5 x 50k property or 1 x 250k property

[Josko]

Hello all,

After reading another motivating thread which comments on the investment in 30-50k property market, I would be interested to read what your opinions are on the opportunity to buy quantity or a single property of total $ value. I did not write quality, as this is a matter of due diligence and not part of the question.

So if you had 250k to invest what would you do and why?

Looking forward to your comments.

Warm Regards,

[NZGEMS]

Hi Josko
Firstly if I have $250k to invest I wouldnt pay cash!!!!!! I like to use leverage, (other peoples money) most of my properties i finance 100% but to use your $250 as an example, I would put say 10% down and buy $2,500,000 of property, yes that is 2.5million. And i would make sure i bought 10 to 20% below value so i had 20 to 30% equity from day one. The 50k houses are great if you can get a good return on them personally i like to get a minimum of $130pw on a house of that value, preferably more. as your rates and insurance are still the same as a $250k house. Most $250k houses wont give you much more than say $280 rent. Now i am generalizing here, before others jump in and tell me of their 250k houses getting $700 pw and their 50k houses getting $80. I know things vary but for me numbers have to work, i would still be wanting to get close to $500 pw for the 250k house for me to buy.

I dont buy for capital growth, i like my houses to pay their way with no money down. capital growth is a bonus the way i look at it. that is not to say i wouldnt put 20% into a 25ok house if it made the numbers right and nothing into the 50k ones as they stand on their own. I do tend to average out my portfolio.

I beleive a good range of quality of houses is the best way to go, and if you just want afew always buy middle of the road, they will always be rented in a down market as well as a strong market. We will see a drop in rentals inthe next couple of years now as so many investors have bought investment properties. I know in the higher part of the market in Hamilton our rents have dropped for over a year now. just because investors are wanting nice rentals, and I dont blame them, I like nice rentals too but I also like income from my houses. So unless you are using them as a tax dodge I would be careful about having too many of them.

The junk certainly pays its way nicely too.

Not that i am suggesting you buy Junk either if you cant handle a lower class of tenant.

Happy Investing.

RObyn

[Josko]

Hello Robyn,

Thank you, yes good point about other peoples money, I should have made it clearer this is my intention. Meaning I have 10-15% as a deposit.

With that in mind and the additional tenant issues would you then recommend at this point in time investing in a single property or would you look at multiple properties. If multiple properties where? ( if secret pm or email me).

My personal situation is that I have one IP and am now looking for the next.

What would you do?

Warm Regards,

[Dean@Massiveaction]

Always comes back to the numbers for me Ivi.
Which option will provide the most cashflow.
Speaking more generally with cheaper properties you have your income risk spread over more sources, which is good. Conversely you have more rates and insurance which can affect yield.
So work out the numbers. Whichever will put more money in my pocket is my decision maker.

[NZGEMS]

Hi Josko
I think firstly you need to work out the costs on both, normally multiple dwellings are much higher in maintenance. That has been my own observations anyway. I have only owned one block of flats and that was in the very early days and it certainly was not a good investment. Still now with my financial situation changed it might be ok. I would spend the money on it that it needed spending and would have probably done better out of it.

Maintanence is roughly $1000 a year, now if you are lucky it will work out at more like $500 but you need to allow $1000 and that is per rental income, always make sure you will come out on top after all costs, rates and insurance, usually with multiple dwellings you need to maintain grounds too, I get tenants to do this in my houses. but multiple dwellings i normally do it. I do still have some multiple dwellings and they work fine, it was that one situation that didnt work out.

in Auckland you will probably need multiple income to get the return these days. If you are prepared to look at some smaller towns you may pick it up there but how far do you want to travel and do you want to self manage or have someone else do it? All this has to be taken into consideration. If you have them managed it is more cost out of your pocket, it is not a bad idea to self manage to start with then when you do get a manager you might appreciate him more.

If you are in a job you can use an investment property to your advantage as it can get you a tax refund but it is not something i recommend, especially if you have to put money into it each month, the houses you can buy are unlimited if you buy ones that put money into your pocket, if you buy ones that cost you then you limit yourself especially if there is a downturn you could end up in trouble. I always go on the causious side, not that some reading this might think so with what i have done, but when i say causious it is causious for me, not you. Just make sure you do something as sitting on our hands gets us nowhere.

