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Jay
06-01-2008, 03:43 PM
Anyone here doing/done this??

Looking at buying cheap as possible and cosmetically in the main doing the property up. That is new paint flooring where needed, new handles on cupboards and doors etc, new kitchen bench top if needed.

Looking at Papatoeote/Papakura/Manurewa areas and maybe West Auckland, but do not know the equivalent areas out that way.

Not looking to the work ourselves, have a 9-5 job and a baby to look after

duncan macgregor
06-01-2008, 04:21 PM
Anyone here doing/done this??

Looking at buying cheap as possible and cosmetically in the main doing the property up. That is new paint flooring where needed, new handles on cupboards and doors etc, new kitchen bench top if needed.

Looking at Papatoeote/Papakura/Manurewa areas and maybe West Auckland, but do not know the equivalent areas out that way.

Not looking to the work ourselves, have a 9-5 job and a baby to look after Waste of time unless you live in it. By not doing it up yourself is it because you are unable?, if so forget it. A handy person living on the premises doing it up at nights and weekends i would say yes its a good idea if you only require help with a major. Macdunk

Sideshow Bob
06-01-2008, 06:25 PM
Alot of people's "profit" have been due to the increases in market prices. I think these have pretty much all gone in the short-term, with the market cooling down. By the time take mortgage and agents fees etc etc, would only work if got a "bargain" price-wise when bought, and did much of the work yourself.

Just bought a house about 10% under registered valuation. While could make a quick 20-30K with a do-up, it looks like we're going to live in it.......

Serpie
06-01-2008, 07:50 PM
Would have to agree with MacDunk on this one Jay. If you're going to pay tradesmen to do all of the work then you'll do well to break even in this market.

You make the money when you buy (under valuation) but can add value by using your own labour. I've been doing one up for the last 18 months, but have done bugger all in the last 9 months because we've got a new baby too. It's amazing how little I get done in the weekends now that our wee boy is here.

Luckily we're not living in the house that I'm doing (it's empty) because the lack of progress would be causing some friction with my better half.

I've done everything myself (it's nearly finished) but if I'd had to pay others the profits would evaporate very quickly.

Steve
06-01-2008, 08:04 PM
If you're going to pay tradesmen to do all of the work then you'll do well to break even in this market.
...
You make the money when you buy (under valuation) but can add value by using your own labour.
...
I've done everything myself (it's nearly finished) but if I'd had to pay others the profits would evaporate very quickly.

In all actuality, you should obviously factor in the 'cost' of your labour to work out the 'real' profit...

Serpie
06-01-2008, 08:23 PM
True Steve,

I ignore the cost of my own labour because my do-up is pretty much a hobby (which is why it's taking so long!).

If you're doing it to make money, then you should count the opportunity cost of your own labour (i.e. would you be better to work OT, and use that money to pay someone who knows what they're doing, and can get it done in a fraction of the time).

I'm always getting asked "why don't you just pay someone else to finish it for you, and sell it?". The answer is because I like doing it, and I don't have to live in it while it's unfinished, so I don't really care how long it takes.

STRAT
06-01-2008, 08:32 PM
True Steve,

I ignore the cost of my own labour because my do-up is pretty much a hobby (which is why it's taking so long!).

If you're doing it to make money, then you should count the opportunity cost of your own labour (i.e. would you be better to work OT, and use that money to pay someone who knows what they're doing, and can get it done in a fraction of the time).

I'm always getting asked "why don't you just pay someone else to finish it for you, and sell it?". The answer is because I like doing it, and I don't have to live in it while it's unfinished, so I don't really care how long it takes.You should always count in your own time Serpie. Its the only true asset we have

STRAT
06-01-2008, 08:42 PM
Anyone here doing/done this??

Looking at buying cheap as possible and cosmetically in the main doing the property up. That is new paint flooring where needed, new handles on cupboards and doors etc, new kitchen bench top if needed.

Looking at Papatoeote/Papakura/Manurewa areas and maybe West Auckland, but do not know the equivalent areas out that way.

Not looking to the work ourselves, have a 9-5 job and a baby to look afterHi Jay, done it a few times and learned a few things. Timing is everything and in my opinion your timing is bad. Interest rates are up, Market is sliding and do up costs are up. In my opinion do ups only really improve sale time. You can make nearly as much ( depending on the timeframe ) just holding it for a bit and selling again. Location is as always critical as gains from your effort are greatest in better areas.

