NZ 1st homebuyers are ScReWeD...

[Crypto Crude]

thankyou for your advice steve f...
at the moment the govt is dangling a carrot for me to stay, with an interest free student loan... If I stay I will save 3k per year on interest charges.. and free up approx 35k for investment...
If I go, then I pay my loan off, and have much less for investment...
you said im looking at 60k starting package....
well if I stay earning 35k... and free up my student loan for investment, aim for 20k return... (would like to think that I could make that easily this year)... 55k in total... in opportunity cost terms I may be indifferent to go or stay...
If I go, then I have to sell all my shares...

Trackers.... not sure if you still at uni, but you may have read in the canta mag last year about my story... some uni guys got real pissed at the foundary, and smashed my car up, (car was written off)... they got dobbed in by their mates, they wanted to become lawyers so they eagerly paid me out, and I made a tidy profit... just abit over 1k...
I put the bit over 1k, along with some other cash and bought AED... that 1k is now worth $3544 australian dollars... Best Uni story that I have!...
.....this year I am attending classes on mgmt 320,321... Im not sitting those exams, just going to Lec's... Im soon going to find out if those classes will give me any bright ideas
[8D]
.^sc

[Steve]

quote:Originally posted by Cooper

quote:Originally posted by Steve

Cooper, have you been studying 'Open Economy Macroeconomics'?

About a year and a half ago

Are you involved with Otago or studying Steve?

Edit; actually if you're talking about Econ 316 then I haven't... that's one I'm going to take to finish my Comm.

Always studying...just to keep the mind active!

[wns]

quote:Originally posted by Shrewd Crude
4.....What sort of job could you expect to get when finished studying and what salary?
I would like a job at AED ... nar, but seriously....
anywhere in the finance sector, I would like to own my own business one day, weather that to be my own start up, or to buy a stake in a small listed company, get a set on the board and go from there... im not sure which route I will take... I'm looking at 35k first year out...
my mate got that salary and 10k rise after two years... short term wages will be lower...
[8D]
.^sc

Hey SC, if you'd like your own business, learning to sell is a valuable / essential skill to develop somewhere along the way.

[Crypto Crude]

WNS.... yes, selling and people skills are essential...

Trackers.... that property for 239k sounds pretty damn good...
two years from now, and something similar like that, and Im in...
[8D]
.^sc

[cantab]

quote:Originally posted by trackers
I was looking at a nice 3 bedroom house on a full size section in Papanui the other day, 239,000.... Unfortunately I pissed around and would have had to taken a spot as backup-of the backup-offer [:I]

Sounds cheap Trackers for a suburb close to Merivale!

[trackers]

quote:Originally posted by Shrewd Crude

thankyou for your advice steve f...
at the moment the govt is dangling a carrot for me to stay, with an interest free student loan... If I stay I will save 3k per year on interest charges.. and free up approx 35k for investment...
If I go, then I pay my loan off, and have much less for investment...
you said im looking at 60k starting package....
well if I stay earning 35k... and free up my student loan for investment, aim for 20k return... (would like to think that I could make that easily this year)... 55k in total... in opportunity cost terms I may be indifferent to go or stay...
If I go, then I have to sell all my shares...

Trackers.... not sure if you still at uni, but you may have read in the canta mag last year about my story... some uni guys got real pissed at the foundary, and smashed my car up, (car was written off)... they got dobbed in by their mates, they wanted to become lawyers so they eagerly paid me out, and I made a tidy profit... just abit over 1k...
I put the bit over 1k, along with some other cash and bought AED... that 1k is now worth $3544 australian dollars... Best Uni story that I have!...
.....this year I am attending classes on mgmt 320,321... Im not sitting those exams, just going to Lec's... Im soon going to find out if those classes will give me any bright ideas
[8D]
.^sc

2 years out of uni now...mgmt 320 and 321 were exactly the papers I did... I loved Strategic Mgmt (mainly focussed on working on, and keeping, a competitive advantage). Haven't read the canta or visited the foundry in tooo long

[trackers]

quote:Originally posted by cantab

quote:Originally posted by trackers
I was looking at a nice 3 bedroom house on a full size section in Papanui the other day, 239,000.... Unfortunately I pissed around and would have had to taken a spot as backup-of the backup-offer [:I]

Sounds cheap Trackers for a suburb close to Merivale!

