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Thread: Buy or bye!

  1. #1
    Join Date
    Jan 2014
    Posts
    1,035

    Default Buy or bye!

    Serious scenario!!!

    If you have the money now, knowing what is going on with the market and you have the opportunity to bag a bargain do you:

    A. Put the offer in with long settlement and hope by the time this pandemic passes you have a market to rent to.

    B. pass the property up, wait a few months then present offer?

    C. Keep the money on hand to see where we are going in the next few months.

    FH
    "Remember, people will judge you by your actions,not your intentions.You may have a heart of gold -but so does a hard-boiled egg".

  2. #2

    Default

    I didn't confirm on a contract I had to buy a house last week - the downside risk outweighs the upside in my POV.

    Beyond that locking myself into another financial commitment (mortgage/rates/insurance etc) that I can't get out of with the uncertainty of revenue streams and duration of this issue means it's not for me.

    You'd need a big pair of stones to buy now.

  3. #3
    Join Date
    Jan 2014
    Posts
    1,035

    Default

    Far too risky ATM! A recession is imminent now anyway, plenty of low lying fruit on the way so waiting is now the best policy.
    "Remember, people will judge you by your actions,not your intentions.You may have a heart of gold -but so does a hard-boiled egg".

  4. #4
    Join Date
    Mar 2013
    Location
    Auckland
    Posts
    1,698

    Default

    Would the people saying 'too risky' still say that if their day job was completely safe and their current tenants were beneficiaries?
    My blog. From personal experience.
    http://statehousinginnz.wordpress.com/

  5. #5

    Default

    I’ve been weighing up the options for myself recently- do I sell up now and get out before the impending price correction, do I sit and do nothing, or do I look for buying opportunities. There is a lot of risk involved in buying at the moment but I’ve come to the decision that I would buy now but only if the purchase price factored in the risk, i.e. I’d only buy something that allowed me to get by if/when prices correct and interest rates rise (I certainly wouldn’t buy into something that could get me into trouble in a few year’s time). It would have to be cashflow positive (and then some to account for future corrections) from day1.

    My current portfolio shows ca. 42% of rental income going to expenses (not including the mortgage). After paying P+I mortgage (@3.3% interest rate), I could currently break even on a $380pw rental income if I bought the house at $220k. However, if the rents get corrected down to $300pw and interest rates rise to 5%, I would need to buy the same house for $140k. At $300pw rent the house would have an 11.14% ROI. At current rents (if I did buy now) the ROI would look like 14.11% (with $380pw rent). So that is the level that I would be comfortable buying now, 14.11% ROI. While these numbers might look like wishful thinking compared to recent yields, it was only 4 years ago that I was buying houses for less than $140k returning similar yields in Flaxmere- and I’d be happy to buy in that area again now.

    I’m thinking to invest $2mill in property if I can find the houses. It might not be possible, but I thought that I’d put my intention here. I know a lot of people think NZ is about to have a prolonged and severe price correction and might want to get out and/or have more liquidity in these times. So if anyone wants to talk with me, I do have lending power that I’d spend on the yields mentioned above, so we might be able to meet each other’s needs in a bulk scenario and in a relatively pain-free way.

  6. #6
    Join Date
    Jan 2014
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    1,035

    Default

    Quote Originally Posted by deechnz View Post
    I’ve been weighing up the options for myself recently- do I sell up now and get out before the impending price correction, do I sit and do nothing, or do I look for buying opportunities. There is a lot of risk involved in buying at the moment but I’ve come to the decision that I would buy now but only if the purchase price factored in the risk, i.e. I’d only buy something that allowed me to get by if/when prices correct and interest rates rise (I certainly wouldn’t buy into something that could get me into trouble in a few year’s time). It would have to be cashflow positive (and then some to account for future corrections) from day1.

