Negative Gearing

[danchop]

what im trying to say rmbrave is the current prices property is selling for over here, i think its very hard to get good rental yields,most are probably buying on the capital gain appreciation hopes and i mean hopes with a big H

[rmbbrave]

Danchop,

After a quick search in Saturday's Herald, I found the following properties - all currently tenanted.

Glenfield 530pw $499,000 5.5%
Avondale 495pw $359,000 7.2%
Mt Albert 345pw $262,000 6.8%
Manurewa 200pw $135,000 7.7%
Mt Albert 450pw $355,000 6.6%

4 Flats 42640-47840pa $595,000 7.1% - 8.0%

During the negotiation process I'm sure you could knock a few thousand off and the yields would be even better.

[danchop]

exactly rmbrave,that kind of gross % return is not what i would call an investment,i had rentals back in the 90s earning between 15-20%,its just not enough unless your banking on good capital gain,you can get 7%p/a in a common bank here,and i dont know what the properties are like you have mentioned,but a dodgey type property attracts dodgey tenants throwing your yield out the window,have a look at "renters" shown here on tv

[rmbbrave]

I agree that these yields are not very high for people who are borrowing from a NZ bank at 7%.

Did you read my initial post carefully? I would borrow 60% of the purchase price of a property from a Japanese bank at 1.68%.

If the capital gain is 3% pa then I estimate I will get a 20% return on MY (as opposed to the banks) money.

I am unable to watch "renters" on TV as I live in Japan. What is it about?

[Halebop]

quote:Originally posted by rmbbrave

This EIE ?

Shinsei to settle 'fraudulent' sale of resort property...

Thats the one. You'll need to look back further though. That settlement is a pale shadow of the former EIE.

[danchop]

i realise your in a different situation with borrowings % over there,so that helps a lot,"renters" is just another reality type show shown here that follows about 3 property managers around namely auck/hamilton and the states some renters have the properties in,at the moment the renter has all the rights so get a bad one and it turns into a nightmare,and generalising a $270000 house in auckland may land you with these such people,not something i would like to land my father into to deal with,i would look elsewhere even to the westcoast of the south island eg westport/greymouth/reefton houses fetching $180-$200 week rent but the house is about $100000-$125000 and demand is there for rentals as the mines are coming back,you may think the area sucks for capital gain but a year ago these same houses were $50000-$60000,beleve me even though property managers take a % its well worth the less stress,and you dont get the tenants who f%^k the whole place up for you by turning it into a lab for meth making which is happening more and more

[StainlessSteelRat]

quote:Originally posted by danchop

thats cool,dont know what auckland yields are

I have seen some properties showing yields as low as 4% - gross!

[duncan macgregor]

STAINLESSSTEELRAT, You paint a pretty grim picture of 4pc yeild but lets suppose that is what you end up with. How bad an investment is that?. Property is a long term investment so we must take a medium to long term approach. The price of a property long term increases in value by 10pc pa on average. So your property with a 10pc deposit will show taking into account capital gain a very healthy return comparing to depositing the money in an interest only account. The easiest way to riches is with property with an interest only loan and the largest loan you can get. What most people dont understand is the small ammount of your own money invested for the largest capital gain which is 10pc pa over the last thirty years. You borrow the money buy the factory or house that increases in value at 10pc rent it out and count on the rent as paying it off or almost and you sit on a 10pc capital gain on a property 90pc more than your deposit. If anyone is in doubt then stay poor who cares. It happened fifty years ago twenty years ago today tomorrow. The easiest way to make money is property but like everything else do your homework. macdunk

[rmbbrave]

Duncan,

I'm not so sure about this average 10% capital gain per year.

I have a book by Jan Somers and Dolf de Roos which states Capital growth in NZ has averaged 10% per year for the last 100 years, and in England 10% for the last 1000 years. (page 9)

I have no faith in their figures because if a house increased in value at 10% a year and cost 1 cent in 1086 (Domesday Book) it would cost $7 x 10 to the power of 35, a 1000 years later . (The US GDP per year is $9 x 10 to the power of 12.)

On the same page they reckon shares have returned 6% over the last 100 years but in Making Money on the NZ Sharemarket page 66, Newman and Briggs say returns have been 16.7% from 1957 to 1998.

[duncan macgregor]

RMBBRAVE, the point you miss is you get that gain on a $300000 dollar house on a $30000 DEPOST. With $30000 in a bank deposit how much will you make in comparison. The capital gain on your first year is 100pc on your thirty thousand less the cost of the difference between the rent and the mortgage. Most deals the rent covers the repayments otherwise you paid to much in the first place. If your initial deposit cant make at least 50pc pa then you are doing it wrong. beats shares. macdunk