Forum Replies Created
thanks for your comment back in 2006! you can know me – skype, facebook, etc – I’m barbgriffin on facebook, hit me up! Barb AKA Mini
Interesting how you can read the article and get doom and gloom and I read “8 per cent ahead of a year ago”…..
….”Listings for the rest of the North Island and the South Island were also on the rise, with the number of properties for sale in Christchurch in February up 63 per cent. “Recent capital gains figures say that Taranaki has gone up 29 percent so far this YEAR. That is (almost) more in 3 months than Manly did in a whole year which was the number one capital gains suburb in Australia at the height of the boom! I think I remember reading that NZ has gone up 14 percent this year so far. Don’t quote me but I am sure I read that!
With the disclaimer that I am not an economics whiz and I’ve sort of picked this up as a property investor, by gaining a better understanding of how everything links with everything else, here’s my thoughts/explanation. If you get a weaker dollar, half of NZ cries HURRAH! i.e. farmers, exports, and so on. Foreign investment. Then you have a period where everyone does well (in NZ) and exports prosper and everyone has lots of money. Fast forward to Taumarunui mid 2003, where you couldn’t get a tradie because (in my project manager’s words who is a local and does all the plans, drafting, resource consents etc) ” Farming has been doing really well and people have some money, so there’s 20 years pent-up demand for new kitchens!!!” NZ dollar goes up…people spend…invest…do up….prices go up…unemployment is at a 19 year low…NZ is economically growing at , what, 2.5 percent a year, and some regions at twice this rate. NZ is hot baby! Interest rates were low. Suddenly the dollar starts zooming up and capital gains etc and WHOA!!! suddenly the government starts worrying that if it goes up tooooo much tooooo fast, then exports will suffer, etc etc so they (in their infinite wisdom) do what they can to ‘control inflation’.
First thing is that they stop the number of people who they let into the country. i.e. slow immigration. This does not mean that suddenly nobody wants to come to NZ any more, on the contrary, there are queues around the block to get it, I’ve known a few Germans etc who have tried, and it’s not easy! High immigration causes growth/demand/inflation as more people put more demands on housing, services etc, so the Government cuts this back. Now if you don’t have an understanding of this basic economics stuff you read an article that says ‘Immigration at 6 year low’ and you might think ‘doom and gloom! Nz is losing favour!’ but not at all, it’s just a way of trying to stop the growth going toooo fast because while half the people want the NZ dollar to go up up up up up and never stop, ditto property investors who already own, half the people don’t want it to (i.e. exporters, people who haven’t bought yet and are ttrying to buy homes on an average income, etc.)So…. then the government does a bit more because by then a tsunami of ‘NZ is hot, let’s buy up large!’ feeling is happening and so they hike interest rates, a little, a little more, a little more, trying to stop the crazyness, and the banks have to do it too, until you get 8 percent and TALK of doom and gloom.
now the other thing to remember is though investors feel that they are oh so important, sophicticated and they probably believe that they ‘are’ the market because they buy and sell more than the average person, the truth remains that the housing market is dominated 80 PERCENT or more, by homeowners!!!!!!!!!!!!
Who don’t really think like investors, they are emotional buyers, who buy the best house they can afford, when they can afford it. Sure, rental accom is a growing trend in NZ (that should be an upside enough to buy there!!!)….but anyway I digress, so you get to this point where property prices are high and rents although they have risen heaps, haven’t risen as fast as prices, i.e. yields are down.OK, so let’s say that prices might ‘slow’ in growth for a while. (everyone knows that property trends upwards and always has done, despite war/famine/recession/stock market crashes) since property prices were recorded!!!! Ask the Queen of England if you don’t believe me!!!! (hahah)
then what’s going to happen? Well rents will rise, this is a predictable phase of the cycle. Then our cashflow yields will be stupendous! With all that surplus, what are you gonna do, but what a good time to subdivide, renovate, build minor dwellings, add value in general, to refinance and keep buying (because flat markets with rising yields are The Perfecto Time To Buy!!!! – you are counter-cyclical, remember! -)
And remember Dolf De Roos who bought his first cashflow positive property when interest rates were a WHopping 27 percent!!!!! And the rental return was way more than that!!!! Because he started in a part of the cycle when returns were through the roof. Basically NZ is not going to go away, it’s a country of people most of whom are going about their business, going to work, going home, renting houses, doing up their bathrooms, buying a home, moving to a better home, selling their home and buying a unit, or moving out of
a unit and buying a home. Anyway… so on we go buying more great deals. My favourites are ‘under value when you buy’, add value, high yields, and just pretty cute tidy nothing to do buy and holds, I have all of the above in my portfolio and I’m still buying everything I can.cheers!-
miniHi there
I have only subdivided in the North island, however the first step is to get a surveyer to visit the site and give you the low down. they measure it, give you a time-frame, exact run down of costs, etc etc
There is a lot to it i.e. where are the services, access, right of ways. There is a legal part of it too but this comes much later. The answer as to how much it costs is soooo ‘it depends’. And only the surveyer is qualified to suss it out for you really. They can also pretty much handle the whole thing for you, even advise you who is a good lawyer to use to complete the subdivision (someone who they deal a lot with is always good as they have a relationship.)
