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vorno
30-05-2014, 05:03 PM
I am beginning to research more about property ownership: Both a first-home & investment options.

So I was wondering from people with experience, are there certain things that you wish you knew about before purchasing a property? Perhaps key-items which are often overlooked?
Hoping we can expand this thread as we go :)

Cheers,
V

JBmurc
07-06-2014, 06:35 AM
Costs - rates,insurance,bodycorp(if it has one)up keep / repairs needed / materials used in house
Flood risk etc ....can never do enough ... Pre purchase study IMHO ,,,,

vorno
07-06-2014, 07:55 AM
Some good advice so far, cheers. I'm not so sure about buying a do-up though - I'm not exactly a diy expert!

baller18
08-06-2014, 06:15 AM
I think belg did not necessarily meant you had to DIY it urself. The investment has the potential to grow in value due to its 'do up potential.' You don't even have to do anything for it after you have purchased it but in the long run when you sell buyers look for these qualities.
Invest in the worst house in the best area, land is where the value is.
invest in the up and coming areas.

troyvdh
13-06-2014, 04:30 PM
vorno..giday...I have been a residential investor for 35 years..

-keep to the basics...dodgy/iffy area/ bad location/no sun/powerlines...etc will probably always be
-a bargain will probably occur tomorrow as well...
-you make your gains when you buy...
-land is very important
-do it all yourself ..DO NOT succumb to a scheme whatever where "the experts will take the worry away"
-you cannot pay enough for good advice. I repeat you can.....
-if you can establish a "relationship" with a lawyer...valuer...

-If someone suggests a great deal....ask if she/he what they are worth.Do not rely on clothes cars or where they live....
-do not buy a leaky home ...there are thousands of them out there.....

cheers

Okebw
13-06-2014, 06:58 PM
For a very small amount of money (about $30/$40 I think) you can pick up the BRANZ "maintaining your home" book. It's pretty handy as far as what to look out for with regards to residential property. If you're ever in Palmy I've got a copy you can have.

vorno
13-06-2014, 10:59 PM
For a very small amount of money (about $30/$40 I think) you can pick up the BRANZ "maintaining your home" book. It's pretty handy as far as what to look out for with regards to residential property. If you're ever in Palmy I've got a copy you can have.

Yeah cheers, I found the site easily enough. $30 for the book and $8 for shipping.

vorno
14-06-2014, 10:08 AM
Is a property especially hard to run from a remote location? For example I live in Auckland but am considering a place like Taupo/Dunedin simply due to the affordable housing.

Okebw
14-06-2014, 11:26 AM
I'd definitely opt to go through a property management company if you're going to be investing from that far away.

troyvdh
16-06-2014, 11:47 PM
No offence mate ...If someone intends to invest in residential property ....and looks for advice in a publication then ...well they really should look some where else.
Renting/owning property is not rocket science or book learned.
Sure you may learn some stuff from a book but nothing will prepare you better than sidling up to some joker/mate or what ever and hearing there tales and experiences.

Listen mate as I said above..establish relationships with folk ...plumber/sparkies/ lawyer and accountant et al....

Above all be prepared to "muck in"...do the basics ...talk to tenants...

Finally I do not mean to come across as a "know all" but Ive done this for 35 years.Sure it aint easy.If it was then everyman and his dog would own property .....which many do for a brief time....

Again I say owning res property aint rocket science...keep to the basics....cheers

vorno
17-06-2014, 07:11 AM
Troy I do respect your advice, 35 years would make you an expert.
..I also tend to take the "hear all" approach and see what people have to say.

Forming relationships with those in the trade & the "KISS" rule is indeed good advice. :)
On the other hand, reading a book on house related material will help train my eyes & at least give some insight.

So, both I feel are good advice!

Cheers

artemis
17-06-2014, 08:04 AM
For a first investment purchase, suggest start close to home. Learn to do property management, tax returns and some repairs yourself. Plenty of info on all these is available. Start building equity quietly. Once you know the ropes you can get more adventurous!

minimoke
25-06-2014, 04:07 PM
First thing. Decide if you are buying your first home or investment property. These are two different things.

