Articles - Graeme Fowler

[Wayne]

The difference is that you are making p payments a choice. The strategy however negates this choice.

There is still a choice in how much principle is paid - the loan term.
Take a longer term, pay less P - make the loan term long or short enough that the outgoings (including P) match the incomings (rent) after you provide for tax.

I did recognise the tax component but I negate it - I pay IO loans and use all the spare cash (after tax, including any refund) to pay down the loan. The amount varies year by year depending on maintenance etc.

Maybe this is the 3rd option - has worked well for me over the last few years.

I find this approach works well because it also recognises that the income increases as time moves on (rent increases) whereas a standard P&I loan type structure doesn't recognise this - you would have to make voluntary P repayments which sort of negates the structure anyway.
So I just approached it with a simple desire - get the properties to pay themselves off as soon as possible.

[orion]

Hi Paul,

Thanks, glad you enjoyed the book

1) Definitely preferable to invest where you live. If serious, some people will move to where it does make sense. I know Robert Kiyosaki moved to Phoenix many years ago (can’t remember where from now) to invest there. Not easy from a distance, it is possible but wouldn’t recommend it unless you have someone there you can trust 100% and can do or organise things for you when needed.
I did work in with a guy from Auckland 2 – 3 years ago and he bought 11 properties which I found for him and then put him onto my property manager. Trust needs to be on both sides as it requires a double settlement if doing this. If you only want a couple here and there in different locations, it can work fine generally.

2) If in your example the cashflow after maintenance, rates, insurance, PM, loans etc were exactly the same, then to me it would not matter which scenario.

3) Not with the 20 properties example, not here in NZ. May be possible in the U.S. or some other countries.

No, still have the same thinking as when I wrote the book

Hi Graeme

I have now read your book, which I think is an excellent addition to the body of knowledge on real estate investing. The openness with which you discuss the past and present is refreshing and leaves few issues unanswered. I do however have a few questions:

1. How important do you think it is to invest in a place that you live or at least know intermittently. I noted that you had purchased outside of the Hawkes Bay area but in the main, you localise your purchases to a region that you know extremely well. How important do you think this is to investing success? I note that Garry focussed on Auckland and lives in Auckland and this trend is similar to investors in Palmy, Chch and Wgtn that I know.

2. Hypothetical. If you could have a choice of two properties portfolios, one consisting of 2 properties each worth 1 million or 20 properties each valued at 100k each, with the total yield across both portfolios equivalent, which portfolio would be your preference and why? I can see arguments for both but would be interested in your views.

3. Related to question 2: Do you think that it is possible to achieve this strategy outside of lower socio-economic areas. I'm likewise a follower of your way of thinking, to a point and note that the purchases in my case are other regional areas or places like Linwood in Chch which, from what I can tell has a similar general reputation as the likes of Flaxmere. I do believe this is in a part where the arbitrage lies in that the areas are unfairly maligned and that there are good and bad areas in each of these suburbs. People's failure to see this is seemingly where the opportunities lie. But can it be achieved outside of these areas? In previous posts, I have seen you say Auckland yields makes this difficult. Can we conclude that it is by design more likely to be achieved in lower socio-economic areas? My thoughts are that it is but the finds will be rare and the timing even more crucial.

I have read commentary on each of these questions in posts and the book but wondered whether your thinking on these three questions has changed in recent years.

Kind Regards
Paul

[Paul34]

Thank you, Graeme

The book is an effortless read, and the transparency is unlike anything I have read before in property. The style of writing is I think what makes the book a real gem.

Thank you for the comments above, which confirmed my thinking. The advantage I see with more properties is that if one were to get oneself into trouble, they could sell down without destroying their wealth which is not the case if all the assets are in one place. The issue I see is the maintenance, and that tradeoff is one is what I believe favours the more expensive building. That, however, as hypothetical as these opportunities don't exist out of the main centres.

I have one last question from my reading. Your note on page 116 the correlation between cities over long periods. I have noticed something similar and have discussed with another in the field that there is a ratio maintained between areas. The ratio doesn't just exist for cities but is fairly across the board, excluding places that become depressed. That line on page 116 I think is one of the most important in the book and is central to the approach. While you say it doesn't matter about inflation, which I understand given the foundation of what you are hammering home is that equity is created over time by design, this correlation is a crucial thing to grasp fully.

