The headline at the moment is that property investors don’t pay tax, and in fact rort the system by getting tax refunds. This is because if you make any losses in your rental properties (and most of us do because rents in New Zealand are kept artificially low) then you can offset these against your income from a job and therefore pay less Income tax.It is blatantly ignored that you can do this with any business. Property investors (like us) are thought of as greedy “rich pricks” (a term coined by the typically potty-mouthed ex-finance minister Michael Cullen).

Of course, we personally are considered even more evil and greedy because Hubby has a well-paid job. It escapes most people that we worked our arses off to get qualified in order to earn that money. It’s not fair!

So – why do people think it’s unfair that we use a system to allow us to pay less tax?

Because most people have been conned into thinking that Tax is inevitable. Like death. Only it isn’t.

The fact is you do not have to be in anyway rich to legally cut your taxes. You just have to be smart. You also need to get your head round the fact that paying money you earn to someone else is not actually fair, and that the richer you are – the more you pay – is even less fair.

Let’s put it this way:

• If someone comes into your house and steals your TV – you go to the police and make a report. You make a claim against your insurance and get the money back to replace the TV.
• You don’t for one minute consider it fair that someone has come into your home and taken something that they may not be able to afford, and therefore have a right to steal it from you, because it’s not fair that you had the money to buy it and they didn’t.
• And yet – the government takes say 30% of the money you earn, and gives it to someone else. And you think this is OK because it’s called tax.

Here is something else to think about:

• While there is no “tax-free limit” to earnings for low income people the way there is in the UK, the bottom 40% of households pay no income tax because they get benefits to compensate.
• Yet the top 10% of earners in New Zealand pay 42% of the total income tax take.
• If you take out the 40% of people that effectively pay no tax because they get refunds distributed from higher tax payers, we are then responsible for a whopping 76% of the income tax take.

And yet we are the greedy ones for not wanting to pay so much of what we work our butts off to earn. Hell alone knows how much we would collectively pay if we didn’t have a way of offsetting tax.

It’s also worth noting that the HUGE tax benefit that property investors fleece off the government in Tax Refunds accounts for just 1.6% of the entire tax take.

Yep – we are about to get nailed to a cross then burned alive for a whopping 1.6% of the total tax budget – which will then be given to other people. I personally don’t think any of this is going to make that 40% who want our blood any richer.

But I could be wrong.

Over the next week or so we will be going over the recommendations (and they are just that – recommendations) and highlighting what they mean – good and bad.

If you want to see a good and funny illustration of why “tax cuts for the rich” are so wrongly maligned – have a look at this blog post: How tax cuts work.

And for some interesting facts about just how many evil greedy property investors there are in New Zealand – read Are Kiwis really obsessed with property?

And for a light hearted look at just what we personally think of the Inland Revenue (in any country) – take a look at Inland Revenue Humour.

Work out the feasibility of the project

Before embarking on a renovation project, work out the feasibility of it. If you’re renovating just before you sell (or buying a property to renovate and then ‘flick’) then you will need to start by figuring out your potential sell price.

To get the ball rolling, I recommend looking at a few real estate websites. Have a look to see what other properties similar yours are selling for. Look for properties that are already renovated, are a similar building style to yours, have the same number of bedrooms and sit on a similar size piece of land. You can also talk to local real estate agents and go to open homes to work this out.

Then do a reverse feasibility study on your proposed renovation. This is where you take your potential sale price and subtract your expenses and expected profit in order to work out your renovation budget. Or subtract your renovation costs (if known) and expenses from your potential sale price to work out your expected profit. Note: I usually recommend spending between 5% and 7% of your property’s pre-renovation value on renovating the entire property (less if you can manage it). Let’s look at an example:

So now you have an idea of what profit you’re expecting to make – are you going to go ahead with your renovation? If your expected profit is $10,000 – $20,000, is it really worth the risk?

If you’re happy with the profit you’ve calculated, then the next step is to look at your proposed budget and work out how you are best to spend it.

This of course is the tricky bit. It is a fun process working out the ins and outs of a renovation, but all too often the heart takes over from the head and renovations become an emotional process. Making the property look great is an important factor, but keeping to your budget is even more so. Every dollar you spend over your pre-determined budget is money out of your back pocket and your profit can take a slippery slide downwards from your expectation.

If renovating your property to sell, then you are essentially carrying out a business transaction. Put your business-persons hat on and have it on every time you see or discuss the property until it sells.

BEFORE:

AFTER:

You don’t need to spend a lot of money to create a great looking property – believe me I have renovated the worst of the worst properties. You just need to spend your money doing just the right things in just the right way. It’s great to get ideas from TV shows and magazines, but make sure if you take on their tips, they are relevant to your property. So often I see people renovating parts of their property that simply don’t need it – because they saw this show or that magazine article of someone else’s property who needed that particular sort of renovation. Or they renovate their property using colours, materials and products that are just not appropriate. Researching all the types of materials and products for your reno is essential. And using the right ones for your property style, area, location and value of your property is what makes the difference between a profitable reno and one you just learnt a lot of lessons from.

The trick is in renovating your property so that it offers value to your purchaser. If your property has what they want at a fair price, then your property will be the one they buy. If you over-spend on your renovation (and need to ask more for the property as a result) or if you renovate it in a way that doesn’t appeal to buyers, then they will end up buying another property down the road – not yours.

What parts of the property will you renovate?