Yeah indeed...I'm in Papanui too at the moment so its 'home turf'...2 offers on the table, ours would be 3rd, so i suspect itll go a bit higher than 229k

[Dimebag]

SC,

For someone as bright and proactive as yourself, whether you buy or rent should be a relatively straight-forward mathematical exercise in working out where you believe your capital is best allocated.

For the average joe punter who knows nothing about shares, the prospect of high property prices is much more penicious, as this has been a dead-set equity cow for the mum and dad punter who saved diligently for many a decade. It is now getting to the point where housing is priced so high that this will no longer prove to be the case. And for these people, there may be no realistic alternatives that offer similar prospects for high compound gains on their equity over time (especially given the relatively abysmal performance of managed funds over the past 10 years).

But for you, if house prices seem too high, you can simply put your money in the stock market and use the dividends to subsidise, and eventually cover, your rent instead.

To me it seems straight-forward that in the long-term, average property prices cannot increase faster than the rate of inflation + economic growth, because more rapid price growth means property is becoming more and more unaffordable. For me, this suggests assuming about 5% pa in capital growth is about as bullish as one can reasonably be. The high end is likely to grow faster than this, as it reflects the skew in income distribution whereby the wealthier are getting richer much faster than the masses, but equally, you get much lower yields in this space.

So your return is basically 5% plus the rental yield of the outfit (or the rent you save by living in it), less costs (insurance, rates etc). By my estimation that is probably about 4% for the average NZ dwelling. So you're total return on assets is 9.0%.

Borrowing rates are 8.0-8.5%, so you make a small spread gain on doing a "leveraged buyout" of a house, but not much. If you assume 10% down on a $400,000 house, you pick up $20,000 in capital gains and $16,000 in "saved rent", but pay say $30,600 in interest (@ 8.5%). You're total profit is $5,400 on a $40,000 equity investment - which amounts to 13.5%.

If you think you can do better than that in the stock market and/or with less risk, then put your money in the stock market instead - simple. That is the approach I'm adopting currently. I'm 24yo, renting an apartment in central Auckland for $215 p/w, subsidised by an annual dividend flow that averages out to about $100 a week.

The equation becomes a bit different when you add back tax benefits you can get if you rent the place out rather than live in it. In general, this pushes the IRR up to closer to 20% by my calculations, but as Halebop has intelligently pointed out, unless you keep regearing the thing to 90%, this quickly falls to the low teens. When you gear this high, it doesn't matter how much money you've made in the past - one blip which causes a 10% downturn in prices would wipe you out.

It doesn't matter how you build your wealth, just build it. Save money regularly, and invest whatever money you do have as intelligently as possible (assisted by diligence and robust investment principles), and given time your finances will be in good shape.

Dimebag

[Tim]

How much are foreign investors in property are adding to capital growth?? No data is kept on this.

[Crypto Crude]

nice meaty post dimebag....
"But for you, if house prices seem too high, you can simply put your money in the stock market and use the dividends to subsidise, and eventually cover, your rent instead."

green...I have never had a dividend... I don't chase stocks that pay dividends...
redthat 239k house in Papanui with land base 3 bedroom doesnt seem too high...

I am indifferent between shares and property in the short term...
in the long term property is far better....

all I know is that the bull market on shares willnot continue forever... the BB's will pull from the market and it will crash... It is a certainty.... It will happen... and I only have a few more years in shares maybe 5 at max....
everyones in shares, why wouldnt they be! we have been through times where picks dont matter because your shares will rise... I am not foolish enough to think that I can continue to make hot picks forever...

what property has going for it is the effect of compounding... yes it is 10% in the first year..
10 years down the track 1.1^10=2.594
1.1^9=2.358
2.594-2.358=.236 return between the years 9 and 10 even though prices only rose 10%...
becuae the effect of compounding that 10% increase has gained you 23.6% return on investment between years 9 and 10
so even though property has only risen 10% this year...
those that have been in the game for along time are making returns of ,20,30,40% return on initial investment

so when You peoples talk about yields being only 4-5% it can be missleading....
yes it maybe 4-5% on a house bought today.... but for long term holders the yields to initial investment are far more attractive....
eg. 90k house.... now worth 200k..... 200weekly rent...200*52=10400...
yield on initial investment is 11.5% .... yield on 200k is 5.2%
it is the yields in the long term that make it lucurative...
This is what I need to focus on... what property will be like in the long term
[8D]
.^sc