I also realize I have probably made a few spelling mistakes for those school teachers among you and guess what I DONT CARE. You get the message. DOnt need to know how to spell to get ahead in life.

good luck Robyn

[Josko]

Thanks Dean,

I'll call to see if we can get together for a chat about this move as well.

In the mean time as a side note, please feel free to call me Josko as in my signature, especially now that we have met.

That Ivi business is reserved for good mates and we have a little way to go to get there.

Cheers,

[Josko]

Hello Robyn,

no hassle about the spelling mistakes, I am a bad speller as well, I just copy my thread into word and then let the little red and green lines take care of the spelling business, its a bit of an effort but it makes me look smarter then I really am.

Your advice is very sound, I have viewed a number of out of town properties through a finder and feel I can not take the risk on trusting everything to come together. This might be one of those head things you mention, I am not willing to take that step yet in investing. Maybe once I have ten or more I will.

So my bias at the moment is close to by close to where I can keep an eye on things and manage them myself, have had a lot of fun with my first investment so duplicating that will be my goal.

Warm Regards,

[SEIBU]

In the mean time as a side note, please feel free to call me Josko as in my signature, especially now that we have met.

Josko/IVI/Mr Sestan (not too sure how to address you, as we've never met ),

Is your name Croatian? I'm sorry, I was intrigued and did a Google search on your surname, and it came back with information about the President of the Croatian Association of Basketball Coaches

[Josko]

Yes SEIBU, my name and birth origin is Yugoslav, now Croatia, after the war.

I have a few mates who play basketball, I have not reached that status of president yet, except of my own fan club of one. Join us, it free.

[FreezingandHot]

Great Thread Ivi,

I was also looking at another property until my mortgage broker told me my lending capacity at the moment is on the red line, so I am currently reducing my personel debt to free up some more cash to buy the next.

For me as mentioned in this post that cashflow from my next IP will have to put money in my pocket after all expences have been taken out. I realise now that this is relativly easy to work out, its as simple as taking away your expenses from the income you are going to recieve from the property.

I think the real hard part to investing in property (or maybe an easy part for others on this site) is finding the deals that put money in your pocket.

My goal now, pay off personal debt and find the deal that is putting cash in my pocket.

How simple.

FH.

[Aston]

How long is a piece of string?

Hi Josko
Firstly if I have $250k to invest I wouldnt pay cash!!!!!! I like to use leverage, (other peoples money) most of my properties i finance 100% but to use your $250 as an example, I would put say 10% down and buy $2,500,000 of property, yes that is 2.5million. And i would make sure i bought 10 to 20% below value so i had 20 to 30% equity from day one.
RObyn

Robyn, May I ask a question please.

If one just happened to have $250,000 in the bank and was wishing to buy IP's .... and I fully I understand what you're saying about leveraging and actually buying $2,500,000 worth of property.....

At what stage could a person actually live off these properties and not work for a salary.

I suppose what I'm saying here is how much would one need as a deposit on property so one could retire (semi retire?) and live from the income. Is $250,000 enough? and if it's not enough how much is enough?

I have cash (just a tad more than $250,000) and I'm wishing to invest in IP's but I don't want to work, I want to live from the income of my properties.

(oh OK. nobody knows who I am..... I've got $450,000 in cash) Is this enough to buy properties and live off the income?????) I also have a freehold house, which I want to keep as a freehold house.

Aston.

[Dean@Massiveaction]

Hi Aston,
I started with a revolving credit facility fo 250K, no cash and generated enough passive income to stop work in under 6 months. It's about the right deals and structures, not cash in the bank. Although that makes it easier.

[FreezingandHot]

Hi Dean

Do you mean that you started your whole journey
off $250,000 borrowed, or was this your own money
to start with.

Regards

FH.

[Kay]

With that sort of money, perhaps you could think about buying a couple of really secure Commercial properties - with really foolproof tenants. Try reading How Investing in Commercial Property Really works. You should be able to buy one or two properties totalling $650,000. Unfortunately the commercial market is a bit overheated at the moment, and returns are around 8%, which is still pretty good, as there are no running expenses or rates.

[Dean@Massiveaction]

Hi Patrick, turned 250K equity into cash so it was borrowed yeah!