My rule is to first and foremost renovate or ‘trick up’ the exterior of the house including the garden and fences. Why, I wonder, do people spend tens of thousands of dollars on renovating their kitchen and bathroom areas but then do almost nothing to the outside? It’s completely natural for people to judge a book by its cover – in this case judging the house from the road – so why not give them the best first impression you can. When selling a property, you generally have only one chance to impress potential buyers. The interior photos on the advert only do half the job. If a potential buyer turns up to a property that does not reflect on the outside what the photos say is going on inside, then they are very likely to drive on by. Again, you don’t need to spend a lot of money to create a more appealing exterior. Renovating just a few key areas can often totally transform it – so make this a priority if you’re planning on selling the property at some stage.

The next most important areas are the entry (or the first area you see on entry to the house) followed by the kitchen and lounge areas, then the bathrooms and bedrooms.

Again you don’t need to spend an arm and a leg to get a really great result. Spend a bit more on the kitchen and bathrooms (say .75% – 1.5% of the property value for each area) to trick it up whenever possible. Giving an overall cleaner, fresher appearance will create a very appealing property so using clean colours and crisp looking products is essential.

BEFORE:

AFTER:

Who is your target market?

The next thing to consider when working out which parts of the property you’ll renovate, is what your target market wants. Who is your target market and what do they place value on?

Look at the area your property is located in and make sure it fits with the needs and wants of the sorts of people who live there (for example, retirees, young families, students, young professionals etc…). If it doesn’t currently suit your target buying market, then do whatever you can within your budget to create that.

For instance, a retired couple will see value in a low care garden that they can nurture and add to. They will probably want a decent amount of storage to keep their life time of treasures in and perhaps a shed for gardening gear and hobbies.

Young families will see real value in (among other things) a fenced off yard for children to play in, so consider creating a secure yard area if that is possible. They’ll also want a bath for bathing the children and perhaps a suitable ‘play’ area near the lounge or kitchen areas.

Young professionals will value low maintenance properties, so at least simplify fussy, high maintenance garden areas. They’ll no doubt want all the mod cons too – so in the kitchen, make sure there is space for a dishwasher and microwave (and probably a coffee machine too!).

Students will value study spaces in their bedrooms and locks on their doors, so buyers of investment properties for student accommodation will look for these types of things. Create a property that is especially user friendly and your buyer will see that downtime during holiday periods will be minimized – tenants will be reluctant to ‘give up’ the property for fear of not finding anything as good when they come back from their break.

So spend a bit of time thinking about who these people are and what they place value on before you begin your renovation. Also do some research on what else is on offer. Again, look on the internet and visit as many open homes as you can in your suburb and those surrounding it to see what your competition is. You may find that there are 10 other properties similar to yours – and this is when you really have to think about what your point of difference is going to be. Why will someone buy your house and not the one down the road? Partially the reason will be price, but like in business, price is lower down the list when it comes to the reasons people buy. If it suits their needs, they are likely to spend more money and buy more quickly.

Do your research first. You should be able to justify absolutely every thing you do and every decision you make during your renovating project. Don’t make it up as you go along and don’t just do something because it will ‘look nice’. Aesthetics are very important, but you must aim for a perfect balance between good looks, practicality, reasonable cost and availability of products.

Keeping to your budget

So you know that your renovation is feasible from a profit-making perspective. You’ve worked out your approximate renovation budget in order to make the profit you want. You know who your target market is – and generally what you’re going to do to your property in order to meet their needs and wants. Now you come to the crunch – the exact details of what you will do to the property in order to meet those criteria (profit, budget, needs and wants of your target market).

The most common question I am asked at this point is – how can I possibly renovate my entire property for under (say) $28,000? The most important thing to know is that it IS possible to renovate your property for such a small amount of money – even if you don’t have all the freebies they get on the TV shows or the ‘behind the scenes’ trades-people carrying out all the work. I have many clients who have renovated entire properties for between $10,000 and $15,000.

It’s a matter of identifying and changing just the components within each area of the property that really need it. Don’t paint the entire house exterior if just painting the trims and tidying the garden will improve it ‘enough’. Don’t replace the entire kitchen if just replacing the bench-top, door handles and splash-back is ‘enough’. And don’t go reconfiguring your bathroom if you can get away with replacing the shower screen, vanity, splashback, toilet and towel rails.

See the idea? Look at the areas in the property and note the best bits. And then leave these as they are. Work around these things when replacing or renovating the other components so that everything ties in together once the renovation is completed.

When selecting the products and materials to renovate or replace the components within your soon-to-be-sold property, you can generally afford to go for a lower quality than if it were a property you were going to live in yourself or hold onto for years to come. You still want a good quality finish but if you have to choose between a $500 toilet and a $150 toilet, you will still get a good enough quality with the latter.

You will get a much better result from your renovation, and a much bigger profit when you sell (or re-value etc…) if you are prepared to do your research and plan your renovation well. Minimise your risk by spending the time up front to plan your renovation based on the facts. Keep your business head on at all times and reap the rewards of your successful renovation.

This UK based program follows 2 teams of budding property dealers who get given a rather lovely £300k to get started and have one year to make as much profit as they can out of doing up and reselling property. All under the watchful Gary McCausland – who has been doing this for years and runs his own successful property empire.

While one of the teams (The women) are doing really well, and have so far made over £60k profit, and churn out one good deal after another – it is just sheer agony to watch the blokes lose money on deal after deal.

