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18 February 2016


Bought from ‘bleeding’ investors.

As virgin investors, we bought a one-bedroom apartment (35 sq m) in the heart of Auckland City in late 2005, financed via equity in our own home.

The first owners of our apartment lost at least $50,000. They were Australians who bought the place off-the-plans and appeared to treat the deal with little thought, (furnished a new unit with old stinky appliances, furniture etc, and relied solely on a agent to rent it).

We, too, first listed with an agency, however after two worrying weeks of no response, decided to try our luck on trademe ourselves.

I was amazed by the reaction, and (after getting rid of the agent), by the end of the week we signed a tenant for one year, they later extended this for another 6 months. These tenants have only just moved out, and once again we had no problem securing replacements.

I periodically check the sale price of units similar to ours in the same complex. At last inspection, I found them listed for at least $20,000 over what we paid, (although, considering transaction costs, commission etc, we would probably break even if we sold now).

Given the ease with which we have secured tenants to date, we intend to simply hold on to it. I believe, in time, first-home buyers will start to enter the market. Personally I would prefer to live in a city apartment, rather than a dumpy house in a dodgy suburb.

Financially speaking, the place has almost maintained itself, the cost of the loan is exceeded by approximately $70 in rent a week, and although this is eaten up by rates, and body corp fees etc, the tax benefits have been worthwhile.

To summarise, I remain positive about our apartment experience thus far.

To anyone thinking about it, my advice would be to: get a place with a view, check the body corp minutes before purchase, try and buy in an established complex, don’t solely rely on an agent to rent the place, don’t settle close to Christmas, and buy low whilst the bad press remains!

Oh yes, it’s a known investing maxim – to buy “when there is blood in the streets”. Unfortunately, during good times, inexperienced investors do not believe there will ever be bad times. And so, they make the mistake of buying in the good times. The good times, they think, will last forever. Never.

Take what’s happening now, in many parts of Australia. Investors are back in many markets sending prices to what any rational person could only describe as “silly levels”.

Ever heard of Charles T Munger? One of the world’s best investors. One time, just before he was about to make a speech that would have lasted several hours, a woman sitting next to him wanted to know the secret of his success. She would only accept a one-word answer. Charlie chose the word “rational”.

I have given up saying, publicly, that there will be “blood on the streets” in many of today’s booming areas. But, privately, I am telling my friends to remember two words about the property markets in Australia – cataclysmic collapse. And that will be the time to buy.

But, please, keep this to yourself. I don’t want angry emails from foolish young investors telling me I don’t know what I am talking about.

I love New Zealand (and its people) and if I was inclined to buy in another country, I may do what you did. But first, I would read every book written by another financial expert, your Martin Hawes. What a wise man.

Neil Jenman


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