Population Growth and Growth in Property Values

[srotherh]

Dean
My take on your situation is
Can you weather any down turn in the market,(rental or valuation) or increase (interest rates) with the amount of debt you are carrying.
Lack of equity is liable to be your stumbling block

You need to be able to service your debt in all markets or your properties will be taken off you.(+ anything else you own)

Dont take this as negative comment
It is a fundamental fact of life

Good luck

[Dean Letfus]

HI srotherh. My equity in a fire sale of my properties would see me with over 2 million in the bank so can I weather any storm? absolutely.
In relation to the capital growth rates I'm happy to supply some samples. NOTE: I only buy property not requiring work so I have done no capital improvements on any of the following.

AREA Year bought P Price Current RV
Scott RD Papakura 2004 173000 250000
Waterview Dr Papakura 2005 320000 415000
Burbridge Mangere 2004 410000 505000
Clyside Pakuranga 2005 700000 850000
shool Rd Rotorua 2005 810000 1550000

I could go on. My worst performing property is achieving way over 10% PA increase. This 5.7% growth stuff is only true if you don't know what you are doing. Buy well in the right areas and 10% per annum is conservative.
Get a good education in property and nothing beats it IMHO!!

[rmbbrave]

Wow Dean that was quick!

Five valuations reports from QV.

As they only allow one valuation report per email address I assume you used 5 different email addresses.

I only have 2 email addresses so I only got 2 reports.

I used to walk down Scott Road in Papakura everyday on my way to school (Papakura High School) and it's only 2 street away from where I spent the first 20 years of my life.

I might even know the house.

What number Scott Road did you buy?

[Stranger_Danger]

Hi Dean,

Firstly, well done. Secondly, and not wanting to be a cynic, but the figures you quoted were

AREA Year bought P Price Current RV
Scott RD Papakura 2004 173000 250000
Waterview Dr Papakura 2005 320000 415000
Burbridge Mangere 2004 410000 505000
Clyside Pakuranga 2005 700000 850000
shool Rd Rotorua 2005 810000 1550000

Note how the numbers get steadily bigger?

I suggest you read Bob Jones's latest book, in particular the hilarious (and true) chapter "Why Developers Go Broke".

In it he talks about the human nature element, in this case about development - ie, if you're successful at a lower level, it would deny human nature to persevere at that level, so they keep doing bigger and bigger deals, all debt funded. He calls it an addiction.

Whilst I realise you're not a developer, I hope the same forces are not at play - esp given that you're not adding any value to the buildings (as you say) - you're basically just leveraging up increasingly larger purchases.

Could your ego adjust to different market conditions? Could your finances?

[minimoke]

I am only vaguely familiar with Deans story having just glanced at it somewhere a while ago. Hence I’m unqualified to comment on the great figures shown with the purchases.

If I use my QV report I find that over time the property has increased at an average rate of 4.5% over 10 years. However in the past two years it has increased at a rate of 14.5%.

So this begs the question. Is it time in the market or timing the market that counts?

[duncan macgregor]

quote:Originally posted by rmbbrave

Wow Dean that was quick!

Five valuations reports from QV.

As they only allow one valuation report per email address I assume you used 5 different email addresses.

I only have 2 email addresses so I only got 2 reports.

I used to walk down Scott Road in Papakura everyday on my way to school (Papakura High School) and it's only 2 street away from where I spent the first 20 years of my life.

I might even know the house.

What number Scott Road did you buy?

RMBBRAVE, for petes sake get with it.
1, most people that buy and sell houses have an understanding with a real estate agent.
2, The agent can look up any house in the street tell you the valuation when it was sold and at what price.
3,The property investor wants the market to rise and fall in price the more extreme the better.
4,I gave you in the past 10pc capital gain with the banks money which is the low end of the scale if you buy and sell at the right time.
5, After you get your first property self funding you refinance to get your initial deposit back its all the banks money.
6, I cant imagine anyone with the brain to have a property portfolio to give out the address of a property for all and sundry to gawk at.
macdunk

[minimoke]

Just a couple of thoughts.

