Who here actually owns investment properties?

[fungus pudding]

yeah its like that or somewhat like that when you start out... but a decade +later with good career, Auckland capital gains etc... my lifes somewhat luxurious now lol

Of course it is, and you learn a lot about wise spending. I've always said property is the classic investment to keep you broke while you're getting rich. And that's where you learn to extract good value out of every dollar.

[alistar_mid]

Of course it is, and you learn a lot about wise spending. I've always said property is the classic investment to keep you broke while you're getting rich. And that's where you learn to extract good value out of every dollar.

thats a pretty good analogy - or description of it.

It was like that too.. like wasn't poor but didn't feel "rich" until I realised cap gains gone up faster than rents hence was effectively sitting on a pile of cash that might get more in an term deposit. wasn't til I liquidated most of my portfolio and the money showed up in my bank account.. then I kinda felt like I had made it.

Moneys in index funds, managed funds etc now. Just had a fn stellar month, 3% to month ended 11th October, thats only slightly less than the annual yeild I used to get (on market value).

[rentex]

@alistar_mid;
Great return. Do you think any of that could be due to the managed funds provider holding properties (through health care shares/etc) and they have been updated to reflect current property valuations?

[alistar_mid]

@alistar_mid;
Great return. Do you think any of that could be due to the managed funds provider holding properties (through health care shares/etc) and they have been updated to reflect current property valuations?

not sure, most of my stuffs in Milford which some of their funds did very well this month (Dynamic fund for example 3%), and they are big on some underlying stocks like a2 milk which have done very well. Overall my managed funds up 2.4%

I also have international ETF's that overall did close to 7%, thats both the underlying stocks going up in value, and a bit of currency stuff around NZ getting weaker cause of our political uncertainty.

So total managed funds / kiwisaver / ETF's - up 3%.

compare this to a place I had worth 675k, doing 450 a week = $23k a year rent. Less rates, body corp etc... lets say you are left with $20k

20/675 = 2.9%

[fungus pudding]

not sure, most of my stuffs in Milford which some of their funds did very well this month (Dynamic fund for example 3%), and they are big on some underlying stocks like a2 milk which have done very well. Overall my managed funds up 2.4%

I also have international ETF's that overall did close to 7%, thats both the underlying stocks going up in value, and a bit of currency stuff around NZ getting weaker cause of our political uncertainty.

So total managed funds / kiwisaver / ETF's - up 3%.

compare this to a place I had worth 675k, doing 450 a week = $23k a year rent. Less rates, body corp etc... lets say you are left with $20k

20/675 = 2.9%

Is it mortgaged and if so what is the return on your initial input? And let's say you now factor in any increase or decrease in value to give a fair comparison.

[artemis]

Is it mortgaged and if so what is the return on your initial input? And let's say you now factor in any increase or decrease in value to give a fair comparison.

Correct. Leverage is a huge component of return on investment, and is the main reason people invest in rental property - residential or commercial - over other opportunities.

[fungus pudding]

Correct. Leverage is a huge component of return on investment, and is the main reason people invest in rental property - residential or commercial - over other opportunities.

Yep. Gotta be sure you're not comparing apples with trucks.

[alistar_mid]

Is it mortgaged and if so what is the return on your initial input? And let's say you now factor in any increase or decrease in value to give a fair comparison.

nah wasn't mortgaged at that point in time as I had sold off other rentals and paid down the remaining mortgage

But with leverage if the gross yeild is less than the mortgage interest rate, leverage is just gonna make it worse



But yeah, i'm fully aware property i quite in depth to work out ROI, you have leverage, tax breaks, cap gain etc etc. Its not as straight forward as shares.

But given cap gains had gone up so much faster than rents and IMHO market was near the peak, i elected to liquidate my most of my rentals and put the money into other stuff, which happened to be managed funds, etf, private equity, harmoney etc

[iceman]

Interesting discussion and I agree leverage is a huge component. But if one has a lowly mortgaged or a mortgage free investment property, an alternative to selling it to buy managed funds or shares is to simply remortgage it and invest the money in shares. Invest in 2 markets at the same time. I personally feel I am not getting the most out of my equity, including rental properties, if they're mortgaged below 60-65% of market value as I don't "need" the income from them for personal use yet. So I keep topping up the mortgages to invest further.

[alistar_mid]

Interesting discussion and I agree leverage is a huge component. But if one has a lowly mortgaged or a mortgage free investment property, an alternative to selling it to buy managed funds or shares is to simply remortgage it and invest the money in shares. Invest in 2 markets at the same time. I personally feel I am not getting the most out of my equity, including rental properties, if they're mortgaged below 60-65% of market value as I don't "need" the income from them for personal use yet. So I keep topping up the mortgages to invest further.

Exactly. Leverage is great with property cause it amplifies your returns when starting out, and then at the other end of the investment lifecycle you have a credit facility that because its secured on something banks like (property) you get to borrow at low interest rates.

For me starting in property investment in Auckland 15 years ago, and I stress INVESTMENT not speculation... ie yield based where I buying apartments and townhouses weekly rent close to 1/500th capital value - eg a place I got for $188k at panmure I rented it for $360 a week, a studio in Emily place $140k, rented for $320 a week. The golden era of yields.

But over time, capital value growth outpaced rent growth, yields fell, and eventually you get to where you are sitting on a bunch of money and its return is quite low. So I liquidated all but one, paid off the mortgage on that one and on the primary residence. The reason I kept that one, as I figured its not a bad idea to have some exposure to the Auckland property market long term (primary residence doesn't really count).

But yeah having it mortgage free, $650k value with a rent of $600 a week (this was the same place that was originally $188 / $360), I decided to draw down on that equity and throw just over $100k in harmoney (I call it the harmoney experiment), throw some money into PE (milford PE fund 2 and various snowball effect stuff) and random other investments.

Its been good, I still have a whole bunch of equity I could draw down on, I think some debt is good esp with these interest rates, but given 8 years of strong markets, not too much debt... need to remain cautiously optimistic