Finance to get to 100+ Properties

[PTILoveYou]

Hi Gary,

What sort of yields are you managing to get in Auckland with new purchases? Would definitely like to get to the 100 in Auckland but it's looking like I would need to balance it with quite a few highly cashflow properties in rural towns to get there.

How many have you got under your belt now?

Not sure whether you go out on the road with Ron on Saturdays, but have been thinking of coming out and seeing what you guys have been buying.

Cheers,
Jonathan

I have 12 properties atm, worth about $8mil+

Just getting my finance for my 13th. Broker told me I can buy up to 1mil.

I would be buying crosslease half section house in good suburb and add bedroom/bathroom plus reno to add value.

4% gross yield is my target.

Yes I go on the road with Ron and our students every Saturday :-)

[snobilo]

None of the above are known for investing in property so your example proves nothing. I suggested business as a good choice.

I'm sorry...Warren buffet is considered one of the worlds most successful "investors". The fields of his investments are irrelevant although I can almost guarantee one of his investments would have had a stake in property at the very least.

My point is these are people who dreamed big and brought a change to the world that made them wealthy. They "invested" in their ideas. Broaden your horizon and think outside the square...

Lastly I started a paper trail of investments when I was 10 right up until I was 15 and made my first investment in shares then. I may not have been actively invested in the market in 2008/09 but I was following it and recording what I would do as though I was. Surprise surprise I didn't do too bad because I researched thoroughly into what I would do and played it safe at a time of turmoil. The economy now is not what it was a few years ago it is forever changing and if you don't take risks you'll be another sheep, be scared all the time and you won't go anywhere. Live a little - we are young take a risk or two - reading can only teach you so much doing solidifies it.

In a market like this businesses are far more riskier than property too - small business will be the first to start defaulting in a recession followed by job loss and personal defaults. In addition to that property is tangible, most businesses are not - you are so a non-tangible asset is a better choice than tangible in a volatile market? Thank you for entertaining my curiosity on your thoughts...

[PTWhatAGreatForum]

Live a little - we are young take a risk or two - reading can only teach you so much doing solidifies it.

In a market like this businesses are far more riskier than property too - small business will be the first to start defaulting in a recession followed by job loss and personal defaults. In addition to that property is tangible, most businesses are not - you are so a non-tangible asset is a better choice than tangible in a volatile market? Thank you for entertaining my curiosity on your thoughts...

Thanks for your interest. I have a couple of big projects on the go at present. One of these is business and other is purely a charitable project. Both are costing me a lot of time and energy but stuff all money.

My point of view is no different to what I would say about business. I strongly caution anyone thinking of setting up a business to:
1. Spend stuff all money until they are sure there is a market.
2. Do their market research and by this I mean not friends and well-wishers (If you know what I mean)
3. Listen to people who have been around the block

One of the big challenges in NZ is it's a fraught country to take a risk. I could write a whole spiel on just that subject.

You are absolutely right that a downturn will tip a whole lot of small businesses (and a bunch of bigger ones too) over the edge. It would be painful for me too (been there before) but I don't owe money on stuff so wouldn't lose it.

[Lovethiscountry]

Nice post snobilo

[JBM]

I have 12 properties atm, worth about $8mil+

Just getting my finance for my 13th. Broker told me I can buy up to 1mil.

I would be buying crosslease half section house in good suburb and add bedroom/bathroom plus reno to add value.

4% gross yield is my target.

Yes I go on the road with Ron and our students every Saturday :-)

Am looking at a commercial property with a Gross yield around 14%(11% net yield) 10yr fixed lease ..but we are talking the dead opposite of the Auckland boom town but small rural backwater surrounded with rich farmlands ....

I fully understand your buying such a poor yield as your hunting for the Capital growth...(did the same here in Central Otago new own home up 15%+ in 2-3months on small reno)

I've always been very conservative in property ...compared to the sharemarket (where my 2016 picks sit round 70% up currently,-JBmurc http://www.sharetrader.co.nz/showthr...etition/page15 )....

I truly would like to have a property portfolio that would allow me to give up the 9-5 ...

but just can't get my head round trying to do it in the current NZ property market starting at present times (NZ property really been in a 25yr+ Bull market and is only being pushed higher on lower rates and NZD'ers ongoing love affair in this fact)

Unless I can lift my personal income or my shares value to get the banks to loan me the funds needed to buy more high yield properties ..most likely commercial (as the return to effort is so much better from the numbers)

Simple fact It would be easy to retire from the 9am to 5pm if a bank would lend me 2-3mill @ a low interest 10yr fixed morg. etc

.....So really the truth is the easiest way to Property Glory is cheap debt and lots of it ...