    My current portfolio shows ca. 42% of rental income going to expenses (not including the mortgage). After paying P+I mortgage (@3.3% interest rate), I could currently break even on a $380pw rental income if I bought the house at $220k. However, if the rents get corrected down to $300pw and interest rates rise to 5%, I would need to buy the same house for $140k. At $300pw rent the house would have an 11.14% ROI. At current rents (if I did buy now) the ROI would look like 14.11% (with $380pw rent). So that is the level that I would be comfortable buying now, 14.11% ROI. While these numbers might look like wishful thinking compared to recent yields, it was only 4 years ago that I was buying houses for less than $140k returning similar yields in Flaxmere- and I’d be happy to buy in that area again now.

    I’m thinking to invest $2mill in property if I can find the houses. It might not be possible, but I thought that I’d put my intention here. I know a lot of people think NZ is about to have a prolonged and severe price correction and might want to get out and/or have more liquidity in these times. So if anyone wants to talk with me, I do have lending power that I’d spend on the yields mentioned above, so we might be able to meet each other’s needs in a bulk scenario and in a relatively pain-free way.
    In theory 14% yield sounds good but usually has some hooks attached, flaxmere seems to get a lot of attention but not for the right reasons, I personally don't like anything outside of Auckland but would look at hamilton for the right price, flaxmere on the other hand just doesn't have the population to support and future growth IMHO, people are going to go to the big cities for work in a downturn and I just see the upside there.

    Here is some details about flaxmere.
    Flaxmere was built to cater to the housing demand of Hastings. Flaxmere was intended to be an upper-middle class subdivision but because land was subdivided into smaller lots it turned into a low income neighbourhood. Flaxmere has one of the highest social deprivation index values of the Napier-Hastings metropolitan area, being exceeded only by the suburbs of Camberley and Maraenui.[3]
    It has a small shopping centre with a supermarket, petrol station, post office, bakery, video store, butchery, indoor rock climbing centre, and various other businesses offering necessities and/or leisure. Other amenities include a library, police station, several churches and an indoor swimming complex, Flaxmere Waterworld.
    "Remember, people will judge you by your actions,not your intentions.You may have a heart of gold -but so does a hard-boiled egg".

  7. #7

    Default

    I'm not limited to Flaxmere. I'm open to anywhere with a population above 30k as long as the purchase price has factored in and allows a rent correction and higher interest rates to be stomached in the future. But I do have property in Flaxmere and don't have a problem buying there again.

  8. #8

    Default

    Quote Originally Posted by Frezzinghot View Post
    Serious scenario!!!
    If you have the money now, knowing what is going on with the market and you have the opportunity to bag a bargain do you:

    A. Put the offer in with long settlement and hope by the time this pandemic passes you have a market to rent to.
    B. pass the property up, wait a few months then present offer?
    C. Keep the money on hand to see where we are going in the next few months.

    FH
    Market destroying pandemic or not, the same rules still apply - if owning the property will do what you want it to, you buy it. If not, you don't.

    The key words in what I've written above is the "will do" bit - if you're relying on "Hope" then things aren't going to end well.

    Everyone I know in the investment market is holding onto their cash at the moment, there are going to be some great deals to be had in the coming months/year.

  9. #9
    Join Date
    Jan 2014
    Posts
    1,035

    Default

    Quote Originally Posted by Monsterbishi View Post
    Market destroying pandemic or not, the same rules still apply - if owning the property will do what you want it to, you buy it. If not, you don't.

    The key words in what I've written above is the "will do" bit - if you're relying on "Hope" then things aren't going to end well.

    Everyone I know in the investment market is holding onto their cash at the moment, there are going to be some great deals to be had in the coming months/year.
    Agree, the real trick is picking when to go in and all out. Go in too early and you miss miss better bargains down the line, go in too late and you've missed the best deals. Im picking 6 months from now once all the mortgage holidays are done.
    Not wishing any off this on anyone but someone will have to buy the properties.
    "Remember, people will judge you by your actions,not your intentions.You may have a heart of gold -but so does a hard-boiled egg".

  10. #10

    Default

    What is your opinion on Steven Goodie's take, that the property prices will not fall, actually the opposite?
    I am shopping for pre-approvals now, but not sure to jump in or wait. My gut tells me, its not over yet, actually the real mess has barely started yet.


 

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