allow 6-12 months for the whole process, even if they say ‘3-12 months’. You will find that it’s a whole lot of hurry up and wait. Council say they take ’20 days’ to process an application but it might take you three months to get to the ’20 days’ and then council come back with some silly tweak and then you have to allow more weeks for surveyers to re-submit and then another ’20 days’ blah blah ad nauseum. you might find it a quicker process in the South, but I’ve done subdividing in Rotorua (very very busy, backlog etc) and Northland resource consent (took a year, sloooooowww aaassss aaaa wet weeeeeeeeeeeekkkkkk) so don’t be like impatient if you want to go through the process!!! however it is a very good way to add value with basically not a hell of a lot of work or (relatively) expense. Also touch base with an agent before you start to estimate the resale value of what you’re about to do. In some places it’s not worth the hassle and expense, there has to be a certain ‘tipping point’ of land values and demands before it’s worth doing. I.e. i wouldn’t necessarily start subdividing willy nilly in taumarunui for instance. Not quite yet, but maybe soon (Gee that town is going off!)
cheers-
barbHi there
“I know there isn’t any “real standard”, but what is a reasonable fee?”
At NZ Bird Dogs we charge $2500 for a fee for the cheapies (say up to $150k.) For deals i.e. 250k we might charge $3000-3500 (depends on the deal.) If there is say 45k equity in it then we might charge $3500 for a 255k purchase rather than $3000k. For the million dollar deals we charge 10-20k, again depending on the deal. One such deal we had was 17 percent under valuation so that was a 20k deal. Basically we just made the client 150k even after our fee was taken out, so we always try to find deals that are worth more to the client than the fee!
Other bird dogs – House Hunters charge about 2k to join the list (our list is free) and then 6k for a deal. This is for Australian deals with stamp duty so you would be up for 10-20k to buy the average deal. Richmastery charge about 1-2k more than us for the same sort of deal.
>I’m doing by own checks on the properties, and am happy with what I’ve found so far. I am not aware of any of their “qualifications”>
we don’t have qualifications because you don’t need any qualifications to be an investor, and all our spotters are investors themselves, 5 of our spotters are full time investors. I would never be a full-time investor as such, because I see property as a way to make ‘free money’ passively without having to slave away at it like a full time job, in order to fund and experience life and fulfil one’s dreams, whatever they are! I am making TV shows and doing deals with networks these days and that’s all thanks to property. So if I am passionate about it, it’s because it works. Sure, I renovated with my own hands when I was starting out but these days I just make calls and ‘have it done’. Frees my time for more important stuff like quality of life!
” but if I do my own checks (checking the numbers I’ve been given, getting the lease agreements, building inspections, council rates searches) are there any other things I should be wary of?”
Basically we have done so many deals now (350, 400, lost count!) and helped so many clients through the whole process, plus monitored all the deals for years (just because we keep in touch with our clients) that we have a handle on all aspects of the process, so we basically help the client so they don’t ‘forget’ anything to do with the deal.
“I have been told that once I sign up with the bird-dog for the property that the sale contract is automatically unconditional. “
I am sure that some bird dogs do this (shonky!) but we don’t. We sign up conditional contracts and assign them to the client with say 10 days to do until unconditional (confirmation.) In that time we are doing builder’s reports, valuations, getting all the bits to the client’s lender, and then re-negotiating the deal if required. Any problems with the deal miraculously come good when the vendor agrees to fix them by settlement or offer a discount off the purchase price to compensate! We also line up a rental manager who we recommend in each area to take on the property. As you know people move around so our favourite rental manager in any town does change from time to time.
>I’m a bit unsure because I haven’t seen the contract of sale and I’m not sure of any encumbranc es, etc. Is this common practice, and how do I best protect myself?>
We provide the contract of sale (this is what we assign the client.) with the deal. As far as understanding the contract, you would use your own solicitor for this. We have a solicitor who we think is the best in NZ and the best priced as well, we use him and a lot of clients do, but you can use whoever you like. The solicitor will do the title searches but this is usually done after the due diligence, towards the end so as not to incur fees. i have never done a deal where there were any title encumbrances so it didn’t proceed. We used to order the title from QV for a few bucks but we stopped bothering because the client couldn’t use the ‘online version’ anyway, the lawyer has to do the ‘proper’ one from the Land Transfer Office. Basically it has never been a problem.
if you email me at barb at vocalbureau dot com I can email you the information sheet which is 15 pages long and answers all your questions and more.
>professionals in Dunedin or Christchurch they have used?
