Investing in Real Estate NZ

[David Hong]

Hi Brandon! Just found biggerpockets channel on Youtube, great great stuff man, keep it up! Now I have a burning question for you

I live in Auckland, NZ. The average house prices here are above $1 million. The rent is roughly $200-300 per week which by my calculations is roughly $1088 per month. As you can see this falls far short from the 1-2% rule

I really wanted to harness your BRRRR strategy , the problem is positive cash flow from rent OR even find an old affordable property in where I live seem next to impossible. What are your thoughts on real estate in NZ?

Hope this message finds you well,

Kind regards and hello from NZ!

Dave 

[Dean Letfus]

@Diogo Alves, flipping, what we call trading, is possible in NZ. It was mostly what I did.  It is just risky. You know you buy a home in Memphis for 50K spend 20K on it and list it for 85K. For some reason you can't sell it so you rent it out and it's cash positive. Or you "give it away" by selling it for 77K and you end up making only a grand or maybe zip. That's about worst case usually.

In NZ, I'll use Auckland because it's my main market, you buy a house for 700K, spend a hundred on it and list it for 899K.  The mortgage is eating its head off while you market it so you are really needing to sell.

Agent comes back to you after 2 weeks and says buyer interest is high 7's because it has a small bedroom, or the garage is too small, or there are new builds close by.

Now what do you do?  You're already in a loss and you haven't sold yet. If you rent it out it will immediately decrease in value and it will be negatively geared. So you sell at a loss to stop bleeding. People, newbies, do this all the time. Houses sell for 100 to 150K less than they sold for 6 months ago. It hurts.

If you're well funded you can wait it out and come right.  I have a saying you can never pay too much for a property but you can pay too early.  So in the above example if you can ride out the neg gearing for 2 to 3 years you'll probably sell it for a mil and be back in profit but you have to have the cash to fund it.

Bottom line is we have no REO industry, no short sale industry, no note industry, nothing that allows property values to move up and down wildly like the US does. So every property is expensive and with total population of under 5 million there may be no demand for a property if you've bought it badly or missed something. Add to that high interest rates, no private lending industry to speak of and reluctant lenders, it's just hard work mate. Not for the faint hearted.

I've bought and sold hundreds and hundreds of homes in Memphis since 2012.  In NZ when I had a portfolio of over 20 homes I was a rockstar!! Like nobody owns more than 3 or 4 rentals in NZ.  Anybody with more than about 10 is like a legend.  Above all it's the dollars that make it hard. Everything is so expensive and nothing cashflows so you really take on risk with every purchase. It bankrupted me in the GFC as all the lenders stopped lending and I was screwed. That can happen easily in NZ, unlike the US.