[Don't believe the Hype]

You are forgetting rents increase overtime in Auckland.

But I guess you don't live in Auckland huh.

You're right Gary... Rent increases will sort out that $750,000 annual loss in no time!

How did you ascertain from these calculations that I don't live in Auckland? More crystal ball work?

[Nick G]

Am looking at a commercial property with a Gross yield around 14%(11% net yield) 10yr fixed lease ..but we are talking the dead opposite of the Auckland boom town but small rural backwater surrounded with rich farmlands ....

I fully understand your buying such a poor yield as your hunting for the Capital growth...(did the same here in Central Otago new own home up 15%+ in 2-3months on small reno)

I've always been very conservative in property ...compared to the sharemarket (where my 2016 picks sit round 70% up currently,-JBmurc http://www.sharetrader.co.nz/showthr...etition/page15 )....

I truly would like to have a property portfolio that would allow me to give up the 9-5 ...

but just can't get my head round trying to do it in the current NZ property market starting at present times (NZ property really been in a 25yr+ Bull market and is only being pushed higher on lower rates and NZD'ers ongoing love affair in this fact)

Unless I can lift my personal income or my shares value to get the banks to loan me the funds needed to buy more high yield properties ..most likely commercial (as the return to effort is so much better from the numbers)

Simple fact It would be easy to retire from the 9am to 5pm if a bank would lend me 2-3mill @ a low interest 10yr fixed morg. etc

.....So really the truth is the easiest way to Property Glory is cheap debt and lots of it ...

What about trading a few? I traded quite a lot with a partner and rolled that income into a run down central city property that renovated a lot and upped rent from $800 to $1300. Am looking for another one and then will probably trade some more to pay that off too. From there the core assets can pay for each other I guess since there (in theory) will be stuff all debt.

Say properties cost $500K to buy and $50K to reno and you can make $70K on a trade after GST. That's $50K cash in hand (ish). Do that 4 times, on the 5th keep the property instead of trading it, and pay down a whack of deposit. You now have a $620K value property with only $350K debt. Start small so you can hold the property if the market turns etc and treat it like a business. It's broad strokes numbers I realise but if you know enough about value to do well in shares property isn't that much different.

[PTILoveYou]

You're right Gary... Rent increases will sort out that $750,000 annual loss in no time!

How did you ascertain from these calculations that I don't live in Auckland? More crystal ball work?

Im not a math wiz but I struggled to keep my cashflow to be neutral the past 2 years due to rent rises and interest rate dropping.

My LTC is making cash now so that means 33% tax... and I got enough other incomes that I don't need more from my portfolio atm.

No offence if you live in Auckland, you just sound like those out of town cashflow preachers that's all :-)

[Courham]

No offence if you live in Auckland, you just sound like those out of town cashflow preachers that's all :-)

Some of us cashflow preachers are preaching strategies that ensure reducing financial risktaking- hence many her still recommending keeping cashflow in the equation and if that means missing out on the Auckland boat (some would say the Titanic) then so be it.

I feel sorry for anyone who actually foolish pays for your advice Gary for when it ll goes tits up they'll be left holding the bag and wondering what the hell went wrong, you'll just shrug your shoulders walk away saying it wasn't me.

There is an old saying, a little knowledge is a dangerous thing.

I think your buy to add some value by adding extra rooms strategy is sound, the rest of your advice, not so much.

No offence.

Craig

[Don't believe the Hype]

Im not a math wiz but I struggled to keep my cashflow to be neutral the past 2 years due to rent rises and interest rate dropping.

My LTC is making cash now so that means 33% tax... and I got enough other incomes that I don't need more from my portfolio atm.

No offence if you live in Auckland, you just sound like those out of town cashflow preachers that's all :-)

Gary - the property market is constantly evolving. What you bought over the past 5 or so years will have very different financials than a property being purchased today. I'm betting you bought at yields closer to 6% (possibly higher) than 4%.

Forgetting the balance of your 12 properties - let's review the financials on you next purchase independent of your portfolio

How far cash flow negative will the property you're planning to purchase with the $1million pre approval you talked about yesterday?

Your yield will be no more than 4.5% and at best your mortgage rate will be 4% (it's possible yield will be 3-4% and borrowing closer to 5%) - therefore even if you stump up the $300k to have this property (not your portfolio) at the 70% LVR requirements you will be AT BEST cash flow neutral with a fair bit of hope and creative accounting my calculations put you at negative $7500 annually. To improve the yield you may be able to do some changes to the property - more cash $25k-$50k so now you will need ~$325 - $350k out of your own pocket.

now multiply this by 100 to get to the desired 100 properties... $750k negative cashflow on top of $63million mortgage and a deposit of ~$30 million

You keep reverting in your posts to your own situation - as a coach (in any field) the coaches experience is relevant but only useful if they can adapt it to the students situation and current market environment - you talk about your portfolio being cash flow positive so you choose to leverage this cash flow to buy more growth assets and minimize tax - sound strategy for you if your risk tollerance is ok to hold more Auckland property in an already elevated market. Not such a sound strategy for a 19 yr old on $20/hr who is asking for advice on how to grow a portfolio bigger than 99% of private investors in a market with super low yield, limited other income and prices that have been running hot for a good while now.

