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  1. #1
    Join Date
    Dec 2003
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    Hawkes Bay
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    Default Some Questions For Property Investors on Long Term Goals

    After reading many posts by mainly beginning investors, I am really interested - actually intrigued, in knowing what peoples' expectations and goals are from investing in property. I see so many investors asking the same questions such as - "do you think I should be looking for cash flow properties or capital gains properties?" or "what are the best areas to buy in to achieve this?" and "what yield do you think I should be looking for?"
    I strongly believe your outcome is dictated by the quality of the questions you ask yourself, and these types of questions I don't believe will lead to financial freedom in property. A big mistake people can get caught up in is talking property 'jargon' as if it actually has any relevance or significance to what they are doing.

    I am interested in investors' thoughts on the following questions as it applies to you, and how you see the answers relating to your own situation and long-term vision:
    Do you eventually want your property investments to replace your regular income, or will it just be a supplement to it?
    What time frame do you expect this will happen in?
    How are you going to achieve this? (rentals, developing, quick cash, lease-options, renovations or other)
    How much weekly income from your properties after all expenses are you planning on?
    How many properties will you need to do this?
    Will they be freehold ie no debt on them, or still partially mortgaged?
    Are you relying on any capital gains in order to achieve your goals?
    If you do not get the capital gain you hoped or planned on, will this affect your outcome?
    What happens if your rental properties values just keep pace with inflation at best - would you re-think your overall strategy?
    What was the main benefit, or advantage of property investment that initially interested you?

    Regards
    Graeme Fowler

  2. #2
    Join Date
    Jan 2004
    Location
    Whangarei
    Posts
    5,867

    Default

    Good questions. One in particular is something that I try to get across to people investing in anything... to a great degree, the term of an investment determines their appropriate strategies and choices. I think there are a worrying number of property investors out there who don't have either the time, funds, personality or skills to make it work.

    Call me frivolous but I have to admit to investing in property to a large degree just because I find it "fun". It is one way, not necessarily the best way (nor the only way) I seek to increase my personal wealth. I am not the kind of person that can do something just because it's profitable. I get bored easily... shoot me if I ever take money too seriously! Property investing allows me to experience new challenges on a regular basis as well as the thrill of an ongoing "project" which for me is a personal motivator. In the last three years, I've done a subdivision, had a new house built, purchased two more houses, significantly restored one of them, formed a family trust and an LAQC. The many and varied experiences of all this is what keep me going! Of course, it has to be profitable but if I ever stop enjoying it, I'll be looking for something else.

  3. #3
    Join Date
    Sep 2003
    Location
    London
    Posts
    150

    Default

    Excelent questions - something I know many property investors don't even consider! And they expect *me* to be able to tell them what to buy! I think it is the equivalent of saying "I have a car and I want to drive somewhere. How should I get there?"

    I will try to answer some of these myself (but there are quite a few.

    Do you eventually want your property investments to replace your regular income, or will it just be a supplement to it?
    I would have thought that everyone wants their property investments to replace their regular income eventually, and I am surprised by how many people don't even consider this a possibility. Often because (even more surprising) they consider rental income more risky than a job! I explain the best way to mitigate this risk is to buy more property so you will not have 100% of your portfolio empy at any stage.

    For myself I want my property investments to replace my regular income as soon as possible - that is my burning short term goal and is always in my mind. Timeframe - next 2 years. Will be achieved through paying down debt and buying low cost, high income properties (actually in the North of England, as I am living in the UK at the moment, and a Sterling income will hold me in good stead wherever in the world I live in the future). Once my personal debts are paid, should only need another 4-5 properties, mortgaged to the hilt.

    Are you relying on any capital gains in order to achieve your goals?
    Part of my strategy is to buy, refinance, buy, etc. which needs capital growth. This is in NZ. My UK properties I refurbish to force apprectiation or buy with a cash discount, therefore, capital appreciation is a nice bonus but not necessary. If I was in NZ I would do the same thing there, but it takes time to do (see previous comment about Sterling income).

