All Topics / Overseas Deals / buying new zealand

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  • Profile photo of Nigel KibelNigel Kibel
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    I have just arrived in Texas after spending 9 days in Christchurch where I successfully purchased four properties. The returns varied for 7.5% to around 8.3%, All the properties were in good growth areas close to the city. This is where New Zealand is still an attractive place to purchase. You can still get good retruns in strong growth areas

    Nigel Kibel

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    Profile photo of westanwestan
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    Hi Nigel

    You are obviously investing in these areas for a purpose.
    Can i ask how are your investors going to make money on these deals ?
    I have no doubt that Christchurch is a growing city, but growth alone doesn’t dictate appreciation of home prices.
    The latest reseach out shows Christchurch’s housing market is flat and economists expect it to turn down.
    I’d be interested to hear your thought about these investments.

    Regards westan

    Properties in the USA 15-25% returns- email to join our database [email protected]

    Profile photo of kpkp
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    Gee I hate to butt in as I know nothing about NZ, but how does 7.5% equate to a good return.??
    I mean, what are the interest rates currently ??

    For what its worth, I am still buying in Oz where I can get a rental yield of 12% on residential, with an investor achieving around 8.5% yield on their investment.

    On top of this it is possible to get an instant cap gain of $70k to $100k per property.

    Of course this takes a bit of creating and thinking outside the square, but its nothing special.
    We are building houses on vacant land and packaging them up for investors to do the same, or to buy the finished product.

    I can’t understand the attraction of going over the NZ or the US to chase pos cashflow property, when you can do the same in your own backyard.
    Yes, I have visited the US, yes its a nice place to visit,no I would not want to live there, and no I wouldn’t want to buy over there..I don’t see the point.

    kp

    Profile photo of Nigel KibelNigel Kibel
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    Are you getting thoses returns in a major city. I doubt it. These properties are in good suburbs that will go up in price. In terms of Westerns comments these are all inner city locations. My investors by property for long term holding. Not for a quick profit. I do not see ther value in Australia in buying in one horse towns

    Nigel Kibel

    http://www.propertyknowhow.com.au

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    Profile photo of Nigel KibelNigel Kibel
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    Just a couple more points.

    Your right KP you do not know anything about the New Zealand market. you tell where in an inner city area in a major city in Australia you can recieve returns of 7.5%-8.3% on residential real estate. The fact that you do not see the point does not make it a bad place to invest. The USA has a population of nearly 300 Million. Thats a lot of accommadation required. In terms of Westerns comments I have given my reasons for investing in Christchurch. I would like to ask you, why you recommend and buy properties in Buffalo. Even if New Zealand flatens out figures show that prices still go up well over a period. Given the high taxes and the lack of growth please explain your reasons

    Nigel Kibel

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    Profile photo of westanwestan
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    Hi Nigel

    thankyou for giving me the chance to explain why Buffalo has become an area i’m investing in.

    Sorry if this seems like a sales promotion but i was asked the question. I’m in a hurry right now so i’ll back up the statements i make with more info later.

    No one denies that Buffalo has been through the wars as a city over the past few decades. This city once had more millionairies than any other city in North American. Sadly its star has now faded.
    After decades of not only no growth but actually negative growth i can underdstand why those who have never been there would think “why Buffalo”?

    Today Buffalo offers the opportunity to buy very high yeilding properties at a very cheap price. For example a 20% gross returning property even after all costs still shows incredible cash flow.

    But what about Capital growth? Well while i never promote Buffalo as an area that you would buy in for Capital growth i actually believe that it will have better capital growth over the next few years than either Australia or New Zealand. After many years of no price growth buffalo is on the upward move, sure its slow at the moment just 5% but its heading up. Lets look at a $40,000 home, very cheap by US standards, it could rise 50% and it would still be incredibly cheap. Now i’m not saying that prices will rise that amount, but if they did it would still be cheap!
    What about the ecomomic picture for Buffalo, well according to the latest figure the city showed job growth. Not really high growth but still growth, and growth better than many other cities in the US.

    So why am i investing in Buffalo, well for cashflow and i believe given time i’ll see growth also. But hey if there no growth i’ve still got cashflow.