Regardless of choice I’d agree with pretty much all advice given so far. To summarize


Buy into the right area first, house second. Look for an area that has prospects to your future buyer. For example a four bedroom house will always appeal to a family so is it near a school?. No point buying a one bedroom if it is near a school.
Try to do as much as you can. The more you spend the greater the impact on cashflow. Conversely can you use your time earning more in your profession than the cost of hiring someone.
Personally I wouldn’t buy out of town. Owning an investment property is a bit like owning your own business – you need to be pretty hands on and close in the early stages. If there is a problem much better to pop in the car and deal with it face to face
Relationships are key. Get flat mates in to help pay the mortgage / repairs. Look after your trades and they will look after you.
Look carefully at the history of the house / area. Nature always wins – so a place may be dry today but soaking in a rain
Look to the future. Is that really a motorway that’s being driven through the neighborhood in 10 years time.
Do the math. I cringe with governments trying to push the dream of “own your own home”. Its not cheap so is it the best short/medium/long term option.
If nothing else, make sure you can afford the insurance and you have the ability to pay on time.
Don’t trust shysters. I put real estate agents ( I haven’t used one to sell in over 20 years), property managers and “Property to Wealth” gurus in that category. Check and double check what your “advisors” say. So far there is no advice on this thread I’d disagree with.
Be prepared for substantial increase in interest costs. An increase from 6% to 9% may only seem like a 3% increase but you’ll be paying 50% more in outgoings. You need to get your debt down. The lower your debt, the greater your equity, the more you can do with your capital.
Don’t be afraid of debt. Providing you can always afford to service it and it funds growth. So every dollar you put into your property you want to make sure you are going to get more out of it.

rentex
26-11-2014, 04:43 PM
Buying your own home and living in it is a great feeling.
Buying a home and renting it is also a great option if circumstances favour that over living in it.

Agree with most of above, definitely some good advice.
There are good experts in every field and there are the 'not so good', talk to a few if getting them involved.
Properties are lots of money so due diligence goes without saying....

Good rentals are typically solid basic houses or units, eaves and external gutters, light, dry, 'good bones', well maintained. Much the same as first houses.
Look out for body corp as mentioned above, not only with rates, but potential limitations on what you can do with the property, rules like pets, liability to cover work at other units in the complex where yours has no issues (think leaky penthouse in apartment block).

Take a builder/others through the property before purchase.
Then perhaps build a spreadsheet with some of the costs worked out on a 5 year+ plan.

Majority of rentals in Auckland will require feeding the mortgage a little if going in with 20% deposit.
Better to be realistic on the asking rent and have a great stable tenant then push for top dollar and take chances or have vacancies.
You can check Trademe, realestate.co.nz and others for an idea on rents, even go to a few open homes.

It's possible to achieve higher yields with multi-dwelling properties, but keep in mind complications with tenants (compatibility), water and power metering, council requirements.

Would also suggest talking to an accountant about structure of home/rental for tax and other purposes as you may need to set up appropriate entities before purchase.

All the best, it's worthwhile in our opinion (most definitely biased). :)

gv1
02-12-2014, 05:17 PM
Location is very important.
Value for money, think if you decide to sell tomorrow, can you sell at that price.
If you are young and single, buy something small...not too much mortgage.(if the deposit is not much)
Make sure you get good tenants, they can rack the place.
Don't put too expansive things in, e.g carpets etc.
Try to maintain the place tidy in terms of repairs etc.
Don't leave the selection of tenants on property managers.
If the property managed is by property manager, make sure you have regular inspection.

Stumpynuts
09-01-2015, 02:07 PM
I wish I had purchased earlier than I did.

Some things I read a few years ago about property.
1. The best time to buy property was yesterday
2. Buy land, it's a finite resource and nobody can keep on reproducing it.

h2so4
09-01-2015, 04:57 PM
Crikey go and read a Bob Jones book.

