIMILARLY SITUATED PROPERTIES or in other words, at the market rates.
Again, use some more common sense. The longer you own a property, the higher your maintenance and repair costs. As a building gets older, it needs more work. It wears out and the owner needs to fix things to keep attracting tenants and maintain the current rental income. Which property is going to appreciate at a higher rate? The new property with a lower expense ratio for the owner or an older property with a higher expense ratio? Every dollar in added expense per month per unit using a cap rate of ten is $120 in lost equity PER YEAR.
It doesn't matter how you look at this question. You can use theoretical mathematical models. You can use empirical statistical studies. You can just use plain common sense. The bottom line is you can make more money faster, with less risk, and earn higher yields buying properties, quickly improving them to add value, and selling them to pyramid your equity than buying a property and holding it for years or decades for market appreciation and gradual increases in rental income."
There it is, in it's entirety.
Kieran Trass I would love you to comment on it in regards to the Auckland market please.
Regards
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