    Nigel i was put off investing in Buffalo when i read the statistics on the area, So i invested in texas instead. It was after i went there that i realized how superior this market was to anything i could buy in NZ or Australia.
    I love the US so much from an investing view that i’ve sold 95% of my portfolio in NZ to finance my investments in the Northern hemisphere.

    Why the Us over NZ ? well as i’ve stated i feel that the market here (i live in NZ at the moment) is going flat for a long period of time and many of the market commentators are predicting a downward move. You make the comment that given time the market will show appreciation. History shows you are right, but why buy a property that will cost you money ? If its for capital growth then buy something thats going up now not something that will rise in value in 5 years. When you add up all the money its cost you to hold the property, plus the loss of opportunity to work that money, plus keeping up with inflation it may indeed be a long time before you break even. So its goodbye to NZ for now, who knows if the market drops enough i might be back to buy.

    Thats why i’m investing in Texas and New York State.

    Regards westan

    Properties in the USA 15-25% returns- email to join our database [email protected]

    Profile photo of wilandelwilandel
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    Hi Westan,

    Interesting reply…[biggrin]

    I personally wouldn’t be recommending to anyone that I know to invest in NZ anymore. Especially with the VERY likely interest rate rise. I don’t see the point of being an offshore investor and investing at the top of a boom. NZ could suffer flat or negative growth now for many years, similar to Australia. (If you believe Aussie John).

    One property that I purchased in NZ, had been on the market for 7 years – believe it or not![bawl]

    At least if you are investing for cashflow, you have no large holding costs while you are waiting for appreciation.[agro3]

    Is Buffalo America’s Tokoroa?????[blush2][biggrin][clown]
    Sorry, but it seems to be copping the same flack that Tokoroa did a year or two ago.

    Cheers,
    Del

    http://www.nzpropertytogo.com

    Profile photo of wilandelwilandel
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    Hey Westan,

    I just realised that we usually agree with eachother….[angel][angel]

    Perhaps we should do a CD together… [strum][guitar]

    Maybe about investing in New Zealand??[biggrin]

    We could call it NZ Property to go.com!!!

    What do you think?[blush2]

    Del [biggrin]

    http://www.nzpropertytogo.com

    Profile photo of kiwiduvetkiwiduvet
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    buffalos a touch bigger than toke, and Westan i agree with your words, I as a Kiwi investing in Buff am doing it solely for cashflow, but there are is a lot of outside investment pouring in and i dont mean from just us kiwis and ozzies, the brits and the US out of staters are already begiing to increase thier investments there.

    I however am following the bob Jones philosophy and still holding my NZ Proprties, they are positive cashflow and i have already geared them to take advantage of that.

    when the going gets weird the weird turn pro

    Profile photo of Nigel KibelNigel Kibel
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    In the main cities in New Zealand there are still good investments to be found. The returns are still better than Australia and over a period of time the capital growth will be good. Frankly I do not care what the market is doing at present. If you buy for the medium to long term you will do well. I have invested a been in this business before the 1990 downturn. This is nothing compared to 1990. The ecomonies of both New Zeaand and Australia are sound. I agree with Western about Texas. Its a great place to invest. Not all people will feel comfortable investing so far away. I am now investing in Texas. I have a different view to some of you. I would prefer less cashflow but look at higher capital growth. Thats why I would never buy in Buffalo. To thoses of you who do. Good luck.

    Nigel Kibel

    http://www.propertyknowhow.com.au

    Australian and New Zealand The United States Property Researcher and education
    One Day property investment research workshop just $290 Melb 26 November

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    Profile photo of AdministratorAdministrator
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    Hi Nigel,

    Are you able to tell us which suburbs you purchased in in Christchurch? I own property there, bought before the current boom.

    Thanks heaps
    Anne

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    Originally posted by westan:

    Today Buffalo offers the opportunity to buy very high yeilding properties at a very cheap price. For example a 20% gross returning property even after all costs still shows incredible cash flow.

    Hi Westan,

    20% may look good at a first glance, but once you factor in taxes (which are very high!), property management, insurance, etc there is not much left over. Sure it may appear to be positive cashflow on paper, but we haven’t even factored in maintenance and other little suprises that tend to popup occasional, such as tenant defaults and tenant damage. With a $40,000 property, you can imagine the property is most likely anywhere from 80-100 years old and your yearly maintenance costs can really chew into your cashflow. You may net around $3,000 a year on a $40,000 property, but your on-going costs can quite easily exceed this. I think that a lot of the investors diving in fail to realise this as they are sucked in by the high yields.