NZSilver
11-03-2016, 02:52 PM
Hi guys, im currently looking at property, looking to get pre-approved for a loan then look to buy mid year. I'm new to this game so to speak, and have looked at kiwibank for pre-approval. I was wondering if any seasoned property investors could give me information on how to get a sharp rate from the banks? Am I best to approach several banks ie co-op, TSB etc. and what are the critical points on negotiation. I have around 30-40% deposit, good income and can get family to secure it. Can you get pre-approval from multiple banks?Thanks in advance

fungus pudding
11-03-2016, 03:45 PM
Hi guys, im currently looking at property, looking to get pre-approved for a loan then look to buy mid year. I'm new to this game so to speak, and have looked at kiwibank for pre-approval. I was wondering if any seasoned property investors could give me information on how to get a sharp rate from the banks? Am I best to approach several banks ie co-op, TSB etc. and what are the critical points on negotiation. I have around 30-40% deposit, good income and can get family to secure it. Can you get pre-approval from multiple banks? Thanks in advance

No harm in talking to any or every bank e.g. Don't try and negotiate - just ask them for the best they can do then tell them you'll think it over - don't make a secret of the fact you are shopping around. But why would you want family to secure your loan when you have 30% deposit?
I know Westpac had a deal whereby if you borrowed a minimum of 150,000 they gave you 1500 towards your expenses. That was brilliant because I put a mortgage over my own home ,and got 1500 even though I didn't pick up the mortgage - it's just there to secure an overdraft if I ever use it. I suppose they all have similar schemes.

Joshuatree
11-03-2016, 06:01 PM
I like KW's approach.Sell all your shares etc and try and buy the house for cash or as much cash as you can put in. Then take huge mortgage out and invest in NZX high div stocks like Gentailers for ex. You can see the attraction there but need to be pretty savvy / smart/ ballsy with this approach. Also rent it out /have flatmates for a while. Not for everyone but you can leverage things your way.
On another tactic ; a friend put in an offer a few days after a house was listed. That forces the auction to be bought forward to a week from the offer(is my understanding) .Consequently any other int parties were put on the back foot with not having enough time to due due diligence etc. Consequently only one other person registered for the auction and dropped out due to the time constraints and my friends price was accepted. He took control of the situation , awesome.

fungus pudding
11-03-2016, 06:16 PM
I like KW's approach.Sell all your shares etc and try and buy the house for cash or as much cash as you can put in. Then take huge mortgage out and invest in NZX high div stocks like Gentailers for ex. You can see the attraction there but need to be pretty savvy / smart/ ballsy with this approach. Also rent it out /have flatmates for a while. Not for everyone but you can leverage things your way.
On another tactic ; a friend put in an offer a few days after a house was listed. That forces the auction to be bought forward to a week from the offer

No it doesn't.

Joshuatree
11-03-2016, 06:23 PM
Thats what happened to him or something very similar.Im all ears...?

Sorry to be clear the house was listed for auction ; he put his offer in and the Realestate firm were forced to bring the auction forward.They didn't like that.

fungus pudding
11-03-2016, 06:34 PM
Thats what happened to him or something very similar.Im all ears...?

No-one can force an auction date to change by making an offer.

Joshuatree
11-03-2016, 06:39 PM
Disagree with you at this point.I will verify his experience and report back. Maybe i missed a crucial detail.

fungus pudding
11-03-2016, 09:26 PM
Disagree with you at this point.I will verify his experience and report back. Maybe i missed a crucial detail.

Possibly the offer contained a time-clause and the vendor decided to bring the auction forward, which would be highly unusual once the auction date has been publicised. But an offer prior to the fall of the hammer does not force anything.

P.S. Are you sure the property was to be suctioned - sounds more like it was for sale by deadline treaty?

Daytr
18-03-2016, 02:21 PM
It can't be forced, but if the offer is accepted by the vendor then the auction is brought forward and the offer then acts as the reserve and opening bid in the auction.


No-one can force an auction date to change by making an offer.

fungus pudding
18-03-2016, 03:10 PM
It can't be forced, but if the offer is accepted by the vendor then the auction is brought forward and the offer then acts as the reserve and opening bid in the auction.