I would love for some statistician to work the numbers on this and establish the ratio. I'm sure it exists like pi Seriously though this will then provide the driver of the ripple effect (when the ratio gets out of whack) and also point to how large it will go. Your recent achievements are indicative of this timing. I realise this is speculative, and therefore outside the core tenant of the book, but I agree with you about that correlation, and I think this should not be under emphasised. Noting that, is part of your wisdom.

[Bob Kane]

With P/I buy and hold strategy laid out the principle payment is set up as part of the loan (say 20 or 25 years) and therefore to not pay it is to default.

There is a risk in doing this and most of us remove that risk by going IO.
We can always make lump sum payments whenever we want so we get the best of both worlds.

[Wayne]

There is a risk in doing this and most of us remove that risk by going IO.
We can always make lump sum payments whenever we want so we get the best of both worlds.

Agree - it gives YOU back the control.
Not for the weak of will mind - many would buy a new <insert choice here> with any leftovers rather than pay the mortgage down.

[orion]

Thanks Paul,

It's very much in correlation with cities over 100,000 population. Under that and it's not so accurate as often there's not enough population to sustain growth of population, industries etc. Also it will change over time with unexpected occurances such as the GFC then the new build shortage in Auckland, but overall it all pretty much is the same as 60 years ago or more.

I even hear in HB a lot that buy in Havelock rather than Flaxmere as you will get better gains, it's just ridiculous thinking and it's simply not accurate.

It's not worth (in my opinion) getting anyone to work it out as in a statistician. And you say and I've said before, it's the equity that's gained over time and whether a property is worth $200,000, $250,000 or $1,000,000 when it's paid off to me isn't important.




c

Thank you, Graeme

The book is an effortless read, and the transparency is unlike anything I have read before in property. The style of writing is I think what makes the book a real gem.

Thank you for the comments above, which confirmed my thinking. The advantage I see with more properties is that if one were to get oneself into trouble, they could sell down without destroying their wealth which is not the case if all the assets are in one place. The issue I see is the maintenance, and that tradeoff is one is what I believe favours the more expensive building. That, however, as hypothetical as these opportunities don't exist out of the main centres.

I have one last question from my reading. Your note on page 116 the correlation between cities over long periods. I have noticed something similar and have discussed with another in the field that there is a ratio maintained between areas. The ratio doesn't just exist for cities but is fairly across the board, excluding places that become depressed. That line on page 116 I think is one of the most important in the book and is central to the approach. While you say it doesn't matter about inflation, which I understand given the foundation of what you are hammering home is that equity is created over time by design, this correlation is a crucial thing to grasp fully.

I would love for some statistician to work the numbers on this and establish the ratio. I'm sure it exists like pi Seriously though this will then provide the driver of the ripple effect (when the ratio gets out of whack) and also point to how large it will go. Your recent achievements are indicative of this timing. I realise this is speculative, and therefore outside the core tenant of the book, but I agree with you about that correlation, and I think this should not be under emphasised. Noting that, is part of your wisdom.

[orion]

There is a risk in doing this and most of us remove that risk by going IO.
We can always make lump sum payments whenever we want so we get the best of both worlds.

And what happens to all those that are on I/O if the banks make up a new rule that within 5 years everything has to be on P & I?

With higher yields you can pay principle as well, therefore not relying on if there's money left over after everything.

Up to you what you do of course, there's more risk in it using I/O and if you don't mind that, it's fine

[Wayne]

And what happens to all those that are on I/O if the banks make up a new rule that within 5 years everything has to be on P & I?

With higher yields you can pay principle as well, therefore not relying on if there's money left over after everything.

Up to you what you do of course, there's more risk in it using I/O and if you don't mind that, it's fine

For the same property (same mortgage rate, same rent etc) the outcome would be the same.

Having an IO loan doesn't mean you have to push the envelope harder but I do understand that people would be tempted - extend themselfs so they are covered for IO only and not allowing for any P.
Your way is probably safer up front for people who aren't fiscally prudent.

[Cousinit]

Thanks Orion for all your detailed posts .

One question I have is why you have stuck to residential investments and not taken the obvious next step of taking up commercial property?

I haven't read your books though.
Thanks again

[Beano]

That question has always interested me too
When you get a reasonable size portfolio ...like say 50+ residential it is a lot of work where as a switch to one or two commercial can reduce your workload immensely

[orion]

Thanks Orion for all your detailed posts .

One question I have is why you have stuck to residential investments and not taken the obvious next step of taking up commercial property?

