Excellent. So what is the expenditure required to maintain the asset base?
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Right, right. I thought about that after posting but it would still be interesting to have the capital maintenance figure.
this must be the 1 standout NZ company. Dividend growth continuous. I am sure the figures are what buffett would like. I have a rental that gives a yield of below 5% net. I am thinking of selling and switching the capital to ryman. A dividend increase of 15% far outperforms may be a 3% increase in rents with a typical rental.
Voltage ...Lizard is right...at least you keep the property....if you are "investor"...with an horizon of 10 years plus...I doubt you can loose....funnily enough..... talking to a mate(ss) last night...(CHCH)...being offered a price from the council for her home (given the EQ/GV) ....unspectacular......which she had owned for 11 years.....she will have ultimately have earned $437 per week.......in CG....not a headline sexy return...over that period....but none the less...
PS...."selling and switching"....could probably cost (depending on value of property)....$10000....$30000......
...good luck
I forgot to mention...in my opinion if you can retain the value of your capital (let alone any gain)...you are doing better tha most....in these "spooky"....times...
Talk of borrowing to buy any share in todays market is just plain scarey--Switching over to an investment you like better is fair game,but these are times to be conserving what youve got IMHO
Wasn't suggesting that. Just that RYM are increasing borrowings beyond the rate they pay divs, so could say they are borrowing against the increase in property values to pay that great div that Voltage referred to.
Of course it's not that simple - like most things with RYM - so I don't really want to start another debate.
thanks for the comments but at the end of the day what really is the difference between borrowing to buy an investment property or shares that pay a dividend.
Hi Voltage,
There are a few differences:
1. The income from a rental property is very steady and secure (generally speaking). This means your ability to service your debt is fairly certain. Using dividend income to service debt is more risky because business profits can disappear due more easily - competition is fierce; business models can be disrupted, demand can subside, managers can make mistakes.
2. Markets themselves can be irrational - you could end up having a margin call because the share price has tanked even though the business is still profitable. In theory real estate prices could do the same but prices are not quoted daily, they are not as liquid, and as result (partly) prices are not as volatile.
3. If the company already has debt leverage then you are actually doubling up and are likely to be unnecessarily increasing your risk.
Obviously these risks could be carefully managed. But in my opinion if you choose the right businesses you shouldn't need the extra leverage anyway.
Regards,
Sauce :)