fg, when you talk about commercial/industrial is this thru LPT or direct holding. If direct holding how does one get into this. I have residential properties and understand the advantages of commercial but isn't entry level beyond most unless you have a sizeable deposit?
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05-01-2012, 11:28 AMvoltage
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05-01-2012, 02:33 PMfungus puddingYou will almost certainly need a large deposit. Once you have built equity in residential then you will have the option. It takes time, but once started it's much more profitable. Forget REITs until money is no longer important. They have their place in an investment porfolio, but only after you've made your pile nad would rather spend your days on a cruise ship, or whatever you fancy. They offer an initial return which is satisfactory, but the growth just doesn't compare with direct ownership. Remember when starting - it deosn't have to look pretty. A grubby old panelbeaters shop can turn out to be marvellous and will certainly leapfrog you into a good position before reits will. Location is more important to be aware of than looking flash. Good luck.Quote:
Originally Posted by voltage
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05-01-2012, 03:07 PMfungus puddingYou and I are on a different wavelength altogether. Having established a good income many years back I quit all debt and piled a bit of surplus into a spread of REITs. I kept two good commercial properties, debt free - enough to give me a higher income than I need for the rest of my days. The reits have been useless. An investment of 650k is now worth less than 600. In direct ownership over that time a well selected building would have incresed by at least 50% (to around a million) in value - without any gearing at all. The income is reasonable, giving me an additional 40k per annum which is the equivalent of 60,000. I'm not complaining at all. I'm happy enough with that because it doesn't matter anymore, but I certainly wouldn't compare REITs with direct ownership. They cost a fortune to administer and the unitholders pay the price. There has been no growth in income or therefore in value. They are for the lazy, the timid, or those who have already made it and can't be bothered (e.g. me). They are not for the still ambitous or those who are trying to establish an income.Quote:
Originally Posted by KW
As far as making money through development - that's highly debatable. some do, but heaps go broke. It's a huge generlisation to state that development is the only way to profit. Mopping up after developers is pretty good though. And as far as Rich dad - poor dad books go; never have I read such trite and childish trash as that stuff. Six months in the real world will teach you more. Finally - the definition of 'rich' is subjective. I prefer to think of becoming financially independant, and for most to attain a level of comfort I suppose an income, purely from passive investments, of between 100 and 200k is about right. But it's a bit of a stretch to call someone in that position 'rich'. Equity of around one and a half million will give that in commercial property - but 1 or 2 million is certainly not rich. I shudder to think of the equity required to make an income of 1 - 200,000 in residential these days, but the returns are much lower, and costs are massive compared with a net commercial lease. And dealing with residential tenants stops being fun after a few short years. -
05-01-2012, 04:36 PMKees
fg.
I concur with you on this i am exactly in this position and it took long hours hard work and learn to walk before you run. -
05-01-2012, 05:32 PMfungus puddingNo. You said rich at the bare minimum is never having to work at all. I said that is financially independant, but certainly not rich - even at the lowest level of rich. The income example I quoted of 100 to 200k ain't rich in anyone's language.Quote:
Originally Posted by KW
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05-01-2012, 05:41 PMvoltage
Residential makes money on capital gain, I am sure over 10 years there is capital gain. Relying on income from residential usually gets gobbled up in maintenance. This is the advantage of commercial, all outgoings paid by tenant. I suppose if one was to look at commercial it is good to find a city with an increasing population. Auckland becomes an obvious choice. Can this be narrowed down further. What is an economical entry level size? Where do you go for advice?? Another way is to buy Ryman because it is a specific type property trust with growth unlike the others like AMP office etc
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05-01-2012, 06:03 PMfungus pudding....and if Australia, which is highly likely, then New Zealand .......Quote:
Originally Posted by KW
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05-01-2012, 06:08 PMfungus puddingPopulation growth is one thing, but replacement building costs are the real key to rental growth. The right thing in a small rural town can turn out to be pretty lucrative, as long as the place isn't shrinking. Bob Jones favoured Ashburton retail for many years when he was working on his first millions.Quote:
Originally Posted by voltage