I haven't read your books though.
Thanks again

Hi Cousinit,

I have had commercial properties in the past and may have some in the future as I'm always on the lookout for something good. The trouble is I'm way more experienced in residential and find it a lot easier so stick to it mostly.
Property managers look after them so there's very little if anything for me to ever do. For the last 3 years or so, me and my partner have been focusing more on the trading/renovation side of property and been enjoying that. The residential properties tick away in the background slowly getting paid off with very good cashflow from them, so I don't feel like I need to focus too much on anything else.
Some people prefer commercial and do really well out of it, if I was starting again from nothing, maybe I would as well, not sure.

[orion]

Is Paying for a Property Mentor or Coach Worth it? 2018

The question of whether it’s worth paying for a property coach or mentoring for investing comes up a lot. There are many organisations in NZ that you can pay anywhere from around $10,000 to upwards of $40,000 for their mentoring. These are usually for a 12 month time frame, while some say it’s not limited to 12 months, but is for a lifetime of coaching. There are others who may coach you on an individual basis and have a limited number of clients, maybe 10 – 30 clients.

For every proponent of mentoring there will be an equally vocal detractor, you may hear comments like; teachers only teach because they can’t do it for themselves, or they’re only doing it for the money, or they’re supplementing their own income to give themselves extra cash-flow etc. While some of these can be true at times, it’s not always the case.

So, is it worth paying the money to have a mentor?
It’s not an easy one for me to answer. I’ve seen and heard of many people who have wasted a huge amount of money on mentoring/coaching and now have no money to invest or worse, they proceeded to lose money investing. Then there are others that have done extremely well, learnt a lot from it and paid back for the mentoring they received, hundreds of times over.

Why are there such extremes?
If you ask most experienced property investors if they think it’s worth a beginning investor to pay someone to teach them about investing, they will most often be heavily against it, or hugely in favour of it - not usually neutral or say ‘it depends’.
I think there are a lot of reasons why there are these extreme contrasts of value that people get from coaching.

First of all there are a wide variety of coaching organisations in New Zealand, teaching different strategies. Some teach mostly property trading and renovations, others teach strategies that in my opinion are very risky and will not work in all markets, others will teach you the basics plus some more advanced techniques, others will teach you higher risk strategies, others will teach you about investing plus the mindset of investing (to me extremely important) and others will teach a combination of these. I think also that some businesses portray themselves as a mentoring and education provider as a thinly disguised veil to sell properties, which is their core business. Funnily enough they teach that the best investments are the ones they sell!

Why are there so many different ways of teaching?
It comes down to what the mentoring organisation thinks are the most important aspects to succeed are, for the investors they’re coaching. They generally (I believe) want their students to do well. Most of the get rich quick mentors from 10 – 15 years ago that were only in it for themselves are now gone; and as far as I’m aware, lost most of - if not all of their money.
It was interesting that even though I warned hundreds of investors about certain charlatans that were mentoring gullible people at the time, many of them still went ahead and gave these people their hard earned money.

However we’ve seen that two different students can get vastly different results from the same coach, so it’s not just the coaches/mentors that play a part in the success or failure in all of this, the other major component is the person being mentored!
The person being mentored or wanting coaching from someone, is an even bigger part than who the mentor is! 

Why would I say that? I ran group mentoring programmes around 12 - 15 years ago. I also did a couple of 1 and 2 day trading/negotiation seminars to over 100 people that were $5,000 + GST. Some people did really well, some not as well and then others pretty much did nothing. Why is this? How could the results be all so different if I was teaching them all the same thing?
Last year using the same techniques as taught mostly in the trading seminars, myself and my partner Katrina made close to $1 million last year. About 85% of it was through trading/renovations on 24 properties and the 15% or so was gained in equity through four buy and holds that we purchased together.

There are a lot of reasons that some do well and others do not, and it’s not until the last few years of doing lots of one on one meetings with people that I can see more clearly why it is now that some do well and others do not.

In 2014/2015 I also did mentoring for around 60 investors in Hawkes Bay, all for free. There were 10 or 11 evening seminars I held over the 12 months for these investors in Havelock North; on all sorts of property related topics.
Some of these included the basics of investing, what ‘is’ an investment, using safe strategies that work in all markets, how to buy well, planning/goal setting, negotiation techniques, mind set, knowing the numbers, how not to get stuck if they wanted to own more than 5 – 10 properties, ‘why’ they wanted to invest and various other topics. I was also available to any of them for the 12 months for individual meetings. These were to go over their own situation, what they wanted to achieve, their risk level and lots of other valuable information I needed in order to help them succeed.
Some of these people I met up with only once or twice during the year for a one on one, and others I met up with at least once a month.