    With these cheaper properties you will also find that financing is extremely difficult, possibly even impossible and not worth the hassle! For the ridiculously high mortgage setup costs and high interest rates, its questionable as is why you would bother.

    I am not saying “don’t buy in Buffalo”, just be cautious and very selective as to which properties you choose. Make sure you buy in a good area and only buy properties that are good solid investments that won’t be needing ongoing maintenance. You can’t eliminate the risk, but purchasing right will help reduce it.

    Regards,
    Ozi

    Profile photo of westanwestan
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    Hi Guys

    wow a fair few replies here.

    Wilandel- a CD ? maybe thats just a free plug for an excellent product ?

    Kiwiduvet – Del made the coment about Buffalo being another Tok from the perspective that people like to slam Tok. I’m in agreeement with you that its better than Tok. I chose not to buy in Tok, yet i’m buying in Buffalo so thats my response. In regards to Buffalo being a sort after place for investor, yes you are right again, investor from all over the world are chasing opportunities in buffalo right now. Its not just Aussies and Kiwi’s as you have already pointed out. I’m also aware the Poms are big buyers. The UK pound is worth so much these guys end up paying next to nothing for the home (well thats an exageration, but you get my point). Californians and investors from New York city are also big buyers. i was talking to Dan the other day, he is one of our contacts in buffalo- he keeps telling me its amazing the interest buffalo has come under over the past 18 months- its been discovered !

    Ozi- i agree with a lot of what you say, but think you are overstating it somewhat
    Taxes- a 40,000 home is about $1600, (in NZ i was paying this in Wairoa for example) so its high but not extreme. if you buy in the Suburbs of buffalo then it really gets high (over $3000).
    Management- well yes 10%, but thats always an expense with property investing. So a 40k home rented at $8,000 per annum thats about $800 if fully occupied for the year.
    Insurance – yes a cost but once again $400 isn’t too bad.
    So a 40k home renting at $8000 pa after these costs ($2,800) has cash flow of $5,200(a lot better than the $3000 net you mentioned. This goes towards maintenance, vacancies etc, so there is still lots left over. .
    Regarding people being sucked in by the high yeilds, At least these properties are putting money in your pocket, can’t find them in Au or NZ now.
    Mortgages- firstly it is possible. we have a guy in buffalo who is expense to set up and interest rates are 8.5%, expensive by US standards (still lower than the NZ floatong rate !)
    Then there is Richard Taylor who can also get some finance on NY properties at a better rate and lower set up costs.
    Maintenance- yes things in NY can wear out quicker than we would usually expect. But the costs can also be way less than we expect in Australia, materials are so cheap and wages can be also. For example roofs are a big ticket item, if one needs to be replaced it could cost as little as $2500 (if it can be layed over the top of the existing, usual practice in NY). If there are 2 roofs already you need a complete tear down it could cost $6,000). Roofs only last about 25 years so you are right to mention it, i’d go futher and if people are cash poor then they should be putting money aside for future repairs. At least put aside $500 pa.
    As far as buying in Good areas i agree 100% there is a real danger in chasing even higher returns and investing in realy low areas. I know in Buffalo the bad areas there i wouldn’t buy at any price. We get a lot of our properties in better areas, One I own in Hoyt st is 4 blocks from a really beautiful part of the city near soldiers place (in north buffalo) and a lot of the properties we have sourced are in the University area (Buffalo has the largest Govt Uni in New York State, Remember the population of NY State is the same as Australia’s).
    Nigel-

    Frankly I do not care what the market is doing at present

    That suprises me ,that you say that. As for me that is a key factor. I like to make money from day one. The stategy of buying at the bottom of the cycle has proved very rewarding for me. As i mentioned before i’d rather have my money working for me, than sitting by waiting for the market to come back. Assume i invest the money and get 20% PA return on my money then in 4 years i’ve doubled my money. I’m a full time investor so making my money work is important to me.