Fair enough. I understand that is the practise followed by a couple of Auckland agents. It's certainly not automatic or essential, and it's certainly not common practise in this part of the world.

Rawiri
19-03-2016, 04:45 PM
I like KW's approach.Sell all your shares etc and try and buy the house for cash or as much cash as you can put in. Then take huge mortgage out and invest in NZX high div stocks like Gentailers for ex.

Hey JT I am in a similar position I am currently looking at investment properties but have enough for a deposit in a savings account(which I gathered from selling down some of my portfolio) and the rest in stocks. But after reading your strategy I am considering doing the same and selling more so i can buy a property outright however when you say take out a huge mortgage to buy stocks how would you go about doing that? as far as i understand borrowing against your house to buy stocks would come with a premium interest rate right? or would you set up a separate entity to sell the property to and use the proceedings from the sale to invest whilst paying off your mortgage over a 30 year term? I am very interested to hear your answer. cheers.

fungus pudding
19-03-2016, 05:15 PM
Hey JT I am in a similar position I am currently looking at investment properties but have enough for a deposit in a savings account(which I gathered from selling down some of my portfolio) and the rest in stocks. But after reading your strategy I am considering doing the same and selling more so i can buy a property outright however when you say take out a huge mortgage to buy stocks how would you go about doing that? as far as i understand borrowing against your house to buy stocks would come with a premium interest rate right? or would you set up a separate entity to sell the property to and use the proceedings from the sale to invest whilst paying off your mortgage over a 30 year term? I am very interested to hear your answer. cheers.

Talk to your bank about interest rate. You'll get a good deal. Generally it is the security you offer that dictates the interest rate - not your intended use of the money. The whole point in buying for cash, then raising a mortgage to invest to increase your income means your interest payments are tax deductible.

Rawiri
22-03-2016, 07:10 PM
Talk to your bank about interest rate. You'll get a good deal. Generally it is the security you offer that dictates the interest rate - not your intended use of the money. The whole point in buying for cash, then raising a mortgage to invest to increase your income means your interest payments are tax deductible.

Right i did not realise this im just going off of the asb securities floating rate for margin lending and it is a good 1.5% higher than the interest im currently paying on my fixed rate

fungus pudding
22-03-2016, 07:41 PM
Right i did not realise this im just going off of the asb securities floating rate for margin lending and it is a good 1.5% higher than the interest im currently paying on my fixed rate


Not sure what you mean. Are you proposing to lock in part of your mortgage that currently is floating? If so - slow down. That will not create a tax deducible loan. The loan you have now is not tax deductible or tax effective. What you must do is repay the loan - that was raised to buy your home and is not deductible. Then after repaying you can organise a new loan to invest, and that will be a tax effective loan as long as it is borrowed with the intention of furthering your income through investing. Timing is crucial.

JBmurc
22-03-2016, 09:50 PM
Hey JT I am in a similar position I am currently looking at investment properties but have enough for a deposit in a savings account(which I gathered from selling down some of my portfolio) and the rest in stocks. But after reading your strategy I am considering doing the same and selling more so i can buy a property outright however when you say take out a huge mortgage to buy stocks how would you go about doing that? as far as i understand borrowing against your house to buy stocks would come with a premium interest rate right? or would you set up a separate entity to sell the property to and use the proceedings from the sale to invest whilst paying off your mortgage over a 30 year term? I am very interested to hear your answer. cheers.

No you shouldn't have to pay a premium over standard rates if you have good home equity(if the banks states that go elsewhere) ....generally understand the major banks will loan upwards of 80% of your free equity ... but does depend on what your investing in
sharemarket etc you might find the bank will only give you 50%-60% etc ...