I have made my family promise to shoot me if I start behaving in such a tosser-ish way as these two. I’m all for investing in property – I have three already and plan on buying many more, but for crying out loud – there is a hell of a lot of work to do. These guys seem to think it’s all about saying you want to make money and that’s it. And while I am the first to admit that I think one of the joys of the property business is sitting around drinking vast amounts of coffee – I also understand that this does not let you off the hours upon hours of trawling websites, dealing with agents, viewing anything from sheds to palaces, and getting to grips with making offers. And maybe getting your hands dirty with some hard labour now and then. One of the guys seems to stop at the coffee bit! The other one seems to dream a lot and talk about how it’s all a matter of getting this bit or that bit right – he just doesn’t seem to do much of it.

Something that does annoy me with the program, is that although the presenter does swoop in to offer his opinion – he doesn’t seem to be actually mentoring the teams, rather just telling them what they should do once they have bought the place. With the girls that works out OK, as they tend to do their homework before they buy. The guys team however just keep buying lemons, and they need to be taught how to spot one! What is worse –is that when the presenter does tell them what they should do with the property they just bought – the blokes completely ignore him, and the girls tend to at least listen and do as he suggests most of the time.

I’m pretty sure either of the two property mentors I have had, Trev and Steve, would have taken me aside and told me to stop being such a plonker before I actually paid money over for a property that was no good. (Steve has a more colourful turn of phrase – but gets the message across!). I thought it was especially important to get help from a mentor as I was a migrant and I needed help to really understand how the property market works over here. It is very different from the UK way of doing things, and when you are buying to invest rather than buying a house to live in it is even more vitally important to understand exactly what you will be dealing with. While there is certainly money to be made in property – if nothing else the guys team show that it is all to easy to lose a lot of money if you don’t understand what you are doing.

I dread to think what kind of mess we would be in if we had tried to go it alone and buy investment properties. As it is, one of ours isn’t doing too well, though the other two turned out to be really good buys. I read today on Property Talk that everyone buys a lemon from time to time, so it’s nice to know I got mine out the way early. Funnily enough, while there are people out there who will abuse the position of being a mentor, and persuade investors to art with cash for any deal, both Trev and Steve have actually advised me against buying many properties because they either knew something I didn’t, or just through sheer experience could tell me what was a bum deal. I actually listen when they tell me this!

Hopefully it won’t be too long before I can buy my next Investment Property.

If you are like many couples currently experiencing the difficulties of the recession and trying to sell your home you just can not afford to do both this year.  If this is your situation, I have the PERFECT solution: give your home a hug by spending Valentines Day staging your home.  And do it with your lover.

Spend Valentines Day staging your home and reward yourself at the end of the day with a nice bottle of wine and dinner at home. Your house will love it, you’ll like the look once you’re done and with luck you will have increased the value of your home and made it easier to sell

One of the great things about staging your home is that it can be done with little or no money. No matter what your budget is, even if it is zero, you can use staging techniques to increase the appeal of your home.

When it comes to selling your home you want it to really appeal to buyers in a positive way. You want buyers to love your home, to look around and go, “Ooh, look at that,” or “Wow, that’s beautiful.” Your home should have some pizzazz, some sizzle. In other words you want to trick your home out and give it some bling!

Here are my tips for home staging:

1. Get Rid of the Clutter
   One of the most important things to do when it comes to making the inside of your home look desirable is to get rid of the clutter. After living in our home for a while we tend to accumulate stuff. I have heard professional home stagers recommend that the average home owner clear about 1/3 of their possessions out of the house before putting it on the market. Definitely remove any collections of dolls, spoons, Star Wars figures, or any other dust catchers.
   Some sellers put their stuff into storage, which can be a great idea. You could try Kiwi Self Storage in Constellation Drive, we have used these guys before and I recommend them, or Smartbox. Smartbox is a super service; they deliver a storage box on a trailer, you fill it and lock it and they store it in their warehouse ready for you to pick up when you are ready. It will cost less than you think!
2. Windows
   Make sure your windows are clean! Sparkling windows show off your view or garden and let the sunlight in.
   It’s a good idea to have window treatments on every window in the house, if they make sense. A combination of blinds with curtains is best. But here’s the catch, you also want to let lots of light into the house. So the blinds should be raised and the curtains fully open. This creates a nice framing effect on each window.
3. Lighting
   In addition to letting in natural light you want to add plenty of artificial light. The trick that home stagers use is to layer the lighting. They use a blend of light from ceiling fixtures, lamps, wall lights and task lights. You want to make rooms bright, without being too bright and not have any single light source overly stand out.
4. Doorknobs, Switch Plates and Outlet Covers, Oh Boy!
   If you are going to go to all of the trouble to make the walls and doors look great, you should finish the job by replacing all light switch plates and outlet covers with new ones. I also recommend replacing all of the doorknobs if they look at all worn, because it’s so inexpensive to do it. The reason this is a pet peeve of mine is that freshly painted walls with painted over switches and outlets looks like a cover up job to me. Replacing all of the switch plates and outlet covers in your home should cost you about $100.
5. Arranging the Furniture
   If you’ve ever seen a professional home stager in action they seem to have this great ability to take the existing furnishings you have and rearrange them, sometimes into different rooms and make your home look completely different–and so much better. Because the furnishings you have and the layout of the rooms in your home will be completely different for each person there aren’t a lot of general tips I can give you for arranging your furniture. Look in home magazines. It doesn’t cost anything to go to the bookstore and look at them. They are full of photos that can give you great ideas. These magazines share tons of useful tips and tricks for making your home look great. If you run out of ideas, try Homebase, they have a service where they will visit your home and give you a plan, for a few hundred dollars. What I don’t recommend doing is going out and buying whole new furniture sets for key rooms in your home just for staging.
   There are a few commonsense tips I can offer that apply, no matter what furnishings you have and how the layout of a room is.
   1. Don’t leave large dead spaces.
   2. Clearing the clutter applies to too much furniture as well.
   3. Don’t have everything pushed up against the walls.
   4. Add some greenery, nice fresh growing plants in the entry or in a strategic spot add drama.
6. Master Bedroom
   The master bedroom is the ultimate refuge. It is the haven within the home. No matter how large or small your master bedroom is, you want it to appeal to the buyers as a place they WANT to spend their nights. If your master bedroom is cramped, it’s time to move some of the furniture out.
   And please, if your home office and computer are in the bedroom, now is the time to put that office stuff away to help create that restful refuge!
   Also, closets are a big selling point for houses. Clear out your closets out. If your master bedroom closet is jam–packed, buyers will look at it and decide there just isn’t enough room, even if your closets are huge.
7. Bathrooms
   Your bathrooms should be so clean you can eat off the floor (but no need to test it this way!). There shouldn’t be any mildew, soap scum, toilet rings, body hair or anything else that makes the buyers think they are buying your dirt. Make sure the mirrors sparkle.
8. Kitchen
   “Kitchens and baths sell homes.” Pretty much any real estate agent in the country will agree with this. Making your kitchen look the absolute best it can is well worth it when you are trying to sell your home. The beautiful thing about staging your kitchen is that you really don’t have to spend any money to do it.
   Clean out any food that is past it’s “use by” date, and sending old plastic and glass jars to the recyclers. Check that your cupboards, refrigerator, and stove are clean, now is the time to spring clean, don’t wait til settlement day!