    As far as Texas goes i’m glad you agree that (city deleted by westan) in Texas is a great spot to invest. I tried to keep it a secret for our investors, obviously someone has blabbed to you, (i know who it was). Now you have been there i will have some competition in sourcing properties. Anyway competition is good for the investors out there. I’m extremely happy with our contacts in (city deleted by westan) and (also deleted by westan). While i like Buffalo, more of my own investing dollars are going into Texas. But I will continue to aquire more real estate in Buffalo. You like my judgement on (city deleted) maybe you should look at Buffalo for yourself rather than rely on what others tell you ?

    Just for the record, i think Christchurch will be a good long term investment for your clients (not good short term). But sorry NZ its Texas for me.

    Regards westan

    Properties in the USA 15-25% returns- email to join our database [email protected]

    Profile photo of nedkellynedkelly
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    What about the exchange rate worries in relation to owning overseas properties?.
    NZ for example averages an exchange rate with Australia of $1A equaly 75cents NZ. At the moment it is around 90cents NZ and many commentators are saying the NZ dollar is overvalued.
    I see Australian investors in NZ losing 10%-15% on the value of there investments purely in exchange rate losses in the next couple of years.
    To me it is hard enough finding great investment properties without trying to guess what exchange rates are doing aswell.

    ned kelly

    Profile photo of oziozi
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    Hi Westan,

    I guess my calculations were a bit rough, so I’ve gone to my spreadsheet for check these numbers [biggrin]

    You mention the taxes are around $1600. Does this include water and garbage, or is it just the city, sewer and county taxes? I’ll assume it’s all inclusive. But bare in mind taxes vary from property to property. They are based on the properties assessed value which are sometimes way off the actual value.

    Purchase price: $40,000.00

    Rent/year: $8,000
    Vacancy rate: 10%
    Adjusted yearly rent: $7,200.00

    Closing costs

    Deposit: $8,000.00 (20%)
    Legal fees: $1,100.00
    Building inspection: $275.00
    Appraisal: $300.00
    Mortgage setup costs: $4,500.00
    Total closing costs: $14,175.00

    Annual costs

    Management fee: $720.00 (10%)
    Letting fee: $666.67 (1 months rent)
    Taxes: $1,600.00
    Insurance $400.00
    Maintenance $360.00 (5%)
    Mortgage interest $2,560.00 (8% interest rate)
    Total annual costs: $6,306.67

    Total net cash flow: $893.36

    CoCR: 6.30%

    Gross yield 20.00%

    As you can see, with a mortgage, would you be happy with this return? This was my point. And the above figures only allow for a 10% vacancy and 5% of collected rents for maintenance (which is a bit low in my opinion).

    I was over in NY 3 weeks ago and this is one of the reasons I decided not to buy. I just couldn’t make the numbers work. Sure, these properties may be positive cashflow but for the amount of risk involved I just wasn’t comfortable with the return. I know these returns no longer exist in Aus and NZ, which is where a bit of creativity comes into play [grad]

    Please correct me if I have over estimated the above figures, but I think they are close to reality.

    People should also realise the “other costs”, such as cross-border accounting, setting up structures in the US, ongoing compliancing costs for these structures + accounting, etc… If you were to buy 1 or 2 of these properties, I really don’t see it as being profitable. If your plan is to have a significant portfolio in the USA, then the numbers start to look better.

    I am not trying to be a wet blanket here, just voicing my opinions as these were all issues I faced recently while I was over in the US. I think there are some good buys over there, it all depends on your comfort levels and which strategies you use to make these investments work for you. Personally, if I was to buy over there I would want a greater return on my money given the risks involved.

    Regards,
    Ozi

    Profile photo of RikkyRikky
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    Besides the couple of people making money from other people , does anyone have any good storys about the amout of cash flow they are making from up state new york.
    Plaese don’t answer if you are bird dogging or flipping or arrangeing finance or getting kick backs, I would like to hear from average investors.
    I spoke directly with Steve on this subject and his comments were interesting.