I certainly know all of the people below that you requested or rather our spotters do, however we provide this information to clients and through the deals (i.e. we use this ourselves) as it has value to us. We work with several agents because we do a lot of repeat business. They know our deals go through and so to pass you the name of our real estate agent would either be commercially imprudent for us to do, and also no use because a new person doesn’t have the relationship with the agent. however as our client you get the leverage of all 8 spotters’ combined on the ground real estate relationships with their favourite trusted agents in different locations all over NZ.
Broker – we use a really good one in Auckland and I only give this contact out to clients so you would have to join the list. To buy a property in Christchurch for instance you don’t need your broker to be in Christchurch.
>- property managers
we choose these depending on the deal. A Brighton beach renovated ex state house might be managed by a different agent to a near – new furnished townhouse across the road from the hospital. It is not one-size -fits- all with property managers and our clients benefit from our town-specific knowledge there because our spotters do/oversee/keep tabs on so many rental properties.>- settlement agents
You mean a lawyer. Yes there are two or three lawyers in NZ that I like to work with (prompt, not expensive, great communicators, smart) and many that overcharge, are hopeless/slack. The ones we recommend are the former and when clients decide to use ‘their own solicitor’ we often get the latter. This is not an exaggeration! However this is where we come in and help bridge the gap between the lawyer and the client. We remind/hassle the lawyer if need be, help write letters of negotiation to save the client fees, etc etc!>- building inspectors
with our deals, we always provide a name or names of who we think is best. I.e. $350 you get a full written report with 150 pictures, or for $150 you get a verbal and an invoice! (the client can choose!)
>- pest inspectorsIn NZ as pests are not like they are in NZ it is not necessary to get a separate one, in fact not at all common, it’s all done as part of the builder’s report.
cheers –
BarbFeel free to text me your email address to be added to the list. Our website is in between changing to nzbirddogs.com (not up yet but it will be) as we are newly incorporated in NZ now, so just email me as above if you want more info and I can email it to you for now.
cheers –
Barb AKA MinimogulNZ Bird Dogs – Great deals in NZ, Integrity Guaranteed!
barb at vocalbureau dot com
0411383117Hi there…
ballpark….takes about 3-6 months depending on how busy the surveyers are. In some towns you can’t even get them to start for about 3 months. They do the stuff and then it gets presented to council. A lot of hurry up and wait.! There are also legals involved. Total price – depends on the size of block, council’s requirements, and some of these you won’t know until your surveyer goes through his or her process. There are legals involved too. Best guess is to call a surveyer and get a ballpark quote – as if this includes council fees. do the same with a lawyer and add the two together to get your ballpark pricing and time-frame.cheers!-
BarbNZ Bird Dogs – Great deals in NZ, Integrity Guaranteed!
I reckon I know who you mean too, this person does a lot of our clients. Okay so the feedback is that some ‘trust’ (arr arr no pun intended) this accountant (as you sorta have to do, to some level) and give up this element of control to save the fees.
others decided they feel a bit funny about this and are happy to pay the fees/taxes and retain control of their investments. (i mean, the percentage basis.)
Not everyone (i.e. me) has a Dad in NZ who is a chartered accountant!
Still others don’t bother about structures for the first few properties, until such time as the taxable income or profit makes a difference, or the equity gained is worth ‘being sued’ over, or any number of reasons. Also in NZ with no stamp duty, it’s easy as pie to transfer the assets to a structure along the road. banks seem to be cool with it too.
cheers-
Minican recommend Chris Raynall from
masteraccountants.co.nz
check the website, his prices are very reasonable, he does this all-day-every-day for loads of our Aussie clients in a similar boat as you.
cheers-
miniI have noticed that a lot of investors’ strategy is to ‘buy where you think the market will go up’. So therefore if they have been buying in one market and it’s gone up heaps, they sell off and then try and find another market where it might go up. This is fine and I guess over the years you would become a real globe-trotting investor. Australia, Buffalo, Japan, Estonia, Sweden, Fiji, – etc etc.
Now me personally, I have been investing in NZ for years now and made …well the sort of returns that people dream about. but I have made more this year because I know what I am doing these days a bit more, even more than I did ‘by accident’ because the market moved in my favour. I now make the profits I expect to make, because I have a plan and an exit strategy, whereas before I was just sort of ‘buying and holding’ (though still not a bad way to start if you don’t have any properties at all!)
So over the years I have got to know the NZ market very well (and this is an ongoing process – I learn a little more every single day) – and this to me is priceless as it means I can identify a good deal instantly. I also have a network around the country, actual relationships that i have developed, trusted associates, and the buying power and clout with agents that comes when you put in multiple offers on deals Every Single Week. it would take me a long time to get to know another market in this way let alone build the team I need. Using a bird dog is one way around this, and if in the US, Westan is a recommended person I would use myself.
