Good news Stories

[minimoke]

would you get into rental property with 10% deposit and knowing the term deposit can go up high from next year to double digits? That includes floating rate up following the term rate.

Well the Reserve Bank reckon the OCR is set to stay around 2.5% for a while yet so I think it would be a brave person saying interst rates will be in double digits next year.

Buying a rental is of course a personal choice and there are lots of things to think about when making that decision. But if you are worried about interest rates heading to double digits next year you could look at locking in a five year mortgage at 8.3%

[fungus pudding]

would you get into rental property with 10% deposit and knowing the term deposit can go up high from next year to double digits? That includes floating rate up following the term rate.

The deposit is irrelevant. You should look at the yield, and also the price in relation to the value. IOW if you find a real bargain - who cares about a deposit, and if you pay too much - a 10% deposit isn't enough.

[minimoke]

The deposit is irrelevant. You should look at the yield, and also the price in relation to the value. IOW if you find a real bargain - who cares about a deposit, and if you pay too much - a 10% deposit isn't enough.

I agree you need to look at yield and price/vlaue but the deposit is also relevant.

Say you have $50,000 in cash - you need to work out how you are going to get your best return on that cash. Perhaps its by putting it in as a deposit and reduce your interst expence at a rate of, say 6.5% and consequently increase your gross income from the rental.

Alternativley you could put your money on, say, an NZF Term Deposit at 8.25% with interst paid quartely. Or you might prefer to put it into shares like TEL for a 10.47% dividend yield.

Just because you have cash doesn't mean putting it into a deposit is necessarily the best use of that cash.

[fungus pudding]

I agree you need to look at yield and price/vlaue but the deposit is also relevant.

Say you have $50,000 in cash - you need to work out how you are going to get your best return on that cash. Perhaps its by putting it in as a deposit and reduce your interst expence at a rate of, say 6.5% and consequently increase your gross income from the rental.

Alternativley you could put your money on, say, an NZF Term Deposit at 8.25% with interst paid quartely. Or you might prefer to put it into shares like TEL for a 10.47% dividend yield.

Just because you have cash doesn't mean putting it into a deposit is necessarily the best use of that cash.

Exactly so, but it's far better to spend time and effort sussing out a bargain than worrying about whether the deposit is 15%,5% or nothing. I've bought properties before and raised mortgages of well over the asking price. (Some to buy the property and some to live on till I found the next bargain) I didn't ever lose sleep over the deposit. Mind you that was a long time ago and easy to do then. And I had no choice, cos I had no $$$$$$

[minimoke]

And I had no choice, cos I had no $$$$$$

And there we probably venture into the "Negative Gearing" territory whcih is probably a seperate thread!

[fungus pudding]

And there we probably venture into the "Negative Gearing" territory whcih is probably a seperate thread!

Ah yes, but I've never mortgaged a property to the point where it wouldn't cover its own backside, so to speak. Even though it meant that not all the mortgage was tax deductible, I just pocketed the excess for living expenses. It was a very good way of creating a tax free income. (Don't tell the socialists - they never woke up to it.)

[The Great Gold Guru]

Will start negotiating with vendor on property 2 next week ... can I fill my 8 properties in 12mth target by Christmas? Lots of stuff on the internet making eyes at me ...

This one will be cashflow positive of $274pm with a 2Yr 6.19% mortgage at 100% gearing if I can get $10k off the current asking price.

[upside_umop]

There is nothing wrong if it is funded by productive earnings. What is wrong is that it is not - it is funded by ever increasing debt. That is the problem for NZ.

We do not have enough productive earnings in NZ to pay for this ever increasing debt (that is why our current account deficit continues to grow). Essentially the housing market is one large Ponzi scheme - values being driven further and further up by access to credit via overseas banks.

Totally agree.

I dont mean to make this negative, but since MM suggested we dont have anything wrong with savings, i'd beg to differ.

Have a think about why banks have been putting interest rates up over the last wee while. The marginal cost of funding is now coming from overseas, suggesting that we have a shortfall of deposits/savings here in NZ. That shortfall in turn is hurting NZers taking out mortgages! Surely its in home owners best interest to have a decent domestic savings pool?

GGG, does that steep upward sloping yield curve not scare you? Cashflow positive at 6% etc...what about when floating rates rise too?

[The Great Gold Guru]

Just to keep you up to date on my target of buying 8 properties in the next 12 months. First one is in the bag and paying me $240pm after borrowing 100% of the cost at 5.50% ( fixed for 1Yr )

Property 2 ( 2 flat villa in central Wanganui ) is in contract and hoping to hear finance is OK tomorrow. This one will pay us $325pm after 95% finance again at 5.50% for 12mths. Purchased at $147,500 with a RV of $165,000

Property 3 ... Had offer accepted on 1 bed flat in Brighton Rd, Parnell late on Friday at $291,000. Should rent at $375pw and is exactly cashflow neutral at 100% debt funding. Really funky little 1950's period flat ... 10 min walk to Newmarket , 2 minutes to top of Parnell Rd ... glimpse of the sea ... FREEHOLD !!

LVR on portfolio ( 11 properties in total ) after purchase of 3rd property 100% debt funded will be 68.8% so approaching the current 70% limit for rental properties without paying over the odds for finance. Fresh equity to come from sale of listed shares prior to end of September.

5 to go ...

Watch this space.

[AMR]

Wow GGG, how are u managing these properties this widespread across NZ?