With all of the people that attended regularly, as far as I remember they all bought investment properties over the next year or two and some have bought many more properties since then. The seminars gave them a good ‘basis’ or ‘foundation’ of what property investing is, what it’s all about including the positives and negatives of investing. Then by sitting down with them individually and getting to know them and how ‘they’ thought, their fears, concerns, and ‘why’ they wanted to invest, it helped me more to help them.

It was this group of investors in Hawkes Bay that I originally set up the Facebook Investor Chat group for. I would put up the deals that I was buying; some were renovation projects, others were quick flips, plus all of the 20 properties I bought that eventuated in me writing the ‘20 Rental Properties’ book in 2016. During the seminars, I often had people say ‘there aren’t any properties out there to buy as you are buying them all!’ I would say “please don’t use ‘me’ as your excuse, for not going out and even looking!” There were plenty of deals around if people really went out searching for them and as mentioned I think they all did buy a property or two at least.

After 18 months or so I opened up the Facebook Investor group to other investors around New Zealand (also has 5 - 10% overseas investors in it). It’s now approaching 15,000 members with around 30 – 50 new threads starting each day with many people posting on it. The trading of the 24 properties that I mentioned before were all documented in the chat group in 2017.

Since doing the free seminars in HB in 2014/2015, I still do one on one consultations for people. These are $400 + GST for an hour (mentioned in my 20 Rentals in One Year Book).
Every one of these consultations has been so different. From the 70 - 80 people that I’ve met up with in the last couple of years, no two meetings have been the same. They can go off on all sorts of various tangents depending on what they are really wanting.

Generally, I will only meet with investors that have several properties already. The reason being it’s a lot easier for me to guide them in the way forward after they have already taken the biggest leap, and that is getting started. Helping people to get started and buy their first property is not something that I find easy to do at all. For that reason I won’t generally meet with people for the one on one chats, as an hour would normally not be enough. I would rather that they read several books on the subject of property investing, join their local PIA, talk to other successful investors in their area and maybe do a few seminars or courses (free ones if possible) on real estate investing.

Having said that, about 20 years ago I did meet with a guy many times who was extremely keen to start investing in property. He didn’t particularly like his job and had although he had some money to get started, it wasn’t a lot. I lived over an hour away from him and I thought if he wanted to talk to me that much and also pay me $100 each time we met, he must be very keen. We met many times over the next year or two and each time he would bring his book with a few more pages of questions. We became good friends and within a couple of years he was doing really well and ended up buying about 50 properties, many of which he still owns today. He is also one of the 10 millionaires in my first book that was updated in 2008 with the blue cover (not the original book written in 2003).

Another guy that approached me after a seminar that I was speaking at in Wellington near the end of 2000 came up to talk to me and wanted to meet. He had one property at the time that he was quite despondent about and also owned a business in Hastings. We met up many times and he bought a lot of properties over the next few years and was able to retire. He had paid the mortgages off on all of his properties in less than 10 years (about 15 properties). He then sold his business at age 50 (over 10 years ago now) and retired. We are still good friends today and do many local and overseas trips together with our families.

Going back now to mentoring/coaching, I believe the very best way to be mentored is one on one. However most successful investors are still out there investing for themselves and so this isn’t always that easy.
Also be wary of individual coaches and also mentoring organisations where the coaches have only been investing themselves for 10 years or less. Often, these coaches have done only a small amount of investing themselves. They’ve only ever bought in a steadily rising market and naturally have done well, but have not gone through something like the GFC or a declining property market where it’s very different to the rose coloured glasses they often see through. Strategies that these organisations generally teach will only work if property prices keep going up, which of course doesn’t always happen.

If you do want to be coached/mentored, there are some good organisations in NZ however as I mentioned before, the mentor is only one aspect. The mindset of the student being mentored/coached is about 80% of the equation and greatly determines whether they will be successful or not.

How your beliefs affect your outcome more than your choice of mentor.