These tips will help to save you money while trying to sell your home and allow you to still spend time with your loved one on Valentines Day. A well-staged home that is competitively priced consistently outsells non-staged homes, even the do ups. By the way don’t forget the flowers! If you would like more tips for do-it-yourself home staging techniques call Ariel Levin on 021 528 318 or check out  Wendy Patton’s book  Rent-to-Sell by clicking HERE. she has some great ideas that might just help!

Love your house (and your spouse)
Published with thanks to Tony White and www.movenorthshore.co.nz.

Home owners, local authorities and the Government should take special care to avoid overblown estimates of the extent of problems and costs associated with the repair of residential structures in which leaks have been identified says the Building Industry Federation.

“There are increasing anecdotal tales within the industry of excessive repair work being recommended at costs beyond that which should be considered reasonable,” said Chief Executive Bruce Kohn in a statement issued today.

“A comparison might be that detection of a leak in a house or apartment block does not automatically mean there should be a complete re-cladding or structural rebuild any more than detection of a freckle on an arm is indicative of an automatic requirement for cancer surgery.

“This is an area ripe for hit and run cowboy activities. Many unfortunate home owners who have identified a leak in their properties are elderly, young or have little expert knowledge. They are reliant on sound advice from experts and need to ensure that those they turn to are well qualified for the task and have a proven track record.”

“Similarly local authorities and the Government in any authorisation of remedial payouts need to be sure that talk of a need for large scale and expensive repair work is justified. It is also reasonable to confine ratepayer or taxpayer payouts to remedial work, not enhancement of the structure. Tauranga’s former MP and builder Bob Clarkson is on the mark in drawing attention to this aspect.”

“Home owners can check in with the New Zealand Institute of Building Surveyors who carry out inspections and can probe identified leaks. Reputable builders can be found through the Registered Master Builders’ Federation or the Certified Builders’ Association of New Zealand.” This is very much a “buyers beware’ situation in which there are reputable and well qualified experts available, along with opportunists.

“Potential for major structural damage to have already occurred should not be underestimated. But nor should the prospect be dismissed that the leak is a defect that can quickly be remedied at comparatively low cost.”

That’s the release, as usual it pays to get any property professionally inspected. Thermal Imaging usually picks up the leak, buyer beware indeed, good luck. Jeff Royle November 2009.

The Real Estate Agents Authority (www.reaa.govt.nz) came into force on the 17th November, ensuring Real Estate Agents are now accountable. But what exactly has changed in relation to buying and selling property?

In the past, the whole Real Estate Industry has been self regulated.

17th November was when it became regulated by the Government.

The following schedule lists the Old and New rules as best I can, highlighting key differences for both Seller and Buyer and showing the keyword to be Disclosure – a good thing for everyone.

Old. Self Regulated.
New. Goverment Regulated with some RE involvement.

Old. Only Agent licensed with Salespeople covered by Agent license.
New. Agent, Branch Manager and Salespeople all need to be licensed and they MUST carry this with them whilst on duty. All have individual responsibility for their actions and the Agent has collective responsibility.

Old. Complaints heard by REINZ only.
New. Complaints heard by REAA and REINZ. In the first instance complaints should be made to the Agent.

Old. Membership of the REINZ compulsory.
New. Not compulsory.

Old. Professional Indemnity Insurance not compulsory.
New. As before but with fines in the $10,000 plus range, most are expected to take this up. Expect costs to be passed on though.

