Investing $250k-300k for cashflow

The first fell down when we found the building didn't have the code required (NZ).

I had an offer accepted on another CIP around 3rd week in December. Vendor insists on 10 days for dd. Fair enough but the whole of NZ closes for 2 weeks over xmas. The bank makes finance offer subject to val. Myself, broker and all at my end move heaven and earth to tick off dd in timeframe. A valuer does a favour and gets the val done on day 9 after xmas and ny close down. Bank recieves it lunch time day 10. 5pm day 10 the vendor refuses an extension of 1 day for the bank to read the val ( which came back ok). He cancels the agreement as he "doesn't like giving extensions." Day 11 bank agrees finance. My agent approaches vendor and his agent and requests the agreement be reinstated as we can confirm. Nope, the vendor wants a new agreement signed, identical to the first but unconditional. This means I need to go back and consult with my lawyer and the bank as it's a new agreement. I walked.

This purchase would have required me to work with the vendor through a bc. I walked away because I believe this guy is an uncompromising and stubborn a****ole who has happily wasted my time and money without cause and would no doubt continue to be and do the same.

So, I probably dodged a bullet but at a cost. Very p****ed off that I had the bad luck to cross paths with this person.

 

Don't forget to factor in tax... offsets are tax free

 

If you could park your money in an ING or Rabo online saver and get 12.5% tax free or better, would you?

If the answer is yes, buy an NRAS property or a dual occ property.

If you use a 500K property as an example, and it generates a 10K CF+ "dividend" after all expenses and taxes, and your contribution (using cash) is 12% + stamp duty, the bottom line is that you're putting up @ 80K cash for a 10K net return . That's a 12.5% net return on 80K, before any growth is factored in. Reinvest that cash flow towards debt reduction and the return is amplified.

Buy a 400K property and the cash contribution drops to less than 65K, for a 10K return. 15.4% net return before growth.Reinvest that cash flow towards debt reduction and the return is amplified.

Buy a 300K property and the cash contribution drops to less than 50K, for a 10K return. 20% net return before growth. Reinvest that cash flow towards debt reduction and the return is amplified.

I'm interested to know how some of the 20% + returns quoted on page 1, which are bank heavy, are faring after the last 2 days .... Those figures were posted on Sunday, and the banks have all come off a little .... then again, they could be up again tomorrow.... I guess thats the joy of stock market volatility .

 

Will I be able to get any portion of my money at any point in time.

 

You get the money annually, at tax time...

 

Not quite.... it represents the net return so to compare this to other investment options it needs to be grossed up. Upon doing so, the real value of this approach can be truly appreciated.

Exactly.

One thing to consider is the potential for capital erosion/loss which can quite a real scenario for many types of assets. Property is generally quite stable but is not very liquid. Shares tend to experience far more volatility & diversity is key here.

Also consider how the income is received. For instance, spousal income splits can offset unnecessary tax liabilities particularly if the two income levels are quite different.

I'm looking to get into a few LICs and grow a few other share holdings. Realistically, enduring 5-6% returns (fully franked) are achievable without taking on too much capital risk. A diversified portfolio can perform much better but some of the capital will be at higher risk.

 

The bank portion of my portfolio was at 23.54% last night and is back up to 24.62% tonight. Riding the wave but the banks are only 1/6th of my portfolio. If the stocks dive for a bit my dividends are being reinvested at a better rate.

 

@Indifference I think only in terms of net return for rentals but I see your point in wanting to compare gross with other asset classes

 

Would you consider private loan companies like ratesetter? not sure what the risks are though..

 

I thought there were some threads on Investchat about private lending. The only one I could find was Borrowing to invest in a unit trust.

Cash flow strategies and offshore investing advice

 

And more so if you compared it to putting that $280k into a interest bearing account etc as you'd be paying tax on the investment return