[PTWhatAGreatForum]

.....So really the truth is the easiest way to Property Glory is cheap debt and lots of it ...

There is a lot wrong with the OP's post starting from the headline "Finance to get to 100+ properties".

Nothing about creativity, hard work, contributing to society or productivity. No, the central premise is debt and lots of it

A lot of people think debt is great... until it isn't. Ask anyone who has taken on a bunch of it and come unstuck. It is obvious many people here (who have only experienced one side of the cycle) mistake luck as being good management and some God given talent... and assume the carousel will keep turning.... they will be in for a big lesson about OPM in due course.

As Don't Believe The Hype has pointed out the numbers are major. As I said before, it's quite concerning the OP is being encouraged in their narrative "I want 100 houses where can I borrow the money" by people who should know better.

[Wayne]

A lot of people think debt is great... until it isn't. Ask anyone who has taken on a bunch of it and come unstuck. It is obvious many people here (who have only experienced one side of the cycle) mistake luck as being good management and some God given talent... and assume the carousel will keep turning.... they will be in for a big lesson about OPM in due course.

The question is 'when will 'due course' come?'
Until then they will keep crowing that it will go on forever.
There will be tears - the question is when.

[PTWhatAGreatForum]

The question is 'when will 'due course' come?'
Until then they will keep crowing that it will go on forever.
There will be tears - the question is when.

I can easily tell you "why" - "Chickens come home to roost", but I can't tell you "when" because this is subject to a whole bunch of variables which are way beyond me and anyone else here.

[snobilo]

There is a lot wrong with the OP's post starting from the headline "Finance to get to 100+ properties".

Nothing about creativity, hard work, contributing to society or productivity. No, the central premise is debt and lots of it

100 properties would require a lot of hard work...
Creativity in terms of "Creative LEGAL accounting"
Contributing to society? he is providing 100 +homes to tenants, that is a contribution in it sown + rates being paid to assist with infastrucutre, as well as tax on his income being a bigger contribution that most of ours.
It will start out with debt yes - Time erodes it if you are smart.

[PTILoveYou]

Gary - the property market is constantly evolving. What you bought over the past 5 or so years will have very different financials than a property being purchased today. I'm betting you bought at yields closer to 6% (possibly higher) than 4%.

Forgetting the balance of your 12 properties - let's review the financials on you next purchase independent of your portfolio

How far cash flow negative will the property you're planning to purchase with the $1million pre approval you talked about yesterday?

Your yield will be no more than 4.5% and at best your mortgage rate will be 4% (it's possible yield will be 3-4% and borrowing closer to 5%) - therefore even if you stump up the $300k to have this property (not your portfolio) at the 70% LVR requirements you will be AT BEST cash flow neutral with a fair bit of hope and creative accounting my calculations put you at negative $7500 annually. To improve the yield you may be able to do some changes to the property - more cash $25k-$50k so now you will need ~$325 - $350k out of your own pocket.

now multiply this by 100 to get to the desired 100 properties... $750k negative cashflow on top of $63million mortgage and a deposit of ~$30 million

You keep reverting in your posts to your own situation - as a coach (in any field) the coaches experience is relevant but only useful if they can adapt it to the students situation and current market environment - you talk about your portfolio being cash flow positive so you choose to leverage this cash flow to buy more growth assets and minimize tax - sound strategy for you if your risk tollerance is ok to hold more Auckland property in an already elevated market. Not such a sound strategy for a 19 yr old on $20/hr who is asking for advice on how to grow a portfolio bigger than 99% of private investors in a market with super low yield, limited other income and prices that have been running hot for a good while now.

Yes of course the market conditions change constantly, hence my buying rules constantly changes or adapts to the market as well.

Also the strategy for our individual students will vary slightly, based on their individual financial strengths and weaknesses.

The ultimate goal however, is the same, long term wealth and passive income. How I or our students achieve it will depend on market forces and how we adapt our buying strategy according to different phases of the economic/property cycle.

I was buying properties at 9% yields back in 2010, and no money down.

Now I will struggle to find anything 5% in the areas I want to buy in.

I think I will write up a long thread about my 2016 Auckland strategy, watch the space.