Old. Minimal qualifications although beefed up in 2008.
New. Existing RE people can Granfather their qualification over but if trained before 2008 they must resit the new exam if they leave one Employer/Agent and not start with a new one immediately. New entry qualifications much tougher.

Old. Apart for the Listing Agreement and Sale & Purchase Agreement very little documentation required for either Seller or Buyer.
New. 3 new documents. REAA Professional Conduct and Clinet Care (must be carried by RE people at all times whilst on duty). NZ Residential Property Agency Agreements Guide (for Sellers) and NZ Residential Property Sale & Purchase Agreements Guide (for Buyers). Seller must sign to say received and Buyer must also prior to entering into any S&P Agreement. Overseas Sellers and Buyers can receive by e-mail and e-mail confirmation.

Old. When Listing no requirement to evidence research when determining a Selling Price.
New. Full disclosure as to how the Selling Price has been calculated although a Seller can choose any Selling Price they wish, with a signed disclaimer.

Old. Listing time around 20 minutes.
New. Expect around 90 minutes to allow for Seller disclosure and recording of a much more comprehensive New Listing Agreement. Sellers are required to disclose all and any known defects in the property and the Agent records these.

Old. Agent not required to disclose amount of Advertising included in the Listing Agreement or disclose any discounts they may enjoy.
New. Full disclosure as to what advertising, where and when. For paid Advertising no mark ups allowed and full disclosure as to any discount received. A $ value for the Commission is also required, not just a %.

Old. Exclusives could be virtually endless.
New. Exclusives now maximum 90 days which can be extended by mutual consent. Most Agents expected to issue a Relisting Agreement although no such document is in the Regulation.

Old. Buyers Agents although rare in NZ still paid for by the Seller. No formal structure in place.
New. Buyers Agents formalised and need to be licensed. Agreements in writing and details of fees and charges clearly laid out. Paid for by the Buyer and the Agent cannot act for Buyer and Seller in same transaction.

Old. For Buyers no documentaion at all apart from a Sale & Purchase Agreement.
New. NZ Residential Property S & P Agreements Guide must be given to the Buyer and signed for before any S & P Agreement drawn up. If already received then sign to say so.

Old. No requirement for Agent to advise Seller or Buyer to seek legal advice before signing S & P Agreement.
New. Now a requirement to advise although both Seller and Buyer may decline.

Old. Commission paid after 10 days from unconditional contract or earlier if early release document signed.
New. Now 10 working days.

Sorry this has taken a while to read, theres a lot in the new regulation and it goes a long way to addressing issues. Complaints procedures are now clearly defined and a Seller MUST disclose known faults with the property. However it is still vital that as a Buyer you check everything yourself and not rely on the Seller or Agent. Many Banks are now insisting on Registered Valuations, Building Inspections and Watertightness Reports….maybe as a Buyer you need to as well.

Jeff Royle. The Mortgage Lender 0508 477324

image by listenmissy

I have read through all of Chris’s postings on PropertyTalk.com and have extracted what I think are his helpful hints and listed them here.

