We have recently been having problems with the council, there were some road works on the street outside the rental property. After some back and forth between us and the council they have said that since it was not the council that was doing the work they did not accept liability.
It was our view that the council is responsible, because it is their responsibility to supply clean water. The roading contractor was not hired by us or doing work on our property. The work was being done on council land and therefore the council must have given consent for the works to be done.
The plumbers bill came to about $110, we were not worried about the amount involved but more the principal. Principals will only go so far, we have decided to pay the bill ourselves and take the easier path. So the big guys win again by simply denying responsibility, but we are very busy people and look at this as a stress-less fee.
Maybe this is not the best course of action in the long term, but in the short term we feel out limited time is better spent trying to relax after working hard and trying to get ahead. This whole property investing thing is somewhat stressful and this was a "cheap" stress reduction.
These are just my thoughts, I encourage you to do more research as these are big decisions and they will be with you for years to come good or bad. Choose to fight the battles that you can not only win but are worth winning, we decided $110 wasn't worth the stress of fighting even though we were most likely in the right.
Sunday, April 29, 2012
First thoughts
Know the market in the area, my partner and I choose Palmerston North because she grew up there and we both went to uni there.
Choose a price range you are comfortable working in, this can be a bit of a challenge because higher rents are available in the upper end of the market, but with higher capital investment and probably worse returns. But the lower end of the market the returns can be higher but the maintenance burden is higher and sometimes the tenants can be less reliable. But this is why we use a property manager, they vet the tenants they choose good people.
The ROI equation that I use 48 (weeks) x (rent / week) / (purchase cost of the property) e.g. (48 x $200) / ($200000) = 0.048 = 4.8% ROI this is not very good if you are borrowing money at 6%. However there can be tax advantages to "losing money" to build an asset. Or the other way i.e. I want to get 6.5% of $200k therefore I need $13k/yr or $271/wk @ 48 wks/yr.
One other thing I think is very important is the debit/equity ratio that I am happy working in, some investment advice goes on about negative gearing to amplify your gains, they warn that it can also amplify your losses. I don't think it is a good idea, most banks want a 20% deposit, this means that when you start that you have a 80/20 ratio. This is a good starting point, we are putting money into our investment as well as the rents going into it. When we hit 60/40 I think we should buy another property it will take us back to about 85/15 as the next one will be worth more then the current one. When we get back to about 60/40 again it will be time to buy another, it will take longer then the riskier approach but we are ok with this as this for us is a long term plan.
These are just my thoughts, I encourage you to do more research as these are big decisions and they will be with you for years to come good or bad. Choose the level of risk you are happy with, the price band you want to work in and where your D/E ratio is comfortable.
Choose a price range you are comfortable working in, this can be a bit of a challenge because higher rents are available in the upper end of the market, but with higher capital investment and probably worse returns. But the lower end of the market the returns can be higher but the maintenance burden is higher and sometimes the tenants can be less reliable. But this is why we use a property manager, they vet the tenants they choose good people.
The ROI equation that I use 48 (weeks) x (rent / week) / (purchase cost of the property) e.g. (48 x $200) / ($200000) = 0.048 = 4.8% ROI this is not very good if you are borrowing money at 6%. However there can be tax advantages to "losing money" to build an asset. Or the other way i.e. I want to get 6.5% of $200k therefore I need $13k/yr or $271/wk @ 48 wks/yr.
One other thing I think is very important is the debit/equity ratio that I am happy working in, some investment advice goes on about negative gearing to amplify your gains, they warn that it can also amplify your losses. I don't think it is a good idea, most banks want a 20% deposit, this means that when you start that you have a 80/20 ratio. This is a good starting point, we are putting money into our investment as well as the rents going into it. When we hit 60/40 I think we should buy another property it will take us back to about 85/15 as the next one will be worth more then the current one. When we get back to about 60/40 again it will be time to buy another, it will take longer then the riskier approach but we are ok with this as this for us is a long term plan.
These are just my thoughts, I encourage you to do more research as these are big decisions and they will be with you for years to come good or bad. Choose the level of risk you are happy with, the price band you want to work in and where your D/E ratio is comfortable.
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