    If you do not get the capital gain you hoped or planned on, will this affect your outcome?
    Obviously will because I won't have as many toys, but it will not affect my main goals. Excellent question because a lot of investors *do* rely on capital growth. I think that is fine over the long term (10 years) but hoping a property will increase in value so you can buy another one in a year's time is more speculating than investing.

    What was the main benefit, or advantage of property investment that initially interested you?
    It's definitely fun, you can add value to people's lives by providing safe, pleasant housing and being a reasonable landlord, passive income where I keep control of the investment.

    Cheers,
    Leanne[/quote][/b]

  4. #4
    Join Date
    Dec 2003
    Location
    Hawkes Bay
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    Default

    Hi Drelly & Leanne, excellent comments and feedback!
    As Drelly says - it can be more for the fun than for the money.
    My favourite part of all real estate investing is the negotiating, that gives me the enjoyment to outweigh any negatives associated with investing. So far this year, I have bought 4 properties and 3 of them have been privately. In this case, you get to talk and negotiate directly to the owners about their property, and often it is more than just the price that they are interested in, ie reasons why they are selling.

    Regards
    Graeme Fowler

  5. #5
    Join Date
    Jun 2005
    Location
    Auckland
    Posts
    5,086

    Default Re: Some Questions For Property Investors on Long Term Goals

    Hi,

    Yes, excellent questions to consider. Here are my answers, and a few thoughts of my own!

    Do you eventually want your property investments to replace your regular income, or will it just be a supplement to it?
    Whilst this would be nice, its is not the main goal. The main goal is to be able to be able to retire comfortably

    What time frame do you expect this will happen in?
    15-20 Years
    How are you going to achieve this? (rentals, developing, quick cash, lease-options, renovations or other)
    Rentals mainly, but we are considering other methods to accelerate our progress.
    How much weekly income from your properties after all expenses are you planning on?
    The written goal is $100,000 in todays terms after tax.
    How many properties will you need to do this?
    At present, each property is +ve by $4,000 on average, so about 25. Obviously the tax benefits reduce when you stop working.
    Will they be freehold ie no debt on them, or still partially mortgaged?
    Leveraged to the max whilst buying, then a period of concentrated debt reduction.
    Are you relying on any capital gains in order to achieve your goals?
    No, we are relying on increased equity to help us buy regularly - if that means adding value in the flat/down markets, then that is what we'll do.
    If you do not get the capital gain you hoped or planned on, will this affect your outcome?
    It will make us think harder about other ways of acheiving our goals, but is won't affect the overall outcome.
    What happens if your rental properties values just keep pace with inflation at best - would you re-think your overall strategy?
    Probably not, because we could live quite happily on the cash flow generated from the low-debt properties.
    What was the main benefit, or advantage of property investment that initially interested you?
    OK, I admit it, it was mainly the ESC Hype!. Since then (a whole year ago), we are able to put ESC in their place on the property information continuum, and things like leverage, control, adding value, tangible asset come to the fore.

    Now, we have been at this only a year, and have learned more new stuff than in any year since leaving higher education all those years ago. One of the most strident messages from all sources over that time is TAKE ACTION. Other messages, life EDUCATE YOURSELF, KEEP AT IT, DONT LISTEN TO DETRACTORS all mean nothing unless you have first taken action.

    So, if an inexperience investor, and we are still really in that class, were to answer:
    Quote Originally Posted by new_to_the_game
    Do you eventually want your property investments to replace your regular income, or will it just be a supplement to it?
    Haven't really thought about it.
    What time frame do you expect this will happen in?
    The guy at the seminar said 4 years.
    How are you going to achieve this? (rentals, developing, quick cash, lease-options, renovations or other)
    Errr.... what?
    How much weekly income from your properties after all expenses are you planning on?
    Currently we are paying $100 a week to support our investment, so breaking even would be good!
    How many properties will you need to do this?
    Not sure
    Will they be freehold ie no debt on them, or still partially mortgaged?
    Don't know
    Are you relying on any capital gains in order to achieve your goals?
    Yes - the developer said that they will go up at 10% a year forever.
    If you do not get the capital gain you hoped or planned on, will this affect your outcome?
    I'll sue the b'tard.
    What happens if your rental properties values just keep pace with inflation at best - would you re-think your overall strategy?
    So long as they are going up, I'll be fine
    What was the main benefit, or advantage of property investment that initially interested you?
    The tax write offs - I'm paying $33 a week less tax - that has got to be good, hasn't it
    then "new to the game" would be in a better life position than someone who didn't go to the seminar because it clashed with NZ Idol on TV. Admitedly, "new to the game" has a bit of work to do, and most of us have yet to go through the flat/down market phase, but at least they have got off their behind and done something. And they have armed themselves with one of the most vaulable PI tools around - this forum!