1. Taking people in the know who have DONE it out for a lunch/coffee will frequently be the one of the best investments you can make.
2. Dream VERY BIG, start small, break it into small steps and try and SYSTEMITIZE the whole thing so that it can grow itself.
3. I learnt a BUNCH about the power of leverage on other people’s time, other peoples skill sets, and other peoples networks.
4. I have NEVER paid retail or anywhere near it for any property
5. I only buy a property that will boost my debt servicing ability.
6. The ability to take responsibility for your circumstances is very very powerful and also very enlightening.
7. Buying well below market and taking care of debt servicing (I bought for cashflow and always aimed to boost my borrowing power with each purchase) and maintaining healthy LVR’s.
8. As part of my goal setting process I have PLANNED benchmarks where I am to stop and smell the roses, reassess, and decide if I am still doing what I want to be doing, for the right reasons.
9. Gradually picked out the agents who were willing to work to my format.
10. a) Especially if I was a beginner, I would pick one market and get to know it very well, this gives you a performance advantage over 95% of the other buyers out there.
    b) While you can buy well in any market if markets are hot where I am and I was a beginner I would move to where the going was comparatively easy, yes MOVE – or at least commute. This will make life a lot easier, there is no need to fight the herd.
    c) I would go looking for agents and build my BRAND with the agents. For me it was I WILL SETTLE ON EVERYTHING THAT MEETS MY CRITERIA (this is great for agents) and especially now I CAN BUY HOUSES FOR CASH – IN THREE DAYS
    d) Make written offers. Look at houses (either before or AFTER your offer, depending on you, but if you look at a house, MAKE AN OFFER). Repeat.
11. Banks look at when lending:
    YOU, your history, your situation, their exposure to you, etc
    LOAN TO VALUE RATIOS, both on the loan you are applying for and your entire position
    DEBT SERVICING, your total existing income plus the expected income from the purchase. Most banks will look at around 75% of a residential property’s gross income as being available for debt servicing. There are many interesting formulas that the different banks use but this is a general guide.
12. If you want a large portfolio make sure every property you buy to keep IMPROVES your debt servicing ability. Keep your LVR at 80% or lower where ever possible and move to different lenders early. Some lenders are much more conservative re your overall position than others. So if you want to be HUGE a good idea is to borrow from the conservative ones early while you can and move slowly towards to more aggressive lenders as you progress. Talk to a good mortgage broker and arrange financing before you NEED it.
13. My criteria…Any house, any condtion, any area……………my price
14. YOU MAKE YOUR MONEY WHEN YOU BUY
15. We know the market we play in very well
16. Motivated vendors, ability to add value, ugly houses or houses a long time on the market.
17. The address of each property that had the potential to cashflow the way I wanted it (for me it was 3 bedrooom plus with garage on full site in a certain price BAND)
    What it was (eg 4 bedroom plus sleepout on subdividable section)
    Why the vendor was selling. (ask this verbally as you go over the houses with the agent)
    The list price
    What the agent THINKS you could own it for
    What the property would be worth and/or would/could value to
    Work to be done (general deferred maintenance and/or anywhere the agent thought value could be added)
    What it would be worth DONE up and or would/could value to
    What it would rent for (either as is or done up.)
18. It is also imerative that you have the ability to make decisions QUICKLY.
19. Be psychologically prepared to fail often and frequently and work on your sales and people skills (or do it in the process) and see how you go.
20. In any instance where the tenant has the right to buy or settle the property I use a P and I approach to ensure I am always reducing my debt in line with their slowly reducing purchase price.
21. 1) Either leave it interest only if I want to draw maximum cash for utilization other places AND/OR I am worried that I may not be able to refinance the property later (I subscribe to the belief that you should always try to have loans sorted before you need them)
    2) Convert it to principal and interest and forget about it (when you get bigger most banks like to have a bunch of your loans being paid down anyway as it makes them feel all warm and fuzzy. Also I have found that being able to forget about things works well for me)
    3) In any given entity, set up one or more of the loans as a revolving credit facility and park the spare cash there. Keep the other loans interest only. If/when you pay down one of the loans, leave the facility there and convert another one of the loans in that entity to revolving credit and continue until you need to redraw the funds or have paid down the lot and are left with a bunch of revolving credit facilities all waiting for action.
    Option 3 is what I would normally recommend to most people with a small to medium sized “standard” buy and hold portfolio
22. I am a fan of both and believe that as long as you know and understand what your money is doing and why and that matches what you plan to have it doing, then there is no real right or wrong.
23. Disclosure and relationship building are very important and to this end I am happy to pay a higher interest rate and more fees and get my trading loans from elsewhere other than the main banks.
24. if someone offers me REALLY good money for a property – I will sell it.
25. if its costing you money and you can’t find a way to get out of it, cut your losses and move on.
26. I will buy any type of house that’s under valued, tidy it up as required and flick it. I have done this in a range from a $35,000 property in Invercargill to a $700,000 property in Auckland and will happily go higher or lower if the deal stacks up.
27. Just keep the trades and the buy and holds in completely seperate entities.
28. over time you would have your own house and bach completely compartmentalized from the others and seperated by both entity AND ideally by LENDER.
29. What I would do starting again is:
    ONE trust set up properly for buy and hold
    ONE trust set up properly for trading properties
    ONE trust set up properly for wealth retention (family house, batch, tons of cash and your favourite classic ferrari).
30. I won’t buy a house as a keeper unless it delivers me sufficient velocity on both my borrowings and capital. This means that I must buy it well under market and be able to refinance all my original capital out (without relying on capital gains) AND it must deliver a return on my end borrowings sufficient to not only BOOST my net borrowing power with lenders (on a debt servicing basis) but also deliver to me a REAL positive cashflow return before tax, proportional to the amount borrowed.
31. 1) I invest in real estate for PROFIT. CASH, CASHFLOW, and EQUITY. I want you to show me the money and I don’t care if there isn’t a single L for LOSS in there. I’m not interested in a system that is based on LOSSES and NOT DOING VERY WELL.
    2) I do not want to HOLD, CREATE or GROW wealth in my own name. That is the number one point.
32. Accept the reality that if you ever want to be reasonably rich, you should try and do what rich entrepreneurs and investors DO. Think of the BIGGER picture. I want a set up that will let me play between my entities, as that is where the real money is always going to be and it is actually where I WANT it to be.
33. set yourself up in a structure that can accommodate the scenario where the bulk of your taxable revenue actually comes in from a different source other than your direct efforts (ie job).
34. In my opinion, and I am not alone, if the above don’t apply to you and you want to be rich faster than you want to be average, dump the LAQC.
35. Set up a buy and hold trust and start moving your equity across sooner rather than later.
36. If you wish to stay in control of your destiny and ramp up your wealth creation (as it relates to growth of an internally funded PI portfolio), NEVER buy a property for retail or you will have to join the rest of the masses and BUY, HOLD and PRAY the values go up. Great cashflow, but the velocity on capital in REI comes from MAKING MONEY WHEN YOU BUY. Period.
37. Trustees: I prefer trusts with a corporate trustee (instead of individuals). This gives a bunch of advantages and to put it bluntly, if your accountant looks at you with a blank face when you suggest it to him, move on.
    Trust deed: The trust deed be flexible, give you all the powers and might need and should be up to date. By this last one I mean that deed should be reviewed and updated at least yearly by a legal professional (typically a specialist barrister) who is current with trust case law.
    Beneficiaries: This will vary depending on your circumstances and whether or not you are also going to set up a trading trust (or be tainted in your own name).
    I get the deeds reviewed by both my lawyer and a specialist barrister.
38. Assuming you have solid borrowing power nothing will give you greater direct velociy on your deposits than buying WELL below value and being able to refinance all of it (or more) out sooner rather than later.
39. Make sure you are set up right structurally so the wealth is growing where its hard for people to touch it. And don’t forget to check out your own back yard over there for various investment options, not necessarily just REI either, when looking for velocity on your capital.
40. Money follows management – the better you are at what you do, the more specialised your skill set/resources and the better the track record, the less you will have to give away to do the deal. The more predictable and sustainable the investment, the lower the required return.
    Put yourself on the other side of the table – if it seems fair and you (or nearly anyone) would do it if your circumstances were reversed then it is probably a fair deal.
    But before you do any of these, find out what they want (so you can go and get it, and give it to them – part of KJC’s three steps to being a billionaire).
41. Joint Ventures (JV)
    For buy and hold, to do the deal try any or a mix of: a fee for finding and securing a GOOD deal, an ongoing management fee (this can be on the high side), a percentage share of any value increase above the purchase price (this should be on the very low side unless YOU are creating any added value)
    For trading: look at a finders fee again, plus project management fee and split of the profits. OR, just a straight profit split, OR giving the financier a preferred return followed by a split of the profits OR and as the trader, this is my preference, give them a fixed GUARANTEED return (your nuts are on the line if you don’t perform) and no profit split. If all goes to plan, this last one is the cheapest cost of capital for the trader and the most secure (and therefore probably lowest) return for the investor.
42. First rule, and it always is – Find out what they want.
43. Work on YOU first and foremost, but move to an easier market to get the most bang for your buck.
44. Clarity = Power.
45. When asking for their perception of market rent, make sure you word all questions along the lines of “What could YOU get this to rent for?” leave the responsibility in their court with the underlying hint that if you buy it, you would expect them to deliver just that. This normally results a more honest answer.
46. I personally would use a property manager when buying from afar anyway, so in reality this would merely be a part of the interview process anyway. If I was intending to buy and hold going into the new area then I would be at least as interested in the local demand for rental accomodation as I would be for the market rent on the property. You never know mate, if there is more demand for rental property than there is for rental accomodation then you might decide it would be more fun to TRADE in that market.
47. For determining the rent and rent market in a new area my other preferred option is phoning “for rent” adds, finding out how much they want for the rent, (and who is doing the renting, manager vs landlord), the conditiion of the house and of course, how long they have been trying to rent it and how many calls they are getting.
48. For the record if you are going pro (full-time, even for just a few weeks) then I would expect between 5 to 10 written offers to be the minimum average per “working” day. At the very least, ONE for EVERY house you physically look at. Even if you don’t buy a house, you will learn a bunch and be well on your way with at least a couple of agents. (You will almost definitely buy a house.)

