It’s been said that you should never talk religion, politics or money. My three favourite topics, so today I’m tackling the horrid question of money.
My boss ten years ago gave me some very sound advice. “Mate, you’re never going to make money from a monthly pay packet, you need to get shares in the company or invest in the stockmarket or property.”
He also said, “always buy the worst property on the best street and always buy below the medium price in the suburb”
I took the advice on board and spent the next couple of years watching and listening and asking as many questions that I could. I can’t say we’re loaded but we’re certainly happy and have made good decisions along the way.
Like most Mum and Dad investors I know, we did the usual thing and put some money into the stockmarket. Blue chip and speculative high risk shares. Admittedly it was around the time of the Global Financial Crisis but even when they say ‘buy low, sell high’ we didn’t have the time to monitor the stockmarket and read the analysts reports on what to buy and what to sell. We watched the money go up and down and by the time we sold them all I think we lost track of how much we had put in, how many shares we’d sold or traded to buy others and what the final ‘up or down’ position was. It was too hard to track. Let’s just say we’re not retiring soon based on our share portfolio. I think to be a player on the stockmarket you need to be a day trader, lucky or you need to work in the broking world. Personally I don’t understand it.
When we purchased our first investment property, my father in law, who’s good at all types of money things, said to hubby “why do you want to do that?” Hubby replied, “Because I can’t take my friends to my share portfolio Dad” – I loved it, still remains my all time favourite justification for buying our farm which is no longer an investment property, it’s just our private place to hang.
I was in New Zealand last weekend to see my family. They live in the South Island about an hours drive from Christchurch in a town called Mayfield. It has got to be one of the most picturesque places I’ve ever been. Admittedly, anyone who’s been to New Zealand will be able to say that the entire country is picturesque and beautiful.
What astounded me about Mayfield and stunning neighboring towns, Mt Somers, Methven and Ashburton was how affordable property was. These towns are less than an hours drive from world famous ski destination Mt Hutt and pretty doesn’t cover it. If we had views like that anywhere in NSW, we would be looking at a $1million price tag for the views alone. Whilst I couldn’t believe the price of property there, my family did explain to me that like many Aussie country farming towns, there’s not a lot happening and jobs aren’t exactly easy to find unless you’re interested in farming. A couple of family members described one town as “the town of simple minds and twisted faces!” Good to see those types of towns are everywhere! As a rental, holiday rental or small cabin that you can visit for a family holiday once a year, the price of these places makes owning property very appealing to those who simply can’t afford to buy in Sydney. After speaking to real estate agents in these areas this week, renting these properties is apparently not difficult and the return on investment is incredibly strong because the farming community always have workers on their farms needing accommodation. Not to mention in influx of skiers in winter.
Let me give you an idea. Here’s one of the properties in the area:
Methven NZ, $289,000 (which is $220,00 AUSTRALIAN DOLLARS)
LOOK AT THAT VIEW! It’s described as an “Architecturally designed modern 2 storey, 2 bedroom home with third bedroom in sleep out. Complete with workshop or ski tuning room. Fully fenced family friendly section. Enjoy fantastic mountain views from the master bedroom and lounge area. This funky home is a must to view.”
Ok, let’s forgive the use of the word ‘funky’. It’s so cute and for a deposit of $22,000 (and NO stamp duty in Kiwi), you could rent this place out for $250 a week (yep, that’s the going rate). According to the Commonwealth Bank, a loan of $200,000 is about $1,419 in repayments a month. I’m not sure if CBA would lend anyone money for a kiwi property but we’re playing hypotheticals here so let’s keep going. So after you rent the place out, you would need to pump in an extra $336 a month (yes, $77 a WEEK), you could possibly own your own piece of property in one of the prettiest towns in beautiful New Zealand.
Return flights from Sydney to Christchurch can be as low as $130 each way and car hire is as cheap as chups. Let’s just say you can get to Christchurch for about the same as it can cost to drive to Thredbo (and it takes LESS time, oh the irony!)
Three years from now I will post the value and increase of homes in Methven. If the property increased in value by 5% a year, it would be worth about $331,243 and if sold, make you a profit of $32,285 – it takes a LOT of hard work and pay rises to make $30,000 cash after tax doesn’t it! For $9.95 you can go to this website and buy a suburb report for the suburbs in NZ to see what they’ve sold for recently Click here:
As proof that I’m making a little bit of sense. I have some family members from a little town in the South Island of Gore. They decided to buy an investment property there. With the conversion rate at the time, they got it for a steal. The town used to have a bad reputation for just being a bit backwards but I’ve now seen enough articles that show Gore, NZ is also the fastest growing town in NZ. Sure, the little house needs a bit of work but it’s been rented since it was purchased and it’s just been valued and woah…..we’d never see a return on investment like that here in Sydney. It was a smart decision.
One of my friends in Singleton, who’s also a real estate agent gave me a tip about 3 years ago, “Buy in Singleton” she said. “The mining boom is taking off”. Three years ago you could type into Australian Real Estate sites 3 bedroom, 1 bathroom under $250,000 and about 63 homes would come up. I’ve just done it now, only 1 home available under $250,000 – they’ve all increased in value by at least $100,000 in three short years. Gulp!
Other suburbs in rural areas that I’ve been told to look at (that I’ve been told about) include Bathurst, Orange and Wagga Wagga – apparently they’re the places to be.
If you buy in Australia and have to put a little bit of cashola into an investment property to keep the payment up (yep $77 a week kind of dosh), I’m pretty sure that property becomes a tax deduction and therefore you can get a lot of money back from the lovely tax man at the end of the year. Win Win.
*This post comes with a massive disclaimer. Don’t buy anywhere on my recommendation, do your own research, get your own tax advice, I’m not an expert, this is my opinion only. If the bottom falls out of the Aussie dollar it’s not my fault and if you make money because I prompted you to think about property investment, then good luck to you, I hope you smash it!