For those of you that have read my 20 Rental Properties in One Yearbook, you may remember me writing about ‘how we all create our own reality’. What we believe is true about the world or about other people; we will constantly be finding new evidence to support these beliefs. Our beliefs usually start from a thought, an event, what we’ve read or what somebody else has told us and then develop from there.
A belief starts with a single thought or idea. It’s something that we’ve practiced thinking over and over and over again and then continue to find new evidence to support it. Eventually it doesn’t become just a belief (to us) anymore, it becomes our truth.

Beliefs can take some time to become beliefs and thereafter are not usually questioned. As adults and potential investors wanting to invest, we already have a belief (or what’s true to us) about teachers, about others telling us what to do, how intelligent we are, how quickly we learn something, our beliefs about money, our beliefs about rich people, our beliefs about tenants, beliefs about landlords, beliefs about coloured people, beliefs about different cultures and people from other countries, beliefs about sales-people and many other beliefs that which we don’t ever think of questioning. How does all this relate to mentoring?

You may now be able to see (or not) that for any individual/couple thinking about whether they should pay for mentoring or not, they already have hundreds of beliefs about every aspect of what mentoring is. Funnily enough also and the way Law of Attraction works, it’s like we are all tuned into our very own radio station. The station that we’re on (the frequency that matches all our beliefs), we also broadcast out into the Universe. And what matches that signal is attracted back to us, giving us more evidence to support our beliefs, or what’s true to us.

Have you ever had a discussion with someone that has different political or religious views to yourself? The more you try to explain why your belief is true, the more the other person seems like they’re just not listening to you and will cling even stronger to their beliefs. You both get so frustrated with each other and just want to go and talk with other people that agree with your belief!

So with our already learnt set of beliefs, we go out looking for someone to coach us and tell us how to invest. Can you see that those people who don’t really trust sales-people that much may ‘attract’ or find a coach that isn’t that trustworthy, or you find out later that they want to sell you over-priced investments as well? Or someone that believes they really aren’t a good or fast learner will find a coach that either talks too fast or doesn’t have time to explain things over to them? Or a belief that if you pay someone a huge amount of money to be coached, you won’t really need to do a lot, just sit there and you’ll get rich?

On the other hand, if you have someone willing to learn and believe they can be successful with some experience and helpful guidance, and believe that they will find a coach/mentor to help them be successful; doesn’t it make sense that those beliefs also will become a reality?

You will hopefully be able to understand now that the other people we attract are just a co-operative component in what we are wanting, coupled with what we believe (and 99.99% of it we are unaware of). In other words, the success or failure of you wanting to be coached comes down partly to who’s coaching you - but mostly about you!

The right student will find the right teacher, so it’s important that first you decide what kind of student you want to be!

I never had a mentor when starting out and don’t know how I would have got on if I’d had one. My basics of real estate were non-existant when I started nearly 30 years ago. When I bought my first rental property, it was the very first property I went to see. I bought it because the sales-person said it would be a good one for me. I sold it seven years later for a loss of $40,000 and ended up with nothing. So seven years after starting, I virtually had no money, but I did have a lot more knowledge and also knew a lot about what not to do!

It’s impossible to say what would have happened if I had a mentor/coach to start with, I may not have lost money on my first deal, but I also may not have learnt as much as I have done by investing myself through trial and error. However I am fairly sure that if I had all the information and knowledge that I have now and was starting again at age 24, I would be a lot richer today!
I estimate my net worth would have been over $50 million today had I put in the same amount of effort over the years; more than four times what it actually is. There are a lot of things I would have done differently over the last 30 years looking back now; however I wouldn’t really want to change any of it! 

Summary

It’s not an easy question to answer whether paying for mentoring is worth it, or not. There are many stories where people have lost a lot of money paying for coaching as well as many success stories.

A friend of mine who also helps me run the Facebook group is an example of this. He invested for a few years, making some mistakes and doing some things well. Then when the right mentor became available he leapt at the chance and has had great results since. He looks back and there were plenty of people who could have advised him as he was starting, however he wouldn’t have known what questions to ask or whose advice to follow. It can be a case of ‘you don’t know what you don’t know’ so beginners will often not know who to talk to, or what questions to ask.

Overall, I think the people who have one or two properties already have a higher chance of success using a mentor than somebody just starting out. This is because they have already done the most difficult task of all, and that is taking action.
(It’s not true in all cases and somebody with the right mindset and set of beliefs starting from nothing could do extremely well with the guidance and support of a good mentor).