However for me, the better I get to know the NZ market and investing in general – the better I remember something Steve taught at the first seminar I ever went to, and he used the kid’s toy where you stuff different shapes into different holes, to make his point. Point being – that you fit the strategy to the deal.
So at the beginning the only strategy I knew was ‘buy and hold cashflow positive.’ Then I learned ‘renovate and add value’. Next, I learned ‘speculate for capital gains in a growth area even if it’s negatively geared, not geared at all, or has no income.’ Next I learned ‘subdivide and add value, and onsell’. Next I learned ‘build houses and create more equity than it costs you to build’.
Therefore I don’t need to move markets, because I am no longer relying on the market to do anything. If it goes up, great, if it’s flat, doesn’t matter, the profit is in the adding value. if it goes down 10 percent, my profits are affected of course but not so much that it’s not worth doing. So by doing that you become the master of your own investing destiny and not so much a cork bobbing on the ocean of ‘market movement’ that you can’t control.
The only strategy you know is to buy high yielding properties in a market you think will go up, then that’s all you will be able to do, and therefore you will have to travel the world to find your deal.
However if you know all strategies and one market like the back of your hand, you will see the deal that you can subdivide (for example) and you’ll even know how much that costs and the probable value of the sections, and how long it will take. Because you will know the market, the prices, the timeframes, the people to ask, the agents who will do you appraisals – you’ll KNOW YOUR STUFF. You’ll know the future value of the house where you can add a minor dwelling. You’ll know the value of making a 2 bedroom house into a 3 bedroom house can make XYZ dollars difference to your resale value, but only cost you XY to do. You’ll know that by spending 10k you can add 20, 30, 50 to the value. You’ll know that by waterblasting and mowing the lawns and clearing some rubbish (2k max) you can add 7, 10 to the value. If you can get your head around those simple beginners examples you will also be able to get how developers can make 1M by spending 500 in 18 months. And how people can buy and onsell and make 100k before they even settle.
And yes, the deals are in your suburb, no matter where you live! (whether you can afford them or have the skills to do them, depends of course on where you are in your investing career and so on, but you will hopefully at least see that in theory at least, you don’t have to go to buffalo (or even NZ) to get the deals.
all of these different techniques – subdividing, onselling, renovations, strata titling, increasing the rent and therefore the yield, are all fabulous ways to make money in any market (provided you know the market well enough to actually recognise a good deal from a bad deal) and my market is NZ.
Yes you could do the same stuff in Aus, but no, it might not be a cashflow positive deal, and not everyone can afford to pump 500k in to a deal (or service debt) to end up making 1M 18 months later.
So I do see why cashflow positive deals are still a fantastic first purchase as they (hopefully, unless you have roof leaks and so on) should break even and make a small profit so you can buy the next quickly. The more cashflow positive properties you buy the more your risk spreads (good) and hopefully over time you will get capital growth that you can either realise (sell) or borrow against to buy more.
So i am still in NZ because you still can find CF+ve deals in growth areas (there’s your value adding – the town will often do it for you!) Plus entry costs are cheap, no capital gains tax in certain situations, no stamp duty, easy to get 80 percent finance from offshore, etc etc.
So the exact same deal in NZ versus Buffalo might be a lot better in NZ because of the simplicity of purchase (time is money), the closeness of NZ versus US (safer), the purchase price (Nz generally cheaper than Aus so more liquid, i,e. less risk), less in and out fees, (affects the bottom line), easy to borrow on shore with no establishment costs (low grief/stress and of course the bottom line again) – etc etc, it’s called an investor’s paradise in so many ways. For this reason a 40k US deal on 15 percent yield might cost you 4k mortgage establishment fee if you use US funds, and if you don’t you’re exposed to currency fluctuations.
Whereas in NZ it’s easy to go to a broker and get 80 percent finance for most deals (70 percent for some places, or commercial deals or less depending on the lender) without any fees to speak of, no stamp duty, don’t need a structure necessarily, etc etcI know this ended up being another yay NZ rant and it wasn’t meant to be, and now I can’t be bothered editing it, but the first point is still true which is you can make money anywhere using different strategies, you don’t just need to use one strategy and then move countries when that strategy doesn’t work any more. !
cheers-
miniOne thing I’ve learned through getting deep into property investment is the relationship to the economy as a whole. What do we know, what can we count on? property going in cycles, of between 7 and 10 years (ten if it’s a long cycle.) So, if we had Taumarunui houses on a 16 percent return (higher if they were dumps, but let’s say 16 for a good house nothing to do) in 2003, and nowadays we’ve got 10, 11 if you’re luck for a similar property, then somewhere between now and 2013, we should get back to 16 percent yields, but low interest rates (4.5 percent.) Now interest rates are rising, they are high, so inflation starts, and this means prices go up. Okay, it’s a bit academic because it might be inflationary not capital-gains in the true sense, but let’s just say (logically, and also going off history) that if we have a time where capital gains don’t really happen in ‘real’ terms just because of the market moving, but while interest rates are high, then rents will go up. They will partly go up because of inflation, and partly because there are a few more renters thinking ‘i’ll wait to buy because interest rates are high, or because the media predicts doom and gloom’, or whatever.