Without the property investor having to daily ‘be there, at work,’ (at the building), passive income is money coming in, day-in and day-out. It’s called rent payment.

For a share market investor, passive income is also money coming in, day-in and day-out, without the share market investor having to ‘be there,’ at work. It’s called a dividend payment. There are major benefits to property ownership/investment:

• Ownership of a tangible asset, real estate – a property with a building on it;
• Most people can tell by inspection whether or not a property and building looks well built, well maintained and durable;
• The idea is easy to grasp. Buy a building – get a tenant, collect the rent;
• Generally, getting in or out of property investment is straight forward and usually without any financial losses;
• Because it’s an easy idea to grasp, most modest-sized property investors ‘manage’ their own rentals;
• Financial Institutions are usually keener to lend money on property than other forms of investment;
• Tax deductions are more readily available on property than on other forms of investment;
• While providing immediate rental income and tax deductions, real estate usually appreciates (goes up) in value.

Of course, those are a few simple points. There are also repairs and maintenance, mortgage payments, rates bills, insurance costs and so on, to consider.

Nothing is certain. Tenants may fail to pay the rent. Share markets may collapse. Buildings can be damaged. Individuals companies can have their share price shrink unexpectedly. The back-and-forth of the pros and cons of each, as passive income generators, goes on, endlessly.

The Location

• What is the zoning? Is it residential?
• Does the area have the amenities you need – shops, schools, transport, etc?
• Is the electricity, sewer connected?
• Are there any major developments going on in the area in the future – proposed motorway, shops, electricity corridor etc?

Land

• Is it free from filling, excess seepage of water, steep grading, dense trees, loose boulders, etc? If you are considering extensions, an engineer’s report may be necessary to access the land.
• Is it free from landslips or is it within a geothermal zoning area? Check with your local council and if necessary obtain a geo-technical engineer’s report.
• Check the lawns for puddles as these can indicate poor drainage.

Building

• Is the paintwork in good condition?
• Are the internal and external walls free from cracks & level?
• Are the roofing, guttering and down pipes in good condition?
• Is the building free from damp? Signs of damp, especially rising damp, are usually found around window sills, chimney-breasts, in ceilings and under floor coverings. Heavy condensation on windows can sometimes be a sign.
• Is the floor level and in sound condition? Using a marble is a good test for level floors. (An unlevel floor can indicate the need for foundation repair)
• Is the plaster in good condition?
• What sort of insulation do the walls and ceilings have?
• Does the house have good ventilation and natural lighting? Overgrown trees can cause dark and damp living areas.
• Turn on all the taps and check for water pressure, and that water drains away quickly.
• Turn on the lights to see if they are working. If they are not working, it may be just replacing the bulb or a more serious electrical problem.
• Check electrical wiring for condition. Many older properties were built with wiring which since install may show signs of degradation. Often power meter boards will be moved at time of repair. Always check with an electrician.
• Check number of power points and if they are suitably located.
• Establish exactly what is included in the price of the house – carpets, drapes, appliances, light fittings, etc.?
• Check that any appliances included are working: stove, air conditioning, heaters, and bathroom fans. If it has a fireplace, ask when it last had the chimney swept? If made of concrete does it show signs of cracking or does it have an internal chimney?
• Does the house have good storage?
• Will the house be expensive to maintain?
• Are doorways and passageways wide enough to move furniture through?
• EQC. Earthquake commission. Many types of council have requirements with regards to earthquake compliance. Factors to consider with earthquake compliance can be things such as multi level, age of building and construction type. Always check with your local council.
• What are the internal and exterior walls made of? Internal walls covered with scrim can be difficult to insure and be a hazard. Whilst exterior walls made of poorly constructed materials can leak or degrade quickly.
• Does the property require a warrant of fitness, fire sprinklers or council compliance certificates? Multi unit dwellings and boarding houses often require these types of regular safety checks and certification.

