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  1. #1
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    Default HOW TO BUY A PROPERTY INVESTMENT

    Lets presume you are a complete first timer looking for a residential property to rent out. This is business and business is numbers so how do the numbers stack up. The numbers must clear 8pc. That means for every $100000-00 the house costs you must get $8000 per annum in rent or the house is overpriced. That way with a bit of luck and a 10pc deposit the house is self funding. Lets say you buy a house at $250000 pay $25000 deposit you need to have it rented out at $385-00 pw to cover the outgoings. So back to your numbers property doubles in value every ten years on average so your $25000 deposit in ten years has made a capital gain of $250000.
    macdunk

  2. #2
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    ASPEX, you raise some valid points, but in general miss the point. It is not a case of i am right you are wrong, or visa versa. Let me give you a real example then you tell me what you think again. 4 years ago i paid $125000 for an 18 month old brick and tile house at randwick park auckland, at a mortgagee auction. I leased it to the The housing corp for $250-00 per wk who looked after it rent gauranteed. They do maintenance whatever any malicious damage is on them. I sold it to my daughter and her girlfriend I was trying to teach them How to make money without even trying. They paid me $145000 for the property on a $15000 deposit and a loan from the bank. They have only visited the property once, at the very start and never been back. The property has been self funding, the rent went up to $300 pw and they managed to pay for everything from the rent money, in other words they invested $15000 and that was the end of it. They recently sold The property and after agent and lawyer fees ended up with $207050.
    In four years they turned $15000 into $62050 or over 400pc.
    Macdunk the smart one bought KIP and CNZ and held them for a couple of years until i woke up to myself and made roughly 18pc pa. You Aspex are telling the wrong person about buying into shares like that. The way to make money is borrow, and have someone else pay the loan and pocket the capital gain. Incidentely my daughter and her pal want me to buy a block of units so that they can buy from me like the last time. macdunk

  3. #3
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    aspex, if i had geared up on KIP or CNZ with a ninety pc gearing i might have increased my profit to lets be generous and say 80pc return on the origonal stake. how long to play catch up to 400pc over three and a half years. Property goes up 10pc a year good times and bad. Place a big enough deposit down until it is self funding. You will then have a 10pc capital gain on the total. Buy right do the sums it works out 10pc deposit gets a 10pc capital gain over 100pc.
    Beat that on the share market year in and year out i cant and i am vcry much in front of the average at that. Most people only save and prosper with property it is the backbone of the country. The average person makes more paying a house off than whatever else they do in life. macdunk

  4. #4
    Runswifscissors
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    quote:Originally posted by duncan macgregor

    aspex, if i had geared up on KIP or CNZ with a ninety pc gearing i might have increased my profit to lets be generous and say 80pc return on the origonal stake. how long to play catch up to 400pc over three and a half years. Property goes up 10pc a year good times and bad. Place a big enough deposit down until it is self funding. You will then have a 10pc capital gain on the total. Buy right do the sums it works out 10pc deposit gets a 10pc capital gain over 100pc.
    Beat that on the share market year in and year out i cant and i am vcry much in front of the average at that. Most people only save and prosper with property it is the backbone of the country. The average person makes more paying a house off than whatever else they do in life. macdunk
    This is an interesting debate but for someone trying to decide which is better this deate has its problems
    That D McG is able to get a better return on property than on shares is useful for D McG but not for me, as D McG doesn't make my buying decisions on property or shares.
    For myself I am repeatedly informed that the long term ROI is better on shares than on property, and since I cannot unlike D McG gaurantee to be much better than average, This should be the guiding principle for me.
    However, it is not quite that simple. The rates of return are based on a fixed sum invested, and when Gearing is factered in aspex and D McG suggest then some slightly different arguments must apply.
    Banks seem to prefer the security of lending on property, and are prepared to lend either at a lower rate of interest or a higher amount, on the same security. So what (anyone other than D McG who knows for himself) wants to know is.... what is the long run rate of return on geared up property, (less cost of investment) compared to the same for the ROE of shares. If anyone knows where you can find those figures I'd be interested

  5. #5
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    Default

    ASPEX, Interesting post taking in in slowly. We both agree on one point, and that is to use other peoples money to make money. The risk factor is the next point. Shares can drop suddenly overnight giving a substantial loss, but are easy to cut and run. Property will only level off in the short term, then continue to uptrend. Property is a long term investment shares can be a very short term. Property is the slow sure easy way to riches with very little input.
    Property is more a gauranteed investment than shares where to a certain extent you are forced to take someones word for what is really going on. Having said all that i am looking at gearing up on shares so you are making me think. cheers macdunk.

  6. #6
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    Aspex, Macd etc...

    Talk about a moot point.

    I have been investing in property for years, and my day to day business is in property transactions. I deal with developers, speculators, investors etc etc on a daily basis and I have seen people make and loose fortunes through every conceivable instrument and technique in the property market.

    I have also been activily investing in shares (directly) for around four years and know less about it. I Actually averaged higher returns (even considering the booming property market) over the last two years, percentage wise, from shares - although my gearing is 80% on property and usually only 30% on shares (with less money involved) - so my ROE is still higher from property.

    For some examples, I bought into SEN on the ASX with borrowed funds (margin) and made over 70% in 2.5 weeks. I have also bought properties on 100% financing and made 100% capital gain in 18 months giving me a total capital gain of 189K from essentially no money down (cross colatoralised of course). The SEN trade made me 20k in 2.5 weeks. Both of these investments are excellent, but dont think of either of them as being any better than the other.

    Comparing asset classes is fraught with problems, and people will always be able to put forward a good argument for whatever suits their opinion. Using historical performance and real world examples is rediculous as well.

    Its natural to gear into property - shares are more liquid - its easy to ad value to property - derivatives can provide incredible leverage - you have more control over property - you can let incredible business minds make money for you with shares and its less hassle - blah blah blah blah blah

    Get over it, learn as much as you can about investments, business, leverage and diversification and then go and make as much money as you can utilising any or every asset class that suits.

    Kind regards,

    Sauce [}]




  7. #7
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    Macd -

    Saying that property doesnt go down in value is one of the most common misconceptions around.

    Property values trend up and down in VERY real terms. There have indeed been many falls in property values, as a whole accross NZ (and elsewhere) and of course some individual cases are worse than others. People also do loose their shirt in property.

    Its not the be all and end all.

    In saying that, there are some fantastic things about property, it is a great investment tool no doubt about it.

    Property on AVERAGE may have provided approximately 10pc over the last ten years (this is in fact quite accurate) - but dont forget that A HUGE amount of that has been in the last two years.

    We are now way above the long term average for property gains in NZ.

    Regards,

    Sauce [}]


  8. #8
    Runswifscissors
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    Aspex thank you for your resonse to my post. but please don't apologise for the length of it . I am interested in all forms of investment and in gearing. But my knowledge and confidence are limited. So I put up a post hoping to get some replies and a discussion going, so I could read and think and maybe learn. So far I have had some success with this. Thanks

  9. #9
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    Just re-read my posts and realised they might have seemed abit arrogant [:I]

    Wasnt suggesting i know everything about anything, just trying to make a point that comparing the two asset classes is flawed to begin with, and that they are both great wealth creation tools []



    Hows the sunshine in Wellington today! w0000t

    Regards,

    Sauce [}]

  10. #10
    Runswifscissors
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    I'm sorry Sauce I see the interesting bits but missedd the bits that seemed arrogant. Maybe you need to work on that arrogance so that its more recognisable.

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