I do think the government/reserve bank make statements to try and influence the economy a certain way (please people, can we try and scare you off property investment a little bit? because otherwise I’ll have to hike interest rates again, and I don’t really want to, because I am also trying to cap inflation again.)
Dolf de roos bought his first property when interest rates were 27 percent. A period of rampant inflation. Sounds crazy, but his yields were still better than that – he was buying positive cashflow. So in the end, I don’t mind if interest rates are 7.8 fixed for five years, as long as the deal stacks up for me. So what I am still buying NOW is a property with some or all of these sorts of factors:
town with an upside – new industry coming to town, or other reason for growth – or just a history of growth higher than the national average – or proximity to Auckland (predicted to grow) or proximity to another growing town.
property with an upside. either a great purchase price, room to increase rent (and add value) or add value (and increase rent) or subdivide, onsell, buy pie and sell pieces, and so on.
if it’s a hot or rising market, you can just basically buy anything and have it go up. if it’s a down or sideways or flat or quiet market, you can be the only buyer on the horizon and make crazy offers and get them accepted. I look forward to that time again, but perhaps it won’t happen ever again. Why? 2003 was pre-Steve McKnight AKA best selling book, 42,000 members of his site now (congrats Steve!) – all looking for cashflow positive properties, and NZ having it’s very own sub-forum.
At the beginning here I was yelling from the rooftops to the Aussies to check out NZ for deals, and some of them listened, told their friends, then we have hit books and seminars, and steve is not the only one, wealth creation is being taught everywhere – and I think once people have KNOWLEDGE they will never go back to being in the dark.
They say that 95 percent of the wealth is in 5 percent of the people’s hands, so maybe wealth creation for ‘everybody’ is long overdue. There is a long way to go before it even gets to 94 percent/6 percent let alone ‘100 percent of the wealth of the world is in 100 percent of people’s hands’ – but where I’m going with all of this is that I think NZ is in people’s consciousness as an investor’s paradise. Sure, the US has loads of opportunities, but it’s an enormous enormous place, and your places where Westan is doing stuff are just small spots where the investing is good. Nz is the same…there’s Auckland apartments (bad! oversupply, stay away!) and there are amazing spots, which keep changing of course as prices rise in places they were lower, and then suddenly places that seemed expensive pick up, as they seem a relative bargain. So NZ is small enough for me (with the help of a network obviously) get a handle on the whole country….and zoom around from place to place, as yields go up here, too high for us, but hey, look, this other town is twice the size and growing, so let’s buy there, and hang on, they have just announced a 3 year plan for XYZ in this town, so we can predict that that’s going to go, and so on!
You can see that this ‘technique’ works because we’ve picked things for various reasons (places) and seen it come true, it’s just logic and predicting what people are going to do in the future. It’s like saying, if I discount beers at the bottle store next door to a more expensive bottle store, I predict that more people will buy at my bottle store…I mean, duh.!
Anyway, you can do well if you know your stuff, and though I have nothing against the US and know and love and trust Westan, I personally am making too much dolleros in NZ and have grown my portfolio so much by just following the simple strategy of buy cashflow positive from the word go, increase the rents by tidying up the property to an optimum level (without overcapitalising of course, which I probably did by mistake at the start a couple of times) or undercapitalising (don’t do any or enough work, and your rents will suffer) – so aiming for the optimum – and then as the rents rise so do values, and you either sell or refinance to carry on. I also bought some negatively geared investments (i.e. vacant land) for cheap in places I thought would rise, but the surplus was covered by the extras I was getting through raising my rents on the ones I already owned. So my portfolio remains cashflow positive. Yes, I have sold, but only two properties since I started, and one was to invest in a business venture and the other was because it needed repiling and had a fire so I let it go to a home-buyer who got a fabulous subdividable section and villa which needed to be ‘returned to it’s former glory’. I am not selling out of NZ, I am buying more! And bigger deals too, as I gain more equity, and in bigger towns as I go (though i am still holding the small town properties – like many of my clients will attest, these are some of the AAAAA+++++ performers yield-wise of my portfolio with capital gains on a scale which would put the cities to shame. Why? Well, my ‘bottom of the market properties go up proportionately faster than mid or top market properties, even in the same market’.! now I would need a mathematician to explain this, but it goes a little like this: median price jumps 30k. median is 180k, so now 210k.