I have for a long time had a 150k loan in the ASX(through my company) ..I did fix this @ 4.9% for 2yrs round 7-8 months ago(same time I got 4.9% home loan)

I agree get a house debt free or close enough to it ..before loaning for the market

fungus pudding
23-03-2016, 07:19 AM
No you shouldn't have to pay a premium over standard rates if you have good home equity(if the banks states that go elsewhere) ....generally understand the major banks will loan upwards of 80% of your free equity ... but does depend on what your investing in



It shouldn't. Most banks won't even consider what you are doing with the money and won't even ask. All they want is security - something to sell if you fail to pay.

voltage
23-03-2016, 02:09 PM
fungus pudding, you have a wealth of knowledge on property trusts, using home equity, are property trusts fully priced and which ones would you recommend
thanks

Joshuatree
24-03-2016, 05:09 PM
Possibly the offer contained a time-clause and the vendor decided to bring the auction forward, which would be highly unusual once the auction date has been publicised. But an offer prior to the fall of the hammer does not force anything.

P.S. Are you sure the property was to be suctioned - sounds more like it was for sale by deadline treaty?

Yes checked today. He put an unconditional 48 hour offer in and after discussions the agent allowed the offer in and brought the auction swiftly forward; . There was one other int party but they pulled out citing not enough time for doing their due diligence. Whether my friend overpaid or under we will never know but it created near certainty for him which worked and he moved in swiftly and set up his business in the large basement . He had moved from sth island and setting up his business pronto was very important.

fungus pudding
24-03-2016, 06:05 PM
fungus pudding, you have a wealth of knowledge on property trusts, using home equity, are property trusts fully priced and which ones would you recommend
thanks

I think they are fully priced. They are all above NTA*, but have been for ages. Hard to see them dropping though IMO with interest rates favourable to real estate investments and the share market itself. Building replacement costs are always rising as well as demand in Auckland market which should bode well for rent reviews flowing through to higher valuations and NTAs. I suppose I'm saying while they are fully priced today they might hold their premium. I don't think there's much doubt that plenty of people are buying or chasing yield. And it is a game where ultimately asset value rises. (Big help - aren't I) So you know the rules - if you buy now they'll drop - and if you don't they'll rise! Over the last few times I have checked they have drifted up and down a fraction. but seem pretty stable.
Which ones? Arg and Str (Argosy and Stride) have a mix of commercial retail and industrial. PCT (Precinct) specialise in high quality office buildings. KPG (Kiwi Property Group) retail. PFI (Property for industry) specialise in industrial and GMT (Goodman Property Trust) have a mix of buildings but also develop vacant land, as do a couple of the others to a lesser extent. They are the ones I hold and should have added Vital health care ,Rymans and/or Sumerset but haven't. Probably will one day. All those ones seem to be well managed and in growth areas. Look at hteir various websites and you'll see the general standard of buildings and a very impressive list of tenant names.
Using home equity? Why not. Remember the returns are tax paid while your interest is deductible if you have borrowed to buy in. I don't even report the income. So you should show a positive return from day one. It's always a risk of course but probably a damn sight safer than most investing. As I wrote elsewhere if you spread a bit around those investments you will have a share in hundreds of prime buildings and they regularly report vacancy rates of maybe 1 or 2%. They all have a WALT (weighted average lease term) of around 5 years or more so income fairly well assured. They all seem to be good tenant managers and work hard to retain where possible or at least move them to another property they own or develop if they have out grown the premises. Looking in my crystal ball I see LPTs as filling a real gap in the market way into the future. Gone are the days when individuals can manage larger buildings, shopping malls, etc. We are not all Bob Jones types. Professional management is essential. Keeping up with legislation etc is not for everyone.

* point about NTA with property is if the building(s) were sold and money distributed then you would not recoup all your money - so unlike lots of things NTA should be the share price in a perfect world. However there is demand for these schemes - so hence the premium.

fungus pudding
24-03-2016, 06:29 PM
Is a property especially hard to run from a remote location? For example I live in Auckland but am considering a place like Taupo/Dunedin simply due to the affordable housing.

Yes it is. Don't even think about it.

Joshuatree
24-03-2016, 08:10 PM
fungus pudding, you have a wealth of knowledge on property trusts, using home equity, are property trusts fully priced and which ones would you recommend
thanks

IF wanting to diversify Aus has some good yields still; for example TIX an industrial prop portfolio; yield re 7 -8% with no franking to lose out on.Trending up atm ahead of div and possible inclusion in ASX 300.I hold.