The investors that have already started often had to overcome many initial fears, concerns or worries. Maybe they had concerns of borrowing money and the huge debt associated with buying their first rental, or fear of losing money, or worries of how others would perceive them now being an investor/landlord etc.

These people often just need a bit of guidance of what to do next and I find are easier to coach. What strategy will take them to where they want to be financially, what do they need to put in place, what sort of properties should they be looking at, how they can be buying better, having a good team around them, all those types of things.

So, is paying for a mentor/coach worth it?
If you are contemplating it, think about all of what I’ve mentioned here before deciding what you want to do. There are some people that simply have an idea of what they want to do and then go out and achieve it successfully. Others will read books first, attend seminars, talk to lots of people and then maybe do something.

We are all different and while mentoring doesn’t suit everyone, for those it does suit - finding the right one and working alongside them can help you achieve all the things you want to achieve.

Whatever you do choose; I hope you are all successful but most of all, happy

[charlotte30]

Dear Graeme

Once again a great post. Thank you. As you grow you learn and I think it is very hard for one mentor to fill that changing role.

Cheers

Charlotte30

[orion]

Article – Biases August 2018


A little while ago, I asked the following question on my Facebook Investor group page, for all those investors that had been investing in property for at least 15 years ... “If you knew exactly what the market was going to be doing every step of the way over the last 15 years, what would you have done differently? Also what would your approx net worth be now, compared to what it actually is?”

There were a lot of comments ranging from people saying they would do nothing different to others saying they’d do a whole lot of things differently.
It would be a bit like if you knew 100% for sure what this Saturday night’s lotto numbers were going to be and it was a $20 million Powerball draw, would you buy a ticket? I think most people of course would, knowing they were going to be $20 million richer on Saturday night.

For me, if I knew exactly what market prices were going to do from the day I started investing back in the late 1980’s, I would have done things a lot different from what I actually did. For one thing I wouldn’t have bought my first rental property, losing about $40,000 over the next seven years.

Knowing what was going to happen in each market all around New Zealand, I would have still focused on buying rentals that had good yields, but also bought as many properties as I could, just before I knew prices were going to sky-rocket. Around 2000 – 2003, prices doubled in Hawkes Bay where I live, and also they’ve pretty much doubled in the last 3 – 4 years here again. Around 2005/2006 was a high, and then prices dropped by 25 – 30% over the next seven years or so.
To maximise things here, I would have still held the rentals that I owned, but not been so active in buying from 2006 – 2013, knowing that even by buying well and paying down debt on P & I loans, the equity would largely be eroded by values dropping so much.
Other locations all around NZ have had huge growth periods over a few years as well. Also, there have been other times when the market has slowed or dropped in value. So whatever market or location you are in, you could have done similar things had you known exactly what was going to happen.

In 2000 – 2002 I purchased about 40 properties to wrap (similar to rent to buys) and although I made a little bit on each deal, an average of around $15k I’d guess, it was nothing in comparison to the amount I lost (if they had been rentals) as each property almost doubled in value over the next couple of years. Just from those properties alone, if they’d been kept as rentals, I would have now been $10 - $12 million better off. There would be very little debt on them now, plus they’re now worth 3 – 4 times more than they were 18 years ago. So I would have bought as many rentals as I possibly could have, finding JV partners at the times when I didn’t have the ability to finance any more. I would have done this up until around 2005 and then stopped, holding whatever I had at that time. Then around 2012/2013, I would have started buying again, using the same strategy, again with yields that made sense (at least 8%). Doing all this, I would probably own 500 or more rental properties today and be geared at around 30% - 35%. My net worth would be approx $80 - $100 million, six to seven times higher than it actually is. That’s a big difference (and it may be even a lot more), just for not knowing what’s ahead in the property market.

Does it concern me or upset me? No of course it doesn’t. The reason it doesn’t concern me is because I know that nobody else knows the future either; even though a lot of investors think they do. One guy even wrote a book about his theories on ‘key indicators’, ‘drivers’, market influencers and other such nonsense, telling investors what’s going to happen to market prices and what to look out for. It didn’t work for him, he lost all his money within a few years after this (a lovely guy, just focused in this case on things that aren’t predicable, and also not important to successful investing).