If Dean has over $7m in property assets and has traded over $14m in property over a couple of years I would imagine he would be in IRD’s radar for Capital Gains Tax as a trader. So the RV values need to be tempered by a CGT contingency on the sale of the property.

There are also inherent risks with affordability ratios. It appears to be generally accepted that housing is getting less affordable with income / property value ratios increasing. While it may be well and good to see one’s property increasing at fantastic rates it only has two real values. One is the value which can be used to leverage borrowing; the other is the value on sale. If your property increases in value too much there is a risk that the pool of available purchasers will shrink; leaving you with a property that is difficult to sell. A $1.5m property might be great for leveraging loans but the pool of available buyers is significantly smaller than the pool of buyers in say the $500,000 value range. Generally that may not be a problem if you can afford the outgoings but if you have done your sums on a 10% mortgage interest rate but rates increase significantly (like to 20+% in the late 1980’s) then the equations don’t look so great.

[Halebop]

A sample from a 2 year bull market is not valid to anyone (except maybe the real estate institute). Dean in 2004 and 2005 I more than doubled my money in equities each year without any debt. While my management of risk and selection criteria partially got me there by avoiding too many duds, the main contributor was that I hooked my boat to a rising tide. I don't mistake a rising tide for expertise or imagine I can extrapolate the rate of rise.

In a fire sale, any residual equity is an illusion. It 'aint called a fire sale for nothing. It burns your money first.

[rmbbrave]

quote:Originally posted by duncan macgregor

quote:Originally posted by rmbbrave

Wow Dean that was quick!

Five valuations reports from QV.

As they only allow one valuation report per email address I assume you used 5 different email addresses.

I only have 2 email addresses so I only got 2 reports.

I used to walk down Scott Road in Papakura everyday on my way to school (Papakura High School) and it's only 2 street away from where I spent the first 20 years of my life.

I might even know the house.

What number Scott Road did you buy?

RMBBRAVE, for petes sake get with it.
1, most people that buy and sell houses have an understanding with a real estate agent.
2, The agent can look up any house in the street tell you the valuation when it was sold and at what price.
3,The property investor wants the market to rise and fall in price the more extreme the better.
4,I gave you in the past 10pc capital gain with the banks money which is the low end of the scale if you buy and sell at the right time.
5, After you get your first property self funding you refinance to get your initial deposit back its all the banks money.
6, I cant imagine anyone with the brain to have a property portfolio to give out the address of a property for all and sundry to gawk at.
macdunk

Duncan,

You've lost it mate. A house will suffer no harm by people "gawking" at it! (not that anyone will waste time going to Scott Road in Papakura to gawk at Dean's house)

You have consistantly tried to compare like with unlike on this thread.

I asked for people to use QV while it was free to get valuation reports on houses with no substantial capital improvements.

You have raved on about:

1. leveraged property,
2. undeveloped land, ie your neighbours' paddock,
3. Dean Leftus's examples which use a RV and not the "Estimated market value" used by QV.

Unless you are willing to do a valuation report with QV on a house you know that has had no substantial improvements don't waste my time with any more of your irrelevant examples.

[Halebop]

quote:Originally posted by broke

One can beat this average using leverage...

I can beat market indices using leverage as well. With CFDs I can leverage myself to 99% depending on the contract. The trick is leverage can also beat me. Apparently this never happens in property scenarios.

quote:Originally posted by broke

but only by...accumulating [u]investment properties</u> with the expansion

I think the key here is the term "with the expansion". What happens to the math if I change "with" to "without"? Worse than that, what if I leave "with" as is and change "expansion" to "contraction"?

quote:Originally posted by broke

and becoming free-hold before it ends.

I'd let the "average owner" off with the error but not the seasoned property investor. Freehold relates to ownership of the land title and not the investor's debt status. The statement should be "Debt free before it ends".