NZ 1st homebuyers are ScReWeD...

[patsy]

quote:Originally posted by JoeKing

So all you economics experts....... where is the missing $20"

The "missing dollar paradox" is an accounting problem:

http://mathworld.wolfram.com/MissingDollarParadox.html

http://en.wikipedia.org/wiki/Missing_dollar_paradox

[trackers]

JK

following on from a point Jess9 made, and also after having a look at Dolf de Roos' website ("Remember good cashflow is your bottom line, not the purchase price of the property. "), just wondering:

Any recommendations on actually finding ANY reasonably priced cashflow positive rentals? Because damned if I can find a single one in ChCh at the moment (and yes, I am trying very hard, using multiple sources)... I'd even take one that was cashflow neutral!

[trackers]

So I'm going to follow on from my above point a bit, using Chch as example


3 bedroom average rental: $280 - $300 p/w or $15,600 p/yr (very generous)
Less,
Rates: $1000, or $20 p/wk
= $14,600 p/yr INCOME

This means, at a 7.5% interest rate (very very low at todays rates), you'd need to have an interest only mortgage equal to, or less than $192,000 to break even.

Average house cost: $330,000
Low-end 3 bedroom house cost (in semi-decent area): $230,000

$230,000 on a 30yr mortgage at 7.5% = $371 p/week
+ rates $20 p/wk
= $391 p/wk

I know the thread's general theme is renting vs first home, but I feel that people supporting residential property (the classical way) should front up with how the average joe could spin the wheels given the current market

[George]

So according to Patsy's link, the 240 is of no importance.
Wifey has $300, she keeps 40 and gives 60 to family.
Nett 200. Simple, so how come my headache.
Are we close JK.

[Jess9]

Hi Trackers. Same problem.

I can find a few passive cashflow (after tax breaks etc) properties - but these generally need much "deferred maintenance" sorted ASAP, and are already multi-income properties. Also if only getting a passive c/flow at this stage of the market (with less chance of ongoing short term cap. gain etc) and if the idea is to reduce reliance on salaried income, then such properties really do not fit such an investment plan anyway.

For positive cashflow, I think we simple need to wait for rents to rise and prices to be eroded by inflation going forward, then genuine positive c/flow should re-emerge again.

Heard on the radio this morning that USA banks were taking mounting losses on their residential loans, as stretched borrowers crumble under stagnating/falling prices and increased interest rates. That sounds like the slump biting over there, maybe "middle stage" of their slump??

The NZ boom started later (than US) so maybe we are 2-3 years behind this stage. I see from past stats, previous NZ slumps seem to last about 4 years after the boom quickly tapers off. Of interest QV today showed national prices falling below 9% (increase) today, so I guess NZ boom is winding down.

I've read real estate is a get rich slow game - I think this is the hardest part, sticking to a plan - through the ponderously slow property cycle.

[Steve]

quote:Originally posted by Jess9

I've read real estate is a get rich slow game - I think this is the hardest part, sticking to a plan - through the ponderously slow property cycle.

Which is part of the reason why the last few years of being a 'get rich quick game' is expected to come back and bite some of the more leveraged newer entrants...

[limegreen]

quote:Originally posted by Steve
Which is part of the reason why the last few years of being a 'get rich quick game' is expected to come back and bite some of the more leveraged newer entrants...

Steve, I have sent you an email via ST (just in case it goes to an address you don't check often).
Cheers,
Limegreen

[Serpie]

Residential property is no different from any other investment. Do your own research, know your market, and buy assets that are undervalued (in the market of the day).

The best thing about rentals are the tax breaks - especially the ability to re-finance your own house, load up the rental properties, and claim the tax rebates on (what would have been) your own mortgage payments.

One thing that the so-called experts actually get right (IMHO) is the need to diversify. Rental properties and trees are not as exciting as the sharemarket, but they keep churning away, day in - day out.

Before we know it 25 years will have flashed past before our eyes, and you'll have a huge asset that someone else has been kind enough to pay off for you.

[Steve]

So the speculators could be saved by the 1st home buyers...?

Houses 'way above value'
House prices have ballooned to a record 42 per cent above what they should be worth, New Zealand's biggest money manager says.
...
But he did not expect house values to fall 40 plus per cent.

Demand for housing from first-home buyers would probably limit price falls to about 10 per cent during the next few years.

It was also possible that house prices had found a new level and that a downward adjustment to the previous long-term trend was not needed.

[Steve]

quote:Originally posted by limegreen

Steve, I have sent you an email via ST (just in case it goes to an address you don't check often).
Cheers,
Limegreen

Got it, will reply...