Mary's Money column appears in the
Business section in the Weekend Herald.
NZ Herald January 15 2005
Q&As: You can make money by leasing out caravans.
Economist confesses how bad all foreign exchange forecasts are.
Question: For those people living in small towns with a few dollars but not enough to start in rental properties, one thing that works is caravan rentals.
Buy the vans from the free ad papers etc for $1000 to $2000, and they rent for $30 to $45 a week.
High grade vans cost $3000 to $4000, but rent for more, typically $50 to $70 and more in Auckland.
Even in Masterton, I rented bigger vans for up to $75 a week. Quite a good return.
There is a huge demand for permanent accommodation for high school students, fruit pickers, farm workers, young couples, house renovators, etc, and during the quieter winter period you can catch up on painting, maintenance etc.
Caravans are highly sellable, and when I sold my fleet of 48, the tenders flowed in.
Anyone with a tow bar on their car, and a back yard to store a caravan could start with minimal outlay.
Hope this helps someone, somewhere.
Answer: All those who are reading this while sitting in a campground full of caravans, look around you. You may be in the middle of a gold mine.
My knowledge of caravans stops at buying one some years ago for $3000, but I've never rented it out. I must say, though, that I've always thought it was really good value, first for camping and now as a spare bedroom.
For those who do rent them out, $70 a week on a $3000 or $4000 investment is indeed a good return. If you had no expenses and a year-long tenant you would get your money back in the first year or so.
I expect, though, that you would be extremely lucky to find someone to hire your caravan for more than a few months, maximum. Otherwise, why wouldn't they just buy one themselves?
It's more realistic to assume there would be long periods when you get no rental.
Still, the idea sounds good for a handyperson who happily keeps on top of the maintenance and lives in an area where caravan storage wouldn't be expensive - especially if they plan to build up a large fleet.
And, most importantly, there would need to be a steady demand for caravan rentals.
It would pay to check out the local scene first - by looking at newspaper ads, talking to employers of seasonal workers and so on - before proceeding. Then test the waters with just one caravan, and add to the fleet gradually.
Thanks for sharing an idea that could set some readers on the path towards Caravan Corporations.
Question: My husband and I are 57 and currently working overseas where we are paid in American dollars.
Most of what we earn we are saving for our retirement, which we hope to do in three or four years, but we are reluctant to remit it to New Zealand because of the current exchange rate. Therefore it is sitting in the bank collecting virtually no interest.
We do have a mortgage-free home in New Zealand plus $150,000 in a managed fund.
My husband feels we are more likely to get the best value if we keep the money in US dollars until the value of the New Zealand dollar falls and then swap over.
He points to the graph of the US dollar, which shows it has a three- to four-year cycle of ups and downs and says we are best to wait. What would you do?
Answer: Firstly, I would read your husband a quote from a recent BNZ newsletter, written by economist Tony Alexander, as follows: "One person's (foreign exchange) forecast is pretty much as good as another person's - be either person an economist, garbage collector or monkey."
Alexander reviewed New Zealand economists' forecasts of the Kiwi versus Yankee dollar. "We are in fact wrong 95 per cent of the time," he said.
The only time they were right was when moving from too low to too high, or vice versa, he says. The economists are like "a tramper lost in the bush wandering around in the general area they think the track is, and only ever actually being on the track when they cut across it to wander blindly on the left hand side for a while rather than the right hand side."
And it gets worse. The economists couldn't even get the direction of change right in 38 of the 83 months reviewed. "To have as good a chance of picking the direction the exchange rate will move over the coming year as economists on average in New Zealand... you can flip a coin."
In other words, no matter what articles you might read or graphs you might study, nobody knows which way the Kiwi dollar will move versus the US dollar.
Unlike the share and property markets, where the long-term trend is upwards despite short-term falls, there is no long-term foreign exchange trend.
There's just as big a chance that the Kiwi dollar will rise further against the Yankee dollar as there is that it will fall. By waiting, you might do yourselves more harm than good.
On the other hand, if you move the whole lot over here now, and the Kiwi falls, you will regret that.
The wise thing to do is to move some money, say, every three months. Looking back later, you'll find that you've sent some when the exchange rate wasn't so good, but also some at the best time of all.
There's another factor to consider, too. You might as well have at least part of your savings earning the higher interest rates available here.
That wouldn't always be a good argument. According to finance textbooks, if a country has higher interest rates than elsewhere that suggests its currency is more likely to fall than rise.
But experts are saying the New Zealand situation is a bit different at the moment, for reasons too complicated to go into here.
All in all - given that the currency could go either way and returns here are considerably higher - I recommend moving your savings here in instalments over, say, a year or 18 months. From then on, I would send the money here as you earn it.
* Mary Holm's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following her advice. Send questions to email@example.com or Money Column, Business Herald, PO Box 32, Auckland. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Sorry, but Mary cannot answer all questions, correspond directly with readers, or give financial advice.