All Forum Posts by: Dale Viljoen

Usually the rate is based on what the prevailing interest rate is in the market for a safe investment often the number used is 10 year US government bonds. However using NPV for REI may just be overthinking the situation unless you are buying properties left and right.

@Dale Viljoen - I'm in Auckland as well. And the numbers on Bigger Pockets basically never work here. The yield is too low and the price is too high. The only way I think is even possible is through BRRRR (talked a lot about on here).

Thats what I'm trying to do at the moment, but the market is very challenging. 

Improvements generally refer to the stuff that was built on the land (i.e. the house, buildings, etc). 

So you might see something like:

Land Value: $25k

Value of Improvements: $75k

Improved Value: $100k

@Dale Viljoen

I specifically liked the book because it was short and to the point. I used it more as a reference manual and a springboard to more in depth articles online. Specifically on discounting and NPV and IRR: if you come across those terms you can look it up and at least know what the idea is, even if you cant necessarily calculate it for yourself or understand exactly what it means to have a 20% IRR, you at least understand that it is a measure of ROI over a longer time horizon. When you are just starting out maybe that is all you need to know about IRR. You might come across that term, look it up in the book and decide you don't need to investigate it further because you have other metrics you are focusing on right now, but at least you understand the basic idea.

I think this reviewer had an unrealistic expectation of the depth an author can get into in a book that defines and gives examples of 37 different financial metrics. It probably gives three pages to each term, which is 111 pages and probably the entire length of the book.

There are others out there, but this is a good one for learning definitions of financial terms. If you want to get into upper division stuff check out "Real Estate Finance and Investment Manual" but its 600 pages of small print on large pages.

"36 Terms" is fluff free and defines all of the key financial terms. I think its perfect for a beginner. But of course everything is free online if you would rather study that way.

Make sure you are utilizing you local library! And ask the librarian about inter-library loan programs. I have been able to request specific books that my library system doesn't have through this program.

Good Luck!

THere's a whole lot of things here that you need to sort out @Dale Viljoen.

Firstly are you sure you want to invest in the USA. I am a kiwi who invests in the USA but I had many years experience in NZ first.  You can really easily get into trouble in the USA and lose your capital. So if you can afford to invest in NZ I strongly suggest you start there.

But let's assume you insist on the USA. One of your questions was is it possible to buy cashflow properties that will cover all expenses including mortgage payments from rental income. The answer is yes absolutely. So step 1 is to pick a cashflow market. I invest in Memphis which is a cashflow market. So is Atlanta. There will be hundreds of cities that do but you'll have to pick one. In my city you can buy a decent rental property for 80K that will rent for $995 a month.

You'll see below this cashflows at $134 a week before the 60K loan at 7% and $9.98 after the note.

This is just a typical example of the houses I buy in Memphis. So choose a cashflow market.  Get some local knowledge and start looking for a property.

 Joe V talks about a particular strategy that may be applicable in his market which is cheap housing in the depressed areas of midwest USA. You are living in NZ which has completely different market dynamics. In the rest of the world properties that rent for enough or are cheap enough to cash flow with 100% financing is unheard of. The population density and market values of housing will never support that. You cannot use the strategies talked about by US investors who buy properties on land which has practically zero value and often depreciate over time in other parts of the world. Also cost of credit and access to credit in the US is looser than anywhere else. Having the government take all risk of the table for the banks allows this to happen (because the banks have bought the government). Anyway, the point of this is to say you cannot apply the same strategies touted on BP to other countries or for that matter the desirable areas of the US either (like California or New York or Seattle etc).

 It stretches my brain trying to convert weekly to monthly to annually and NZD to USD, but I'll tell you what's important.

Trying to buy rentals listed for sale with agents will not work there.  They don't work that way in my area or lots of areas here, either.  You need an off-market deal.  A seller that's a don't wanner.  Maybe a different asset type that can be re-purposed like an old warehouse or mall in a good location.  A closed up storefront or poorly run storage or mobile park. 

The good deals are never found on a device or at your computer in your underwear.  Hit the streets and drive/walk/ride for dollars. Take different routes to work and look for opportunities. Be around 'old guys' at diners in the morning or at senior circuits at the gym.  Theatre, cancer walks, chamber of commerce meetings, what have you.  Network with seasoned people that own stuff and know everybody.

You are.  What  you're missing is a plan of  how to use what you have.  What you have are properties that won't cash flow unless you pay all cash.  Since you never, EVER, under ANY circumstances, EVER, want to use your own money to buy anything in RE,..what do you do?

The answer is in the timing, and whose cash you are using.  Both the timing, and "whose cash", are the same events.

First, you must flip your current cash (seed money), and reinvest all profits until your "seed money" has at least doubled.

Second, continue to flip your now larger seed money.  Now, you want to use your profits to buy rentals (they'll now CF) with all cash.  What's the difference?  This way, you're not spending your seed money...your spending your profits...which is OPM.