How to make a fortune and lose it all.

[whitt]

Buy as many properties as you can 3 years ago and when they have all gone up in value tell all your friends you knew what you were doing.
Now for the next 5 years of your life:
-Deal with bad tenants, due to the bad suburbs you purchased in.
-Deal with high never ending maintenance if you wish to preserve your investment. High maintenance is because you bought well under value. The only reason you managed that was the property was in bad condition and no body else wanted it. Dolf De roos mentions it is easier to find a below value property in a cheaper suburb than an average one.

Janesco wrote:

Most properties that are being sold as cash flow positive are in fact the bottom of the barrel. You can only rent rubbish to rubbish. They don't pay the rent so it is no longer cash flow positive. Also the gang problem and the white trash areas.

-Several years down the track get fed up with all of the above and sell some properties off to relieve the pressure. This is historically what happens during the slump the fun part of rising values is over and Investment property is now hard work. So alot of investors give up.

Remember anybody can make money in a boom by just purchasing any property. The trick is being able to hold on to it all untill the next upward cycle. History has shown us investors which accumulate significant portfolios, only to lose it all during the market downturn.

[Stevegoodey]

Ok So thanks for your opinion on how not to do it,

Any advice on what you would be buying now if you had to purchase property number 1 again.

Location
Price + - to GV
Deposit you would pay
Tenants you would try to attract?


Steve

[Josko]

I wouldn’t interpret Whittaker’s comments are about what not to do.

It reads like this is one of the traps of investing with "velocity without strategy and long term planning".

As a further thought though, I would be interested to find out about suggestions on how to do it now.

Warm Regards,

[whitt]

Josko Is correct with what is being said. The comment I made was more of an eye opener to people who blindly start investing with no plan at hand. Be wary as investors have fallen over before. But instead if we plan our strategy correctly now we won't be a statistic.

[Propoholic]

I agree with Whitt and Josko's comments.

A buy and hold strategy experiences all the four seasons and many changing weather patterns along the way. As property investors we are exposed to all the seasons.

In the agricultural sector it is good for any farmer who has benefited from a long period of sunny weather and temperate climate and good grass growth but it is unwise for that farmer to base his five/ten year plan around this. The salesman selling the new tractor and combine harvester to the farmer is not going to focus on the changing business cycle.

whitt wrote:

Deal with high never ending maintenance if you wish to preserve your investment. High maintenance is because you bought well under value. The only reason you managed that was the property was in bad condition and no body else wanted it. Dolf De roos mentions it is easier to find a below value property in a cheaper suburb than an average one.

For many new investors I feel there is a lack of understanding of yields. I'm not talking about the simplicity of rent/market value or methods of creating higher yields but the diffrence in risk between a lower and higher yielding product. Via the seminar circuit and buyers agents properties in one horse towns with a population of 10,000 have been wrapped up as CF +ve deals. Purchasers are told the numbers look good so it must be a good investment!!! Properties in these one industry towns are a higher risk and will always be sold at substantialy higher yields than in larger populations centres.

Janesco wrote:

Most properties that are being sold as cash flow positive are in fact the bottom of the barrel. You can only rent rubbish to rubbish. They don't pay the rent so it is no longer cash flow positive. Also the gang problem and the white trash areas.

whitt wrote:
-Several years down the track get fed up with all of the above and sell some properties off to relieve the pressure. This is historically what happens during the slump the fun part of rising values is over and Investment property is now hard work. So alot of investors give up.

The fun part of rising values will also be over for your friendly bank manager. Lenders reduce their exposure to the property investment sector and in particular the low socio economic areas. Lenders cover themselves by requiring higher equity on these properties, reducing their lending or pulling out of these areas completely.

[muppet]

Hi Guys

Was thinking the other day while mowing a lawn and the thought I was thinking was how many 10000 people towns have fallen over in New Zealand?

Regards

[17billion]

Plus, if they do decide to build that new sawmill in your town muppet, what do you think will happen to the property values? And also the yeilds? Some people will come off very well.........

[muppet]

Hi Guys

And especially when the price of petrol goes to $1.50/litre. Being so central to many centres of the north Island. Ahh the future of Tokoroa looks very bright.

Property values continue to go up and so do the rents but much more slowly.

And with another group of Aussies due to hit the town soon.

Yields have drooooooped in a big way. From 20%+ down to about 8-12%.

Regards

[janesco]

Interesting set of posts....

Who would buy in Takaka at the present moment

[RentMaster]

And especially when the price of petrol goes to $1.50/litre. Being so central to many centres of the north Island. Ahh the future of Tokoroa looks very bright.

Being so close to the centre of the north island, doesn't that make it a long way from the ports and import/export opportunities? As the cost of transport increases, being closer to a major port would be a good idea.

Althought in the case of a saw mill, being close to the forests is probably a better idea.

[whitt]

Any advice on what you would be buying now if you had to purchase property number 1 again.
Steve

Well I have seen investors over the past several years continue moving further and further out of town to chase yeilds.
Another strategy instead could be similar to what Robyn Grinter (NZGEMS) is up to.
Check out her story in NZ property magazine or in the forums here.
She realiased finding good deals is getting harder so is offering those she finds to other investors for a fee. This fee is then used to reduce debt on other property she owns. If property does not sell she simply takes the deal herself.

Yet another example of a successful investor thinking out of the square.

[whitt]

FINDING THE REAL DEAL
the place is a little on the dark side and feel if I change the carpets, add some lighter colors, repaint the walls in a velvet sheen finish (currently painted in a semi gloss which makes the place feel cold), add a large mirror in the bathroom, tiles around the kitchen bench and bathroom vanity unit, I will need to add a washhouse sink tub. Outside the front I will add a small fence to create a private area. I propose making it semi furnished by adding a washing machine, fridge, maybe a microwave and dryer, so that it will appeal to students in the area and hopefully increase the current rent of $240 to around $280+. I should be able to do all the renovations at a cost of around $4k to $5k.


POTENTIAL VALUE
If I revalue the property during early summer after cosmetic renovations, I believe the new increased value will be around $200k to $220k to possibly $230 in 12 months. (Hopefully around $45k profit so that I can recycle all my deposit back out.)

Ron purchased for $182,500 with an estimated value of around $190k in current condition.

Yet another example of a strategy which can be used.
There are numerous methods you can use when the going gets tough.
And if all else fails why not do some more training if you are employed. Try to become more qualified and earn more money. This way the bank will give you more to invest with.

Anyhow good luck and keep looking.

[Propoholic]

janesco wrote:

Interesting set of posts....

A pertinent re-read is Grow Rich with the Property Cycle - kieran Trass. In particular chapter 8: 'The Boom Phase' is particularly applicable to this thread. I find comments on pages 100 to 109 ('The end of the Boom') to be very much aligned to our current market.

What do other forumites think??

[whitt]

A pertinent re-read is Grow Rich with the Property Cycle - kieran Trass. In particular chapter 8: 'The Boom Phase' is particularly applicable to this thread. I find comments on pages 100 to 109 ('The end of the Boom') to be very much aligned to our current market.

It is always amazing how much more you take in when you re-read something like these Pages from Kieran.
He does mention also to prepare yourself incase values do fall. That way you are secure to continue investing.

[whitt]

Three years on and post number one I wrote looks quite relevant doesn't it?

http://www.propertytalk.com/forum/showpost.php?p=21432&postcount=1