Bedrooms

• Will the bedrooms be affected by light and noise – are they close to a street, to street lamps, stadiums, airports, etc.?
• Are the bedrooms located so they are reasonably free from living area noise? This is often important in flatting situations.
• Is there sufficient ventilation?
• Is there a wardrobe or storage space? Will bedroom furniture fit? Does the passageway and stair cases allow ample room to move furniture into and out of rooms.?

Bathroom and toilet

• Is there sufficient ventilation?
• Is there an extractor fan to remove steam?
• Is the shower recess or bathtub free from leaks and sealed soundly?
• Is there a power point?
• Are there towel rails, cupboards, mirror?
• Is the toilet in good condition and does it flush properly?
• Is the floor and lower levels of vanity units in good condition?

Kitchen

• Are there sufficient cupboards for storage, and adequate bench space for preparing and serving food?
• Do the cupboards open and shut properly and is there room to add more?
• What is the condition of the stove? Is there an exhaust fan? Try the elements to see if they work.
• Will a regular-size refrigerator, dishwasher and/or microwave fit?
• Is there sufficient lighting and ventilation?

Dining and Living Rooms

• Will the furniture fit?
• Is there room for an extended dining room table?
• Are there sufficient power points & internet outlets?
• Is there heating? What type – gas, electric – and is it expensive to run?
• Does it have a TV aerial & satellite antenna?

Laundry

• Does it have a laundry tub?
• Is the hot water connected?
• Could a standard washing machine be installed without any problems?
• Is there room for a dryer?
• Does it have any cupboards or storage?
• Is there a floor waste (drain) or is the floor sufficiently graded so any overflow of waste can escape without causing damage?

Outside area

• Are the paths and fences in good condition?
• Is there a garage or carport? If not, can one be put on?
• How much maintenance does the garden require? Tenants don’t tend to be good gardeners.
• Are the lawns easy to mow?
• Is there a place to store lawn mowers, bikes etc?
• Can the grounds be improved? Landscaping can be a cost effective way to add value. E.g. creating an outdoor entertaining area or deck.
• Is there a pool? If so, does it comply with safety standard regulations?
• Is there plenty of off street parking? Is there space to lay pavers to park on?
• Have you checked the boundaries and fences are located on the legal boundary?

For someone on wages, when a customer leaves without buying anything because of the staff’s manner, or a lack of suitable product, there’s no immediate consequence to the staff pay packets.

But for a property investor, having a prospective tenant decline to rent the property because of the property investor’s manner, or because two windows are broken, there is an immediate consequence: no rental income, while the mortgage chews on.

Attention to detail is important. The pertinent laws often require many documents with precise items and language in them, especially with residential properties. NZ tenancy law is weighted in favour of tenants. Some speculate the reason is that property investors are in business, so have a greater responsibility than tenants.

Recording everything is important: expenses for repairs and maintenance items, rent received and in what form (directly into a credit union or bank account, or cash/cheque), receipts for cash payments, matters to do with bonds (if changed) and so on.

Computers with appropriate software and an Internet connection can make these tasks easier. Daily access to the credit union or bank account to check rent payments have been received is a modern technology boon for property investors.

Like many businesses, most everything can be done on a DIY (Do It Yourself) basis, perhaps more so when only one or two properties are involved. DIY covers everything from purchasing the property, obtaining a tenant, doing repairs and maintenance, to filing a tax return.

When or if the number of properties increase to the point where a DIY approach is not manageable, there’s plenty of people and companies around that will help with different aspects. A Property Manager is the most common, in such things.

However, there’s no need for an all-or-nothing arrangement. E.g. DIY everything except for using an accountant for the tax returns and a lawyer to prepare and execute the tenancy/lease agreements.

While there are Property Managers available to look after the routine aspects of tenants and property maintenance, utilising one does not free a property investor from all aspects of their business. Oversight of the property manager is important.

Liaising with a property manager does not mean interfering. It means being kept informed – both ways. A property investor should have a contract for service with the property manager and both should be sure of its contents and the obligations such a contract imposes on both parties. Being kept informed is of critical importance.

There is probably nothing quite so startling as a letter from the bank saying that no mortgage payments have been received for the last five weeks. Then the property investor realises that no rent payments have been going into the account (to cover the mortgage payments) and hurried calls are made to the property manager to find out what’s going on. “No surprises” is a good motto.

All businesses have their rewards and trials and property investment is no different. If ‘being in business’ is a scary thought, proceed with caution and lots of good advice from experienced people.