With a lot of the posts on my Facebook Investor group as well as Property Talk etc, people often ask others what they think prices will do, or tell everyone what their own opinion is about it. The ones that think they know will often put news items or other article type posts that agree with their own opinion. So, you get a lot of news items with some saying prices will go down because of this and others saying they are going up because of this reason, or that reason...
A huge amount of attention is therefore on these types of posts, and new people reading who are starting to invest understandably get very confused. Saying comments like ‘Is this a good time to buy, or should I wait?’ or ‘I want to buy something now, but am too scared that prices will go down, so I’ll wait and see what happens.’ Of course, it’s all theories and opinions of what people think will happen and as much use as a one legged man in an arse kicking contest.

The weird thing about it is none it if actually matters, as long as you invest safely with strategies that work in any market. In very simple terms - buy rental properties that are in locations of 100,000+ population, aim for an 8% or higher yield and finance them on a 25 year (maximum)
P & I loan. What prices or values do after that doesn’t matter. You’ll be gaining equity in the property from the start and eventually your tenants will have paid off your mortgage (apart from the initial deposit).
Not do as so many investors say or do – buy properties in the main four cities of NZ, don’t worry about the yield even 4 - 5% is fine. Then finance them on interest only loans, as we all know that market prices will always go up, so we have nothing to worry about. They forget about cash-flow and also market prices don’t always go up.
I have many investors come to see me after they’ve been investing for a while wanting help, having previously talked to their financial advisors/mentors and so called experts, and are surprised that they have no cash-flow. What have they missed they think? Should we buy more? I say ‘Yes buy more just like you’ve been doing if you want to go bankrupt! The more you buy like this, the bigger mess you will be in and the more likely you will lose everything.’

So, why did I ask the question to the group as mentioned at the beginning of this article? It was to see what reasons people had for doing what they did over many years of investing. Many investors sold properties and now wished they hadn’t. Personally, I think a lot of investors sell because their properties have gone up in value and they are scared that prices will drop. They read way too much about what other people think and get themselves all wound up and confused.

What it comes down to I believe is this – biases.
For someone like me who only buys rentals because it makes sense to buy at the time, in other words not caring what’s happening in the market out there, I don’t have any bias. In other words I don’t ever have an opinion on whether I think the market will go up or go down, because for me I don’t care what it does. Buying any property has to make sense on the day that I buy it, not if prices go up more, or avoiding buying it because I think prices will drop. There are not many investors I know today, even after saying this for the last 20 years or more to thousands of investors, that don’t have a bias.
A very good friend of mine who I have lunch with each week, used to have a strong bias when I met him 15 years ago. He was able to retire at age 27 in the early 1980’s from property. He’s owned a lot of properties and also sold a lot of properties. When I met him he had very low debt, only around 10%, so 90% equity, but refused to buy anything more. He’d recently sold quite a few properties and now had almost no debt. We used to have a lot of conversations about this and it took about two years before he bought anything more. He was convinced the market was at an all time high and prices were going to fall, as it just wasn’t sustainable. Two years later and prices had gone up again considerably, before he actually reluctantly bought anything more.

People often don’t have as strong a bias as my good friend had, but they usually have a bias one way or the other and it often affects what they do. If you look at top share-market traders or currency traders, the really good ones will not have a bias as to what they think will happen. Sure they will use graphs to determine what they trade and when, but it really is only an indicator to what they think could happen (they are not attached to it). Good traders may only be right 5 times out of 10 and still make a profit. Top traders can be wrong 7 times out of 10 and still make big profits.
An amateur trader will often have a strong opinion on what they think will happen with a stock or currency pairing etc. Having such a strong bias, these people don’t use trading stops (in other words a sell order when the price goes the opposite way to what they think it will) to limit their losses. And if things go so far in the opposite direction to what they assumed it would, they still hold on knowing they would lose money now if they sold, hoping one day that things will go the other way. This way in their own mind, they haven’t lost any money, unless they actually sell. Many sharemarket-traders still have worthless pieces of paper in their drawers from the 1987 share-market crash, having refused to sell when things didn’t go the way they had thought.

Sharemarket/currency trading is obviously a lot different to property investing in many ways. However, hopefully you will now understand that having an opinion, or trying to forecast the property market in any way - is about as pointless as an ejector seat in a helicopter.

[Perry]

Another Council Crock of Campylobacter

Chlorination woes: Hastings landlord forced to replace hot water cylinders in 50 of his 65 rentals
23 Jan 2019

The council adding chlorine to the water caused the problem, but, despite that, it's not the council's fault.

Of course.

No such thing as cause and effect.

Unless it benefits the council.

Then it does matter.