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post #1 of 5 (permalink) Old 05-20-2009, 04:43 AM Thread Starter
Join Date: Jan 2007
Location: Paraparaumu, NZ
Posts: 298
property investment

Does anyone here invest in property? How many properties do you own? Are they relatively cheap, rough places or do you prefer to run more up market places? Do you have renters? Do you use a property management company or do you do your own managing?

Do you run your properties cash negative or positive?

I'm getting into the whole property thing soon and am currently gathering all the advice and knowledge i can so any input from those in the know would be great.

Currently i have a mortgage broker trying to get me to borrow massively and run everything cash negative and do everything through a revolving credit facility - which i dont like the sound of. I wondered how other people do it?
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post #2 of 5 (permalink) Old 05-20-2009, 06:45 AM
Join Date: Mar 2007
Location: Johannesburg, South Africa
Posts: 904
Re: property investment

No, but I do finance property, mainly commercial concerns and up to some pretty large anmounts.

Firstly, the question of why you want to invest - is this going to be a major part of your income or is it more of a supplement to your pension/long term self-funding capital investment? If the former, you aren't likely to do well as a first timer... get involved as an equity partner with someone who has weathered a couple of storms in the property market already and break away after you've served your apprenticeship.

If the latter, make sure you're going to be tenanted. Research the area you want to invest in; talk to local estate agents about rental demand in the area and the ability to resell a property quickly to retire the debt in need. What sort of deposit are banks going to be looking for if you're purchasing on a buy to rent basis? Investigate the legalities (can't speak for your neck of the woods, but ours are pretty onerous) - what sort of damage deposit can you take? What rights do you have as a landlord? How fast can you evict someone if they fall into arrears? Is capital gains tax an issue in NZ and does it make the resale of a property prohibitive?

Property management companies: a good enough idea, but expensive. If you're going to use one, use the one with the best reputation.

Cash negative? The very idea is abhorrent unless it's money you really aren't going to miss - if the amount you need to make up is the difference between three meals a day and starvation (even for a relatively short period)..... run.

Property should be a great investment all right, but it can be a millstone round your neck if you're overindebted and the market turns against you - interest rates rise, the resale market falls, and while the rental market usually picks up around then, you tend to be faced with an increasing monthly shortfall (since rental isn't keeping pace with increases in bond repayments) that you have to subsidise at a period where it's difficult to convert to cash.

Like everything else, moderation is the keyword. Project a worst-case scenario and budget your spending around that.
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post #3 of 5 (permalink) Old 05-20-2009, 09:07 AM
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Join Date: Nov 2000
Location: NJ - USA
Posts: 11,475
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Re: property investment

NZ is a different market then 80% of the viewers here from the USA. Regardless I would not borrow massively at this time due to a poor worldwide economic climate. Property investment basically follows the rule #1 supply & demand and #2. location, location, location. I would put $$$ elsewhere at this time, especially in the USA where we're on the downside of a housing/property bubble. Good luck... glen
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post #4 of 5 (permalink) Old 05-20-2009, 09:27 AM
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Join Date: Apr 2001
Location: Chicago
Posts: 2,494
Re: property investment

A friend of mine has bought 2 properties over the last couple years, fixed them up, and is renting. It brings in extra money for them. A good idea. But he also has to play the landlord role now too. If you have the money, now is the time to buy property for obvious reasons. Builders in our area are selling brand new homes for much less than they went for last year! They are losing money by sitting on them. I found out some homes are going for $289k! They were going for $420k last year. Amazing.

I dabble in the stocks, and, that too, is a great thing to invest in right now without too much risk (depending how much you invest.) You need to research and build your portfolio wisely. Everything is down so whenever it comes back up, there you go. Look at GM for example. Their stock is lingering around the $1.20 range a share for awhile now. They were around $40 a share until the economy took a dive. Once they / if they go back up, that's a nice return. If for some reason it doesn't work out, it isn't that big of a risk since price is so low now. There's my tip for the day I never got into the trading until I worked at the exchange downtown, IT support to the floor.

Last edited by shredmaster; 05-20-2009 at 09:33 AM.
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post #5 of 5 (permalink) Old 05-21-2009, 03:20 AM
Join Date: Oct 2006
Location: Johannesburg, South Africa
Posts: 592
Re: property investment

DavyH I may be buying in Johannesburg at the end of the year (still deciding on JHB vs CT), PM me your details
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