We buy 100k properties (rock bottom is say 75k, in worst don’t touch areas. we go for best of the worst, or worst of the best, if you get what I mean.) and so (this is my theory) *everything* goes up 30k. So the cheapies we are buying, just went up 30 percent….but the mid to expensive ones, only went up 10 – 20 (something) percent.Like I said I’m not a mathematician, but I do think that you can make money in any market by outperforming it – and doing stuff. In Buffalo westan’s mates genesis buy the run down properties and do them up with their team and you buy them done. In NZ, we buy the properties and the new owner does them up (with tradies of course) and gets the profit, so in one market you I suppose are looking for capital gains to happen all by itself, and in the other (NZ) we don’t care if it does nothing, because we can create capital gains all by ourselves, and isn’t that a wonderful outrageous concept, to actually be in control and not be reliant on ‘the environment’?
So yeah, still in, can’t see it slowing, apart from in towns we’re not buying in anyway, (declining ones) or aren’t for the moment (overpriced ones) or oversupplies ones (auckland apartments.)
hope everyone is having fun, and creating wealth, that’s the main thing. i will add that in NZ it’s super-easy to get finance, and I should know as I’m a self-employed full time investor!
cheers!-
mini
http://nzpropertytogo.com/Hi there
I am still very active in the NZ market, recently I bought a property for 85 valued at 110, CF+ve and 1.5 hours from Auckland. I have on the table an excellent renovate CUTE property 3 hours from Auckland for 56k and I know the renovators and how good they are, it is a 12.5 return which is brilliant for something which needs nothing done and is a great rental hold. Interest rates at 7.8 fixed for five years, not too bad.
Recently I signed up three deals in Invercargill, all 11 percents on contract price which I believe is 1 percent or more better than others can find right now, but wait there’s more, the property was under 100k and it valued up at 24k more than the purchase price. All these deals are in the last month.
I am still buying myself, and like mad. Who needs to wait for the market to rise if you can either buy value, or add value? A lot of our deals for example in Christchurch, you buy something for 130k, spend 5-10k on it before settlement (access clause) then settle, get the val, wahey it’s now worth 155k but you only spent 140k, and there’s your extra equity to go again?
or else what you can do is add value by buying, and subdividing or strata-titling and then re-selling the ‘pieces’. NZ is still so cheap, and there is no stamp duty so it is a fantastic place to do this sort of thing, sure you could do the same in Aus but you would have stamp duty in and out, higher prices, and lower yields.
Sure you could also invest in the US, but I have many reasons not to do that both personal, ethical, logical, and practical, and I don’t want to go into it here because a) this is a NZ section and b) westan is a good and trusted friend, if I was buying in the US I would do it through him just as people buying in NZ would do it through me.
I am a firm believer in knowing your market and thus being able to spot great deals all the time.
I have spent years now getting to know the NZ market and having trusted people in place all over the country, and I can still see opportunities everywhere. I welcome the ‘fire sales’ from spooked investors, I welcome the lazy landlords who didn’t manage their investments/renovations/rental managers/ insurance or whatever, we are very good at solving problems. i think my training was to buy the very worst shiznitboxes in NZ in the very worst streets in the very worst towns, and make them profitable, and work out!
So with clients i would never find anything like that for them, but where I was going with that is ‘if I can make my first three deals work, then we can help our clients make their deals work because they are much better properties/streets/condition than the ones I bought and I made them work – and all from a distance!’
Also I love the fact that the more you buy the more you can buy, it’s just magic, and of course the more income streams you have, the less it matters if one is vacant. if you see what i mean.
So i just want to keep on buying, I can’t imagine stopping!cheers-
Minitalk to a surveyer and they will do a site inspection. if they say ‘yes probably can do it’ then let them do the site-plan and start the process, which goes in several stages, get them to cost that all out for you.
also talk to an agent as to what sections are worth and how easy to sell, to figure out if this is a viable/profitable move.“”It’s the ones who got in six months ago who are not necessarily going to get capital gains.”
Disagree!
Ok, you don’t necessarily ‘get’ capital gains in 6 months if you are not going in a fast automatic price-rise period, BUT!!!! There are so many ways to create capital gains that if you are impatient you don’t have to wait for time to make capital gains happen for you, you can make them happen.If for example you get access before settlement and spend 5-10k on your 63k house before it even settles, you may be able to get a valuation for 92-95 when it’s all fixed up, by the time you settled! then you made 20k not even in 6 months, but sort of on ‘day one’ of owning the property!
By the way you were able to improve your rent from $120 t0 $180 in the process too, and remember you only borrowed 63k (73k with reno) so if you hold, then there’s a 12 percent yield you just created out of a ten percent one that you bought, plus the 20k, not bad!???it makes it more than cashflow positive on the whole amount including the reno, and you can go again straight away.
So you just keep on going in that fashion, you don’t wait for the market!
