Forum Archive Index - May 2001

["Andrew Smith" <smith5@free.net.nz>]

I was not going to get into this debate but Melcoms response I agree with,.
its even better if you have to pay child support. Some people have the
advantage of 70 cents in the dollar return. (max tax rate 39c plus child
support 4 children 30%) I only hope that more people continue to rent. The
secret is to provide property that is in demand. Dont get bogged down with
the cheap end of the market.

Andrew
----- Original Message -----
From: "Breadmore, Malcolm" <BreadmoM@anz.com>
To: <sharechat@sharechat.co.nz>
Sent: Friday, May 18, 2001 12:25 PM
Subject: RE: RE: [sharechat] Residential property again


> Roy
> I agree with all your points, but remember you don't get something for
> nothing. Your points suggest that the baby boomers may decide to rent
rather
> than own (which is logical), it still makes a great rental market for
> property investors. The property investor will not buy a property and rent
> it to a baby boomer if they don't get a reasonable return on their dollar
> (supply and demand).
>
> As a property investor, you do have to work out whether you are buying for
> capital gains or cash flow (or both). Most properties fall into one of the
> categories. The average ¾ bedroom home is not very good at the cash flow
> thing, but flats generally will be better. So when buying a ¾ bedroom
home,
> one will look to the rent to cover the expenses of ownership. This is
> normally offset with a significant "tax break". This is one of the reasons
> it is more expensive to own your own home, because you cannot claim the
> expense against your income.
>
> The only money I put into my rental properties is payment on the principle
> amount of the loan, which directly increases my Net Worth. I would not buy
> if I had to pay any other expenses. So that being the case, at 100%
finance
> I pay nothing, but reap the "small" capital gain each year (3-4%) on the
> banks money. If I buy well, and buy in a "growth area" where people want
to
> live (like you Baby Boomers), then I can expect a better than average
return
> on capital (5-10%).
>
> So the sums look like this: $200,000 3 bed home = $10,000 return at 5%
> capital gain per annum. My return on investment is great considering I
have
> put down only the cost associated with the purchase (lawyer, valuation
fees
> ~$1,500).
>
> So, I hope more people choose to rent like yourself and your friends.
>
> Regards
> Malcolm (disc own property......well the bank does)
>
>
>
>
> -----Original Message-----
> From: Roy [mailto:baldman@internet-auditor.com]
> Sent: Friday, 18 May 2001 12:13
> To: sharechat@sharechat.co.nz
> Subject: Re: RE: [sharechat] Residential property
> again
>
> Malcolm,
>
> Needless to say both you and Max have a point IMHO.
> Depends how you are looking at residential investment.
>
> Yes the 3/4 bedrooms will be excess to requirement for  US
> BABY boomers.
> Yes lots of us  will be selling.
> However most of my compatriots are not buying smaller but
> renting!
> Why do I (and they) rent?
> a) Its cheaper than owning (don't forget to take in the cost
> of capital,
> maintenance, rates & insurance) the later of course a
> deductible.
> b) No worries about maintenance etc etc (my rent even covers
> the Gardener!)
> c) If I want to go try living someplace else I have the
> flexibility to move
> in a very short time with no financial penalty. (ie no real
> estate agents
> fees etc etc)
> d) In a low inflation regime leverageing on a non income
> producing property
> is a nonsense.(ie I pay more in interest on the mortgage
> than rent on a
> house & get bugger all capital appreciation
> e) House construction produces more houses each year than is
> required (note
> net population figures of adult ie house owning population)
> f) By the way most of us rent a 3 bedroom house for the
> economics.
> Office/Hobby room plus something for
> guests/visitors/returning offspring etc.
>
> As you say an interesting discussion.
>
> PS By the way two friends who are well respected Financial
> Advisors have
> joined me in renting for many of the reasons above.
>
>
>
>
>
> Max Interesting theory,
>   however.....you say "the percentage of the population over
> the age of 60
> will double "....... from what 2% to 4%, 5% to 10%. This may
> not be as
> significant as you suggest. "the cash needs of an elderly
> population often
> make them 'motivated vendors'"..... I disagree. They haven't
> been saving
> all their lives to suddenly decide to sell in such a hurry
> as they sell
> under market value. "These cheap houses are also going to
> negatively impact
> the rental market as this is the market that will suddenly
> be able to
> purchase." So you say there will be a whole new group of
> purchasers out
> there...you can't have it both ways. Supply and demand will
> keep the prices
> up. A couple of other points to consider. People have to
> live somewhere.
> Whether we rent or own we all need roofs over our heads. The
> market will
> never change that fact. Housing will not disappear because
> some chartist or
> fundamentalist says "it's not a good buy". Immigration has
> been given the
> green light to increase by 60%. I read in the IT news that
> 10,000 new
> immigrates will be granted residency because the IT sector
> is
> under-supplied with skilled resource. Back in 1987 the NZSE
> 40 was over
> 4000, it is now only half that. I wonder what the return is
> on the average
> 3 bedroom home, if purchased back in 87. Food for thought
> Regards
> Malcolm
> "I Trade therefore I am"
> Zen Trader philosophy
>
> Roy
>
>
>
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