Heres an example
In the eighties I did a buy and flick at the same time as a mate of mine. I bought in Titirangi for 65k ( 3 bdrm ) He bought a 4 bdrm in Glen Eden for the same money with more potential for improvement but in a lesser area. He maximised the potential of the do up and sold a year later for 92k. I did nothing at all to mine and sold a year later for 95k :D

Serpie
06-01-2008, 08:47 PM
Too true Strat.

That's why I'm not worried about how long this house is taking.
You get up, and it's a nice day. You can either go and work on the house, or spend time with your family and friends. It's a no-brainer really.

However, I can say that because I'm now fortunate enough to have a level of financial security that allows me to do that. But that security has been gained by working pretty hard in the past. To get ahead sometimes you have to knuckle down for a while.

I think I'm going to have another house become empty in the next few weeks, and I've got to get that one turned over really quick, so it'll be full on for a few weeks when that happens. Such is life.

My wife bought me a guitar (and instruction DVD's) a couple of Christmas's ago Strat. One day I hope to have all of the houses done, and have some time to learn the big fiddle.

STRAT
06-01-2008, 08:56 PM
My wife bought me a guitar (and instruction DVD's) a couple of Christmas's ago Strat. One day I hope to have all of the houses done, and have some time to learn the big fiddle.Guitar is like exersize and saving money mate. A little every day :D.

Start today.

Tell me what you want to learn to play and I will send you some TAB ;)

Serpie
06-01-2008, 08:58 PM
Cheers Strat,

Will continue discussion by PM.

Jay
07-01-2008, 01:19 PM
Thanks for the comments guys.

Will look further into this.
From what I've read and learned from a few people, it is knowing the expected selling price, in any market, when done up and work backwards to the purchase price allowing for profit, expenses etc etc.
Therefore offers will be a lot lower than their asking price, however, keep persisting until one will accept if they are desperate.
Will be looking to do some work ourselves and maybe sell it ourselves.
Would be very choosy on the properties in the first instance, may find a bargain or two for renting as well.
Not rushing into anything though.

denpal
07-01-2008, 05:36 PM
The easiest money is made by buying under market value. ATM, with a quieter market and high interest rates, holding and turnaround costs are too high IMO to make it worthwhile.

You could look at mortgagee sales to pick up properties cheap, but even these are now popular with the crowd.

Alternatively, you could buy and hold as an investment, but it is questionable if now is the right time to do so.

Consider tax as well. If you buy and sell as a business you are up for income tax and GST, effectively 45.5% taxation on your taxable profit. If you buy to invest, no GST or taxation liability, only depreciation recovered liability.

Dazza
11-01-2008, 09:50 PM
Im like Jay here as well

looking at papakura/manurewa area as well as avondale in west.

was thinking of doing 'do ups; as well however im working full time so i wont have the time to do the labor myself.

I was just talking to the old man regarding what interest rates were like in the 90s and the early 2000s.

Yet he says around 6-7%

is this correct?

I have checked out rbnz and it seems that OCR was around 4.5-6%, so say it was 5% then banks would put mortgage interest at about 6% right?

I currently have got 250 per week disposable income with about say $20k cash as a deposit, can go to $40k too as a deposit.

being a young man, and just out of uni, im keen to start buying property.

People say that currently interest rates are high OCR 8.25% , 2 year fixed rates from banks at around 9.5%.

But wasnt the 80s the itnerest was around 14%+.

Truely if we can get say back to OCR of around 5% that would be amazing.

If anyone can direct me to say the 2 year fixed rate %'s for say the last 20 years would be great.

I think in 2005 , a 2 year fixed interest rate was 7%?

Corporate
12-01-2008, 09:28 AM
People say that currently interest rates are high OCR 8.25% , 2 year fixed rates from banks at around 9.5%.

But wasnt the 80s the itnerest was around 14%+.

Truely if we can get say back to OCR of around 5% that would be amazing.



The problem is income has not increase along with house prices. It was quite common in the 80's to be on $30k per annum and buy a property for $120k (4 times the salary) now the same house is $400k with say a income of $40k (10 times)

Steve
13-01-2008, 10:22 AM
I was just talking to the old man regarding what interest rates were like in the 90s and the early 2000s.

