Property Stocks

[777]

I think though, that with interest rates are where they are now, they will all attract investors. As interest rates increase then hopefully their will be an NTA increase and dividend increase to support continuing investing.

[fungus pudding]

I hold 3 through 8.

Bought most though at well below current prices so actual yield very good.

They are meant to provide me with cash flow in retirement. Hopefully a growing one.

Nice chart PT.

I have 650k in LPTs, from which my annual income is 40,600. My marginal tax rate is 33%, so 40,600 equates to 60,900 of income. Given that I know nothing about the sharemarket, I can't see where I could possibly get a similar return. I'm only up 3% after a good few yeares, but was well down after GFC, so they've recovered well. If you want income in retirement, you could just keep buying these and reinvest the dividends. -keep stacking up that income, is my motto - My other income is from commercial buildings, so this is just a few more eggs in the same basket. Foolish many would say, but it suits me.

[voltage]

FP, I do follow your comments, you seem to be very wise and experienced. Interesting I have been looking to join the auckland property market but cannot get my head around paying over 400000 for a 2 bed unit in a good area that may rent for early $400 per week. Take off costs - low yield. Compare with property trust may have better growth but much lower yield and more hazzle.
I would add Ryman as a property trust specialising in retirement area with good growth prospects.

[fungus pudding]

FP, I do follow your comments, you seem to be very wise and experienced. Interesting I have been looking to join the auckland property market but cannot get my head around paying over 400000 for a 2 bed unit in a good area that may rent for early $400 per week. Take off costs - low yield. Compare with property trust may have better growth but much lower yield and more hazzle.
I would add Ryman as a property trust specialising in retirement area with good growth prospects.

I wouldn't bet on long term growth from residential property. By any measure it's overpriced. I cut my teeth (too long ago) on residential stuff, but wouldn't go anywhere near it under current conditions. Don't forget - the biggest contributor to current prices being so high relevant to income, is the current low interest rates. Property prices and interest rates are opposite ends of the see-saw. One day they'll climb. It will happen to commercial stuff as well, but to a lesser degree. Res. property can sure have its headaches. No matter how well you screen tenants, you're still likely to strike the odd bad one; and they can cost a fortune. And don't forget, when looking at budgets, to allow heaps for maintenance. I know many landlords and without fail they underestimate their R+M expenditure. Good luck. And thanks for your comments. I might be experienced (aka - old), but have a long way to go before I get the wisdom badge.

[voltage]

You are right about R&M, I own a few rentals, new carpet, repaints, reroof and repairs do happen and kill any profits. it is the capital gain where you make the money.

[fungus pudding]

You are right about R&M, I own a few rentals, new carpet, repaints, reroof and repairs do happen and kill any profits. it is the capital gain where you make the money.

It was once. To invest in res. prop. with current returns means you are betting on capital gains continuing. That's a massive gamble, and not one I would take. My personal philosophy, for what it is worth, is to treat capital gain as a bonus, and just keep stacking up income. I've never really been a flick-over merchant, and have always bought for income. I never made a practise of selling, apart from when I exited from flats and houses. And in the last few years sold some stuff to eliminate all mortgages, simply because I can't be bothered with commercial activity anymore. It's possible to become financially independent by compounding your spare income. The problem with capital gain is you can't spend it. I'm sure you've heard of, or know, some oldies who are well off on paper, but have nothing to live on. Yes - you can sell the odd assett, but then you haven't got it of course. if you take the approach of income stacking, by the time you feel like retiring you can have a very satisfactory income. When concentrating on capital gain, you can't have your cake and eat it too; by stacking income - you can. Grab a copy of Bob Jones' book, Jones on property and read chapter 19 'Good cash flows keep deals well oiled'. Then read it again and again until what he is talking about sinks in. But it's important to work out what you, personally, want. Would you be happier with an extra million or two on paper? In cash? Or a perpetual passive income of 100 -200k a year - inflation protected? (Don't take too much notice of the numbers - there's no limit.)

[voltage]

Thanks FP for your comments. I suppose many of us have instilled in us probably from the high inflation days and from property seminars the advantages of gearing into property. Interesting how many of these property gurus are now bankrupted. You are quite right capital gain is the bonus and where I live in Rotorua with low growth population I do not see any gain in value. I am too now thinking of getting rid of debt and focus primarily on income where you can get a better return without the hassles.

[fungus pudding]

Thanks FP for your comments. I suppose many of us have instilled in us probably from the high inflation days and from property seminars the advantages of gearing into property.

Advantages, or disadvantages. Never forget, gearing works both ways. If you have 100% equity in something and it drops 10%, that is all you have lost. But if you have 10% equity against 90% borrowed, then a 10% drop wipes you out. Not something to be too negative about, but be conscious that gearing carries a risk. The future of the world economy is simply unknown - less certain than ever, and I can't see how NZ house prices can rise much more. It's difficult for me to fathom how a family on an average income, can purchase an average priced property with an avarage sized mortgage. There's simply no way they can pay more without large general wage increases, and that just aint gonna happen! Dropping real estate prices in America wiped out heaps of investors iin the last few years.
For all that, I see Ollie Newland predicting median house prices in Auckland to hit $1 million in the near future. I can't see that at all.

[POSSUM THE CAT]

Fungus Pudding maybe has some he wants to sell?

[troyvdh]

Dear fungus....I agree with about gearing.However not so your other comments.
Without intending to appear somewhat a "know all" it does frustrate me when folk talk about the "NZ house market"-in my mind there are many many many "markets" i.e. location-which city and where,flats,constuction type,batches etc.
I have always been loathe to accept one explaination re the wisdom of investing in houses.You say (and your probably right) that how a family can afford.......so what do these families do then......rent perhaps ????.
Fungus ...can you imagine if those tens of thousands of folk (often elderly) had not been sucked in by those flashy ****er types with there glossy pamphlets had in stead bought the place next door ?.
Ah hhh your probably thinking what about all those who got caught in those property buying schemes that eventually fell over....but hold on if folk seriously understood the principle " of it sounds to good to be true......" many would not have been caught.
Ive been in res. property for more than 30 years-nothing really flash....Ive a mix of properties.A block of flats bought 20 years or so now is debt free and returning about 18 % on purchase price p.a.
What does also intrigues me is peoples perception/expectation of what making money involves.For example many folk have seen there houses increase (at times) by as much as 20-30-40-50 %.....then a following period where there is no change or perhaps a small drop. Now you and I probably agree that such an increase over a period years ..be it 4-5-8...that this is an acceptable return and that a long term view is required.

I also doubt that many people understand the scale of this "leaky home" fiasco.The CHCh earthquake .....say $20 billion...I read estimates of the "leaky" issue between $20-$40 billion !!!!!!!!!...whats more they are still being built,bought and sold !!!!!!

Another consideration that I believe needs to be made is the "lag" extending now for probably a few years where house building numbers have stalled...and will be needed to be made back up.

I also may have quite a different philosophy about investing....sure handling tenants can be a pain....but if it was easy...everyone would be doing it.Also making money aint rocket science....and currenty in todays world I believe that if your managing to hold what youve got ...your doing alright.
cheers.