    Good on them, I say, but you might like to get yourself a mentor!

    Happy Investing.

    cube

  6. #6
    Join Date
    Jun 2005
    Location
    Auckland
    Posts
    5,086

    Default

    Quote Originally Posted by orion
    So far this year, I have bought 4 properties and 3 of them have been privately.
    Hi Orion,

    Just wondering - buy and holds, quick cash, wraps?

    And did you find the private sales from connections, adverts, letter-box drops - what methods have you found effective for finding private sales?

    Thanks

    cube

  7. #7
    Join Date
    Jan 2004
    Location
    Whangarei
    Posts
    5,867

    Default

    I'd be interested in some suggestions for private sales too... I put an offer in on a place at the weekend but right after me came 3 or 4 other people putting in offers as well. As it was a Sunday afternoon, the vendor didn't get to see my offer before the others and now he's in a kind of "dutch auction" situation. The bargain is gone as the others offered thousands more than an offer I had been certain of getting acceptance.

    If you're not first, you're nowhere right now! Maybe private sales are the way to go in this overheated market?

  8. #8
    Join Date
    Dec 2003
    Location
    Hawkes Bay
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    Default

    Hi Cube, some more great answers to those questions!

    Just wondering - buy and holds, quick cash, wraps?
    One is a rental, another one - the current owner is renting for a year or so, then I will sell it, another one - the tenant is staying on, I will get the exterior painted when they do move and sell on again, the other one (bought through an agent) will either be a wrap, or a quick cash - settles next Friday and is currently vacant.

    And did you find the private sales from connections, adverts, letter-box drops - what methods have you found effective for finding private sales?
    I have some "I Buy Houses" on a few rentals around town, also advertise weekly in the daily newspaper and a couple of free local papers. No letterbox drops or flyers etc.

    Regards
    Graeme Fowler

  9. #9
    Join Date
    Dec 2003
    Location
    Hawkes Bay
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    Default

    If you're not first, you're nowhere right now! Maybe private sales are the way to go in this overheated market?
    Hi Drelly, yes private sales are a great way to go if you are good at negotiating, but more importantly, know your market prices well - or have people on hand that you can ask, or get another opinion from. The majority of private sellers want too much, but about 10 - 15% of them will be worth following up on further. I ALWAYS get at least one other opinion from an agent or valuer that I trust that also knows the area very well. It is easy to get sucked into stories that sellers tell you about what they think their home is worth and the reasons why, and if you cannot prove otherwise, you will end up paying far too much. Private sales are definitely my favourite way to buy as you can get far better deals, and you don't have 10 other investors competing for the same property. Last year, about 15 or 16 of the 27 properties I bought were purchased privately. My aim is to buy about $15,000 to $25,000 below what they would normally sell for, which is very easy to do, no matter what the rest of the market is doing. This is in an area where the properties I buy are usually bought between $110,000 and $170,000. Two of them last year had profits of just over $40,000 each after all costs including land agents fees. Although I buy lots of properties privately, most sales are done through an agent, unless of course they are a wrap in which case I will find the buyer.
    So they can be a great way to buy, but unless you have the experience of the market you are buying in, and also trustworthy people that you can get accurate information from, you could quite easily lose the equivalent amount of money, that you may think you are making on a deal.

    Regards
    Graeme Fowler

  10. #10
    Join Date
    Jan 2004
    Location
    Whangarei
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    Default

    That makes sense. I always try to stay informed about market values even when I'm not buying.

    I'm investigating a block of 10 one bedroom flats at the moment which would be a private sale. Do you have any advice on what sort of things to look out for?


 

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