Yet he says around 6-7%

is this correct?

I have checked out rbnz and it seems that OCR was around 4.5-6%, so say it was 5% then banks would put mortgage interest at about 6% right?

He is correct, Dazza.

In April 1999, you could get rates for 5.95% fixed for 2 years.

Those were also the days when you could buy rentals with a gross yield over 10%! Cashflow positive from the start, even with 100% financing.

The way that investing should be... :)

Crypto Crude
14-01-2008, 11:31 AM
Hey dazza,
Im in the same situation to you, maybe one year behind yah...
My best advice Is to not buy in the current market...
In 5 years you will be able to build a bigger deposit, and with sideways / falling market you WILL save a decade or more on the term of your loan....
My mum,dad were telling me that in the hight of Inflation they were paying 20%, and up to 22% on debt....
Everybody has to make their own minds up and Im confident enough in my own situation to be prepared to risk it by holding off (looks like a pretty damn good risk if you ask me), than to buy and get booked for the next umpteen decades...
I've said that I'll move offshore before I let that happen...
Be smart, and dont get in at the top of the cycle...
10% house price growth with these interest rates are completely wiped out by interest you will pay on your debt...
eg, buy house 300,000.... interest payments to bank at 10%, 30,000 to bank in interest per year ($600 per week)... house price rises 30k.... these two effects cancel each other out...
Now I know what the old croners will do... they will come out and say, "but wait".... Well im telling you now, none of this "but Wait", or "how about we add in", or "you missed this bit".... simple rule, house price growth is destroyed by interest payments... end of story...

now work through same equation in 5 years time with the house price at a smaller number/perhaps the same (work through the bigger deposit you could add between now and then and minus it from the house price), also calculate it with a lower interest rate say around 7-8%...

first homebuyers are still screwed...
First homebuyers in 5 years will be shrewd...
simple as that....
Im not suggesting to push a house aside for share investment....
on the housing thread, put MD on the ignore list when he tells you to buy:D.... His advice looks pretty spot on otherwise...
..In 5 years-10Years you will be better off with a house as the market re-trends up again...(long run better off regardless)...
a decade perhaps two, difference in loan term is a major IMO, so look at the fundamentals closely.
keep in touch, lata...
:cool:
.^sc

BRICKS
14-01-2008, 06:38 PM
DONT forget Shrewdie you will be 5 years older and remember time is your Enemy..

FarmerGeorge
15-01-2008, 10:47 AM
Remember the monetary policy tools have changed since the times of 20%+ inflation. Back then the RB didn't set interest rates directly as they do now, nor did they target inflation as specifically or purposefully. In that respect we live in very different times to our parents.
I'm also looking at borrowing and my aim is to wait until this tightening cycle is coming towards an end. It's better to borrow at high interest rates and prospects of loosening in policy than the opposite, IMHO. First the interest payments get progressively lower but also the dropping interest rates increase the money supply and asset prices tend to grow faster in such an environment.
Final thought: why buy property anyway? Just leverage up a good parcel of shares and let your landlord worry about the rates, maintenance, plumbling etc.! Then buy yourself a nice place on the beach to retire to with all the money you've made!

STRAT
15-01-2008, 03:19 PM
Now I know what the old croners will do... they will come out and say, "but wait".... Well im telling you now, none of this "but Wait", or "how about we add in", or "you missed this bit".... simple rule, house price growth is destroyed by interest payments... end of story...

.^scLOL, I didnt want you to go off dissapointed Shrewdy :D

so.............