“1. What would be some of key learning points and lessons which you will like to share with us, given your past and present property development
experiences”hi kenneth
Well if you learn 80 percent of your lessons on the first three developments, then as none of them are completed yet and won’t be for a while (these things take much time) then I am not even 80 percent where some on this forum are, however there are a lot more where I was a year ago (about to do a development, would like to do a development etc) and I guess I was one of the people who moved past wanting to and hadn’t to one of the people that ‘did something about it’.
So although I can’t tell you I am a legend and I made so much money (yet) the reason that I expect I will is:
1) I bought land in an undervalued area which was also growing, by the sea, good climate etc. This purchase was validated by the fact that it doubled in value in the first six months and probably tripled by now.
2) Make sure of your market by talking to valuers, agents, and rental agents.
3) Make sure there is not a glut of what you are developing (be that houses, flats, sections) -make sure there is demand and that demand is expected to continue (something happening in the area to attract or cause growth)
4)Don’t do too big a deal the first time so that you learn the process without too much risk
5) have insurances, structures, and so forth in place
6) Use expert, i.e. surveyers, valuers, master builders, architects, people with a track record, experienced project managers if you lack the skills
7) Have someone to be accountable to with the project – to bounce and test theories with – this could be an accountant, business partner, mentor, or more experienced developer
don’t be in a rush because anything that is supposed to take ten days will take 3 weeks, anything that is supposed to take 3 months will take 6, etc etc!9) If building make sure your prices are fixed and can not go up on you ‘after the fact’ – change the contract or insert clauses to suit if need be
10) make sure your development fits in with the surrounding area, i.e. no use building too cheap in a fancy street, or too flash in a crummy street
11) if you can make your development cashflow positive (i.e. eventual rents will cover the borrowing on the money you have in the deal) then all the better, because in case you can not sell the property at a desired price, you can hold it as a rental property
12) Have a margin of profit of 40 percent including your contingencies, and then even if it’s only half that you will be doing as well as most developers
13) you can market your development for sale even before title or in some cases before even DA approval is through, if onselling it
14) developers have different tax implications to buy and hold investors, so make sure you allow for this
15)Bigger developments are often better to do as a team with specifically skilled people
16)Have plans A-G (at least) or different options at every stage to cover for every contingency.
17) Know that you can stop where you are and sell at a profit at any stage in the process.
18) spend the money on a feasibility report
19) network, network, network
20) have loads of options. for example with our bigger deal, we are looking at a) onselling with DA approval for lots b) which is the optimum lot size for the market c) partnering with a building developer d) offering our own house and land packages e) completing the subdivision process and selling the sites to the public f) doing absolutely nothing apart from holding the land for a year for capital gains (well that’s not developing, but it is a contingency plan, which is a bit part of developing!
21) Allow for what if’s. What if the council don’t approve the plans. Who pays for the changes? If the builder goes bankrupt what happens? If there are delays how does it affect things. Are your prices fixed? What if you find a defect in the land along the track which is costly to fix? What say the council change the laws on you suddenly to expose problems your land didn’t have before the law change?
22) How exposed are you if anything goes wrong? The idea is ‘not exposed’, meaning, you wouldn’t totally go down in smoke if your development didn’t work out or lost you money.
that’s all I can think of for now
cheers-
Mini“
Its been said that successful property developers are a bit like movie producers. They assemble a highly talented team of people and skillfully lead them to develop a profitable outcome. “As an executive producer I can so relate to that!
problem plus solution equals profit.So there was a day about a year ago when I was ‘not a developer’ and then a day where I was, and ‘became a developer’. The difference was, I decided to do it. It’s just a matter of…well, a million questions you need to find the answer to, basically a whole lot of ‘what if’s.
My first development was to build a couple of townhouses on bare land, my second was a CBD 3 lot subdivision with existing structures on it,and my third one is a 22 lot subdivision that we will either sell as sections, or offer house and land packages – still working that out.
As with any ‘quest’ or mission, you just start at the beginning and find stuff out, a lot of it before you even go unconditional and buy the land, you should have a fair enough idea if what you plan is viable, just on some ball park numbers (i.e. a per square meter land cost in that town, a per square meter building cost that you know you can achieve worst case.)
The work you do on from that (once unconditional) is a lot of number crunching, networking, team building, stick-shaking, and in fact every human personality or character trait you have, everything you have ever learned in your previous or other careers, will come out during the process (in a good way.)
I kinda can’t believe that I am onto my third development already, I haven’t started writing occupation: property developer on my immigration forms yet, but really for me the thing was ‘just start doing it’. If you are a good investor, problem solver, executive producer, business person, it is likely you will have the right skills to apply to developing, which is a bit like investing, but a more advanced version.
nothing you can’t handle. Just make sure you think of everything that can go wrong. if you are still Okay with it, then proceed!
cheers-
MiniSo here’s the thing, there are always a squizillion people wanting to emigrate to NZ from all over the world. The government in their infinite wisdom, turn the tap ‘on’ or ‘off’ as they think best. At the moment, as you know, the economy is kicking serious butt, the property thing is just going nuts, and the government are I guess concerned about the NZD going too high, which means our exports are too expensive. And this affects inflation, interest rates (another thing the government rises and falls at will, to try and control the wild beast AKA the economy, and so on and so forth.