    Kind regards Rick

    Monopoly, my favourite game

    Profile photo of CastleDreamerCastleDreamer
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    Well, given that i love NZ so much i moved there – and to Christchurch, its been an interesting last few months looking at the markets and what has been going on.
    christchurch continues to present opportunities – but i am seeing these as renovation opportunities – which are much harder to manage and do from a distance. I am not so keenly buying for the longer term in Christchurch at the moment, unless the right property comes up under value, or with the ability to add value through refurb etc.
    I spent 10 days in the US last month with Westan and a group of people looking at investment opportunities. Now, I went with an open mind, but not overly certain that I would invest so far from home – and I came back believing that there are a couple of key areas in the US that I would very happily invest in – and will be investing in.
    Is the US market better than the NZ market – that’s a bit broad a question…. certainly there are some very good opportunities in the US in particular states and areas that I will be taking up because I believe they are better than I can get in NZ at the moment.
    Everyone has opinions about places to invest. I am still getting PMs from people asking about starting investing in NZ. i would suggest that now is not the time to be starting a property empire in NZ. There are some good opportunities certainly. But there are no big winners in the short term at every corner like there used to be.
    I will keep investing in NZ while I live here. But for my money I am seriously looking elsewhere now as well.
    that’s my two cents worth….

    Cheers
    CD
    CastleDreamer
    Find out more about New Zealand investing… go to http://www.nzpropertytogo.com

    Profile photo of bardon_2bardon_2
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    Rikky,

    I have got +ve cash flow out of investment properties in WNY. Ozi figures are accurate though and yes water usage along with lawn care and snow clearing are an extra cost to be added to his list. Fortunately my property manager doesn’t charge the 1 months letting fee. We use a local lender who is far cheaper than the quoted rates on this thread. I have used three different teams and ended up working with one. Of the other two one was okay but couldn’t provide enough deals and the other was a complete disaster. My advice is that the property must be in good condition and preferably recently renovated and have a gross yield of 25% to be worth your while.

    Another strategy that is working well for ozzies is to buy up market property in very trendy areas of the city. You can get them and do things like convert the attic into another unit and get a gross yield of 25-30% and with the larger value purchase your holding costs are proportionally less and you only need to worry about one roof etc.

    I also know other investors that are doing very well with there buy and hold investments up there and some that have bought complete lemons.

    You need to allow $1,000 per year for maintenance. If you don’t spend it then it is a bonus.

    I know a lender up there who says the she is very concerned about a lot of ozzie investors buying poorly this includes so called ozzie gurus and they have portfolios that they dont even know if they are occupied or vacant. This lender is now very nervous about ozzies and aint taking any more on.

    To do well you need to be able to identify the right property and that is just the same as any other market. This is the difficult part to do from afar as many are now finding out. It is very difficult to find a good property manger they are worth there weight in gold.

    I am doing a combination of buy and hold and buy, renovate and sell. I am not involved in any referral fees or the like. My view is that prices will rise significantly in the next 5 years.

    Profile photo of piggypiggy
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    Quote:
    Originally posted by Rikky:

    Besides the couple of people making money from other people , does anyone have any good storys about the amout of cash flow they are making from up state new york.
    Plaese don’t answer if you are bird dogging or flipping or arrangeing finance or getting kick backs, I would like to hear from average investors.
    I spoke directly with Steve on this subject and his comments were interesting.

    Rick,

    You have made a good point here about kick backs and referral fees. I am an average investor investing in Buffalo and have spent a lot of time and effort getting set up. I have seen evidence of deals offered to investors that are probably inclusive of add on fees and kick backs and have managed to do far better on my own hard work. The way I see it is the cost of getting set up is less than the extra cost you pay for spotting fees and referrals which are probably added to the cost. Once you are set up then you can continue to do well. I can tell you that there are Australian investors including myself doing okay with buy and hold but I guess they are for the most part relatively private about there business. The figures posted by OZI are about right and also Bardon correctly points out that water usage, snow and lawns cost money as well. Last time I was up I spent some time with an English lady who was closing on eight single family homes she reckons there are plane loads of UK investors about to descend. The lending is hard but no where as expensive as the figures mentioned here you can get 75% LVR at 6.2%rate with 3-4% costs. Some level headed US investors have set up there and they are predicting high growth in 5 years they also say that rents will rise as well, I hope they are right.

    Also for your info I have posted on this web site before warning about two tier systems in Buffalo where Australians are buying houses through third parties far above the market price.

    Profile photo of RikkyRikky
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    Bardon and Piggy

    Thank you for your posts , I would still like to here from other people .

    Kind regards Rick

    Monopoly, my favourite game

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