:eek:"BUT WAIT":eek:
Not if someone else is paying your interest for you:D

Mmmmmm, Not sure If I qualify as an old crone :confused:
But Im sure you will let me know in due course:cool:

Arbitrage
15-01-2008, 04:13 PM
In the mid 1980's some us were young and stupid and bought houses in inner city Auckland at the peak of the market. Interest rates were high, banks were reluctant to lend as the housing price cycle was at a peak and valuations were likely to fall. With a minimal deposit we saved by busting our guts, we bought properties at exhorbitant prices between $50-$70000. A few mates kept renting and playing the oil market with Southern Petroleum and Cue Petroleum shares waiting to make their fortunes. Gee we were financially silly.

trackers
16-01-2008, 08:11 AM
10% house price growth with these interest rates are completely wiped out by interest you will pay on your debt...
eg, buy house 300,000.... interest payments to bank at 10%, 30,000 to bank in interest per year ($600 per week)... house price rises 30k.... these two effects cancel each other out...
Now I know what the old croners will do... they will come out and say, "but wait".... Well im telling you now, none of this "but Wait", or "how about we add in", or "you missed this bit".... simple rule, house price growth is destroyed by interest payments... end of story...

now work through same equation in 5 years time with the house price at a smaller number/perhaps the same (work through the bigger deposit you could add between now and then and minus it from the house price), also calculate it with a lower interest rate say around 7-8%...


All true but lets not also forget that 5 years worth of paying rent is effectively burning a whole lot of paper is it not? ($150 per week * 52) * 5? Ouch.

I'm 25, in my first house - have a 10 year mortgage on a decent property with my missus and managing along just fine

trackers
16-01-2008, 08:19 AM
In the mid 1980's some us were young and stupid and bought houses in inner city Auckland at the peak of the market. Interest rates were high, banks were reluctant to lend as the housing price cycle was at a peak and valuations were likely to fall. With a minimal deposit we saved by busting our guts, we bought properties at exhorbitant prices between $50-$70000. A few mates kept renting and playing the oil market with Southern Petroleum and Cue Petroleum shares waiting to make their fortunes. Gee we were financially silly.

haha :) That's exactly the way I'm looking at it now...... By the time the newspapers, taxi drivers, students etc are telling me we're in the next boom, I know it'll be over already. There's ALWAYS opportunities somewhere, somehow

Arbitrage
16-01-2008, 10:31 AM
and there is nothing better than owning your own piece of New Zealand. It is a great way to build real equity as a base for future investments. Plus you can paint it, landscape it, dress it up, and renovate it the way you like it rather than relying on the landlords "spanish white" paint job and patch ups.

upside_umop
16-01-2008, 02:16 PM
reserve bank will always win. end of story.

they say they want house prices to more relevent long run multiples..and they will get it.

im waiting a while...

tend to disagree a little sc..couldnt see inflation hitting up 20% here again, so interest rates wont increase too much. imagine paying 20% on 350 k? 70k on interest expense for the average home? but do agree that wrong time to buy at top of cycle, although it has meant to have been the top of the cycle for the 3 years.

a couple more hikes this year should do it.

MrDevine
17-01-2008, 09:02 AM
I think I've said it before –*at the moment for 1st home buyers (esp in Auckland) the numbers really don't quite make sense at this stage.

However you do have to live somewhere, and renting is effectively burning money. The missus and I are 'only' paying an extra $100 pw in Mortgage expenses living in our 'own' (read Wespacs') house. We're not planning on staying at our place for 30 years, but hey get this, we have a flatmate and we still do save money. I reckon sell up in a few years, realise some cap gains and invest more equity in the next property. I predict market will do the same things that happened in Sydney, certain pockets will drop by a large pecentage, others will flatline and some areas will keep appreciating.

Mr D

minimoke
18-01-2008, 02:42 PM
I think I've said it before –*at the moment for 1st home buyers (esp in Auckland) the numbers really don't quite make sense at this stage.
Mr D
I’m not sure the numbers ever did or ever will add up. MrD you’re already burning $100 a week in extra interest over your old rents. You’ll then burn insurance and rates. Add onto this deprecation and the cost of maintenance and the inevitable renovations. At some point in the future you’ll sell into a market but probably buy in the same market so any capital gains you might have made are swallowed up when you buy the next house.

You have been successful in purchasing pride – you should be proud to own your own home – but respect those who rent who also should be proud when they put their extra money from not paying rates etc into something beneficial. You have also purchased security – in that you don’t have a landlord to kick you out. But don’t turn your back on your banker! You’ve purchased commitment – a commitment to meet your mortgage obligations which are a lot harder to change than those you would have had to a landlord. And you’ve bough a business – you have a room and environment to sell and you’ve got your flatmate as a client. Well done!

minimoke
18-01-2008, 02:47 PM
... It is a great way to build real equity as a base for future investments. ..
Though I suspect the best way at the moment is thorough KiwiSaver. Take the tax-payers upfront grand, the salary sacrifice, employer contributions into a low fee reasonable return fund and you’ll build equity way faster than property, cash or stocks! Play your cards right and nab the first home benefits and you are even better off!

