Now that fully self funding property is getting difficult to find in New Zealand, strategies are changing - with more people doing flicks, do-ups, wraps etc.
This represents a move from strict investing into a business module, with GST and tax implications that are different to investing. Others are getting into business associated with property, offering anything from property finding services to mentoring.
With this in mind one has to ask is property the best business to be in, and this is my question to you, "If your job or business has now become property is this the best use of your mental, physical, and financial resources? For example, if say you have significant IT skills would your efforts be better rewarded in this sector as opposed to property?
I note that a few years ago we had the opportunity to reap comparitively very good returns from property but not very many people were interested in it. Currently the investment returns from property are low, yet we seem to have no end of people willing to climb aboard.
Fortunately recent entrants to the property market have been rewarded with ever increasing prices, so despite having to put in heafty deposits, or to top up loans, the equity has been increasing. To keep the dollars flowing some investors have changed strategies from investing to trading, but again profits in this sector being propped up by increasing prices.
To me this seems a bit like the share market of the late 1990s that seemed like it could keep on going for ever, but despite one of the longest bull runs in history it dropped like a stone in mid 2000. What will happen to all the highly geared property investors if/when this happens, if interest rates go into double digits, if property values drop, if banks start calling in highly geared loans, if finance criteria changes, if rents start plummeting, if legislative changes impinge on returns?
The trouble with property investing per se is that it doesn't add wealth. A painter adds wealth by continuing to paint pictures that enhance people's lives, just as a builder does by creating new spaces that people can work and live in, but once created and sold to an investor, be it a building or a painting, the investor adds little wealth to the equation, other than by paying the builder or painter some money to continue adding value to planet earth. It is the painters, builders, scientists, manufacturers, inventors, problem solvers that add value to this planet, but not the investors.
Perhaps the low returns on property are here to stay, and perhaps that is how it should be, for we as investors aren't adding much value, other than freeing up an entrepreneur/business person's resources so that he or she can go and add value to the planet.
What are your thoughts?
Julian
This represents a move from strict investing into a business module, with GST and tax implications that are different to investing. Others are getting into business associated with property, offering anything from property finding services to mentoring.
With this in mind one has to ask is property the best business to be in, and this is my question to you, "If your job or business has now become property is this the best use of your mental, physical, and financial resources? For example, if say you have significant IT skills would your efforts be better rewarded in this sector as opposed to property?
I note that a few years ago we had the opportunity to reap comparitively very good returns from property but not very many people were interested in it. Currently the investment returns from property are low, yet we seem to have no end of people willing to climb aboard.
Fortunately recent entrants to the property market have been rewarded with ever increasing prices, so despite having to put in heafty deposits, or to top up loans, the equity has been increasing. To keep the dollars flowing some investors have changed strategies from investing to trading, but again profits in this sector being propped up by increasing prices.
To me this seems a bit like the share market of the late 1990s that seemed like it could keep on going for ever, but despite one of the longest bull runs in history it dropped like a stone in mid 2000. What will happen to all the highly geared property investors if/when this happens, if interest rates go into double digits, if property values drop, if banks start calling in highly geared loans, if finance criteria changes, if rents start plummeting, if legislative changes impinge on returns?
The trouble with property investing per se is that it doesn't add wealth. A painter adds wealth by continuing to paint pictures that enhance people's lives, just as a builder does by creating new spaces that people can work and live in, but once created and sold to an investor, be it a building or a painting, the investor adds little wealth to the equation, other than by paying the builder or painter some money to continue adding value to planet earth. It is the painters, builders, scientists, manufacturers, inventors, problem solvers that add value to this planet, but not the investors.
Perhaps the low returns on property are here to stay, and perhaps that is how it should be, for we as investors aren't adding much value, other than freeing up an entrepreneur/business person's resources so that he or she can go and add value to the planet.
What are your thoughts?
Julian
, software house etc., but unless you put in a minimum effort of, say, 20 hours a week, you won't survive because your 'yield' will rapidly reduce to 0, because customers want your shop open when its convenient for them, not for you.
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