So, they try and slow things by reducing the number of people they let in to NZ, because if they let too many people in, that would further stimulate things. So it is plus or minus several thousand, as to how many they let in per year.
NZ is hotter than ever in the world’s ‘estimation’ so if there are less numbers coming in, it’s just part of a deliberate economic strategy!
I don’t think that many people know this.
I never used to realise that the whole economy is all linked which includes investing, but it so is.
Blair, Blair, it’s all about Blair.
He is so far ahead of the LJ’s and the harveys and the rent centres and the professionals and the ray whites and so on, who are all riddled with EMPLOYEES who don’t care. Blair cares because HE da Man, i.e. it is his business.He does operate in a funny way i.e. landlord gets the entire rent, Blair invoices by the hour, landlord pays the invoice monthly. Different than others who take out their fees and give you the rest.
but if you can get your head around that, he is the one.
Now. word of warning. He will not touch trash properties. So if that is the case you should go to Jane Motu. I forget which agency she is with at the moment, they do tend to move around, but she is good for your lower quality properties. Am hearing complaints about the Rent Centre. They used to be good, but you see things change. it’s all about the person at the company, not the company.
cheers-
MiniGreat question!
I would get preapproval and see how much you can borrow. i would then buy some property, something you can add value to. (do up, subdivide, re-tenant, unit title a block, add a minor dwelling, etc etc etc) and then re-value the property.If this is a negatively geared property, you can still make money, but you won’t be able to carry on indefinitely unless you sell, because your serviceability will run out. To keep going and cntinue to hold, you need cashflow.
You will at some point need to buy or create cashflow positive property. Often some sort of adding value can give you that result.
good luck
cheers-
MiniIf I had stuck to the ‘only invest where you live’ rule, oh, my word! The things I have done, the things I have been able to do, ah! – I have to pinch myself some days, because of the ‘free money’ made by property deals.
as for Japan, So keen. I was there in May and it was all doom and gloom, the country is in the doledrums and has been for ten years, well I vibed it then that the only way was up, that it was the lowest point of a cycle, 20-30 percent yields achievable, excuse me! That is SO an indicator for growth to come! Anyway I so would have invested if I’d had time to set up a team there. Time is my scarcest commodity these days! The place is incredible. I’ve only been to Osaka, Tokyo, Fukuoka and Kyoto, but all of them rocked.
Hey – there’s a trend that I reckon Japan could SO do, which is RENOVATE! Over there, they just tend to rip them down and re-build, but I reckon you could do the Cathy Jayne thing (that adelaide woman) and do up whole blocks over there. I would SO buy a place over there, rent it out to Gaijin, and then go stay in it myself from time to time!
Tokyo Joe, I am shouting my 3 best girlfriends for a week’s hell-raising/shopping/sushi-eating in Tokyo for my birthday next year (April) so if you are still there we should SO make some time and get stuck in to making this happen, I am so keen it’s not funny!
Xenia, so sorry to hear about your dramas overseas. Care to elaborate? Particularly about your NZ properties. If it is in an area I have a team on the ground I would be happy to do what I can to help (whatever that may be) no charge of course just because. I hate to see people struggling.
Even Christchurch (one of the largest cities in NZ) has been weird for vacancies in certain types of properties, or at least it was for a few weeks during winter, when it was cold and rainy (funny that, nobody wants to move!) So Gore eh. What tenants there are in Gore just aren’t picking your house. Why? Nothing wrong with the house, it’s just ‘the house for the price’. I.e. as others have said, the rent is too high. Drop it! Drop it $10 a week until you get a tenant. Too costly to have it vacant. What I mean is, much better to have it rented for even half the price, than have it half vacant at the full price. Do you get what I mean? For example do the numbers on missing out on $130 a week for 3 months (how much you ‘lost’) versus having it fully occupied for $100 a week for 3 months (how much you ‘lost’) and you will see how it is much better to get rid of vacancy and get someone in there pronto paying ‘something’!
You can always put the rent up again in 6 months, anyway.Call your rental manager and tell her/him what you want them to do. GET YOU A TENANT and fast.!
Also think about selling the property.
if it ain’t performing, and you can’t solve it so it can, get rid of it.
Sell it to another investor on a ‘rental assessment’!cheers-
Barb
Hi there Muppet
Thanks a lot for that, REALLY!!!
I love it when the world vindicates things I have been ‘vibing’ for a long time!
Let’s just say I have ‘a lot’ going on in rotorua!
cheers-
Mini
don’t be in a rush because anything that is supposed to take ten days will take 3 weeks, anything that is supposed to take 3 months will take 6, etc etc!