Crypto Crude
21-01-2008, 09:30 AM
bricks-DONT forget Shrewdie you will be 5 years older and remember time is your Enemy..

bricks,
I will move offshore before I get buried into a 30year loan...I will have to earn the riches before the house then eah...A 53 year old and a house only would be a major failure for myself... if it rises to 1mill I would still not be satisifed with where im headed...

Upside umop... I Said My parents were paying 20% interest and above... I never said we will have to...

Trackers,
I see your point about 150*52*5
BUT.... what about the flip side...
300k house at 10%...(is NZ average not closer to 350k!)... anyway, 10% of 300k is 30k per year in interest payments only... $600 per week...
Now in the short term you are less 150 per week in rent...
The differential is $450....
Housing investment with 10% interest rates only works if house prices are rising more than 10%...
end of story... No 'but waits', strat....
I cant think of anyone I know that is paying $600 in rent to cover the landlords loan requirements for a house valued arounf 300k...

Arbitrage,
I think that the NZ housing market will surely remain up in the long term and the next 5 years of housing is an opportunity to sit out and be abit shrewd...
The goal is to save a decade or more on the loan term... All indicators are pointing to house price falling... I would have to be a mad mad professor to be buying now, and I dont even think I could with minimal income throughout my last year of study....
But yes you are correct, If I got in now then in 10years I would be better off...The idea is to be shrewd mate... catchyah...altiora peto...
:cool:
.^sc

STRAT
21-01-2008, 10:20 AM
end of story... No 'but waits', strat....

:cool:
.^scShrewdy I bought another house early last year at 10% down in Auckland and it is cash flow positive. Theyre not easy to find but they are/were out there. It isnt interest at 10%pa though ( 7.8% fixed ) Point is, 10 years from now it will have been a sound investment.

Arbitrage
21-01-2008, 11:08 AM
I am impressed that you can be cash flow positive in Auckland, especially on such a low deposit.

STRAT
21-01-2008, 11:25 AM
I am impressed that you can be cash flow positive in Auckland, especially on such a low deposit.It took a while to find. Its a 4 bedroom House with a separate self contained 2 bedroon basement flat.

Arbitrage
21-01-2008, 11:34 AM
Thought so. I was wondering how many people you could squeeze into a property to get that sort of return. Well done.

Dr_Who
22-01-2008, 04:50 PM
I wouldn't be buying anything in this market.

Arbitrage
25-01-2008, 07:46 AM
If the numbers stack up, you can buy in any market as Strat has shown.

STRAT
25-01-2008, 03:47 PM
The great think about RE is the leverage available and if it wipes its own **** its more or less set it and forget it. That said there were other reasons ( personal ) for the purchase also. Removing those from the picture I would have to agree with the Doc. I wouldnt have been buying either,

Dazza
26-01-2008, 11:26 PM
The great think about RE is the leverage available and if it wipes its own **** its more or less set it and forget it. That said there were other reasons ( personal ) for the purchase also. Removing those from the picture I would have to agree with the Doc. I wouldnt have been buying either,

strat , which area did you buy in?
south auckland?

Snow Leopard
27-01-2008, 08:38 PM
I, by either either luck or good judgement (probably the former) sold out of the Auckland property scene last June. History will be the judge whether this was, in the long term, a good idea or not. Currently I, again by either either luck or good judgement (probably the former) am involved in the Melbourne property scene.

But the fundamental issue is this: The great Australisian property boom is dependent upon the finanical institutions being willing to lend on ever greater ratios between average income and true property worth.
In the current global credit climate the questions will be asked and the answers are less certain than ever.

sleep well
Paper Tiger

STRAT
28-01-2008, 10:29 AM
strat , which area did you buy in?
south auckland?No Dazza. West

The Doctor
29-01-2008, 07:32 PM
No Dazza. West
guess..Glen Eden..

STRAT
29-01-2008, 08:08 PM
guess..Glen Eden..Sorry Doc, No cigar