David Whitburn

Archive for the ‘Property Development’ Category

My book - in all leading bookstores this week

My book writing journey

I am delighted that my book Invest and Prosper With Property has been released into bookstores. I started writing the manuscript for this book in January 2010 with the purpose of answering my friends and family members questions on how to invest in property successfully.  I wanted to do a good job, so I decided to give a broad coverage of all property investment topics. After several hundred hours of work had been invested I decided I would like to have it published so I didn’t just sell a few hundred copies or have to give them away. I made the decision to seek out the services of a professional publisher. My friend Amy Hamilton-Chadwick was a professional editor and she edited the manuscript and gave me excellent feedback to make it more readable.  Then it was time to brief out my manuscript to publishers and having been told by so many people about how hard it is to get a big name publisher behind you I was expecting it to go the way of most of my offers on properties – rejected.  This was a most pleasant surprise to me and full credit to Jan Riley of Random House who introduced me to the publishing team.

I was most impressed with the professionalism of Random House from the outset, with their large Auckland presence, an enviable list of best-selling books, and their reputation as one of the very best non-fiction publishers (as well as fiction publishers) in New Zealand, and worldwide.  So I choose them and Random House have been excellent in distributing my work through bookstores nationwide.

Topics covered in my book

There are number of topics covered in my book as it is designed to function as manual for those wanting to invest in property or for those who already invest in property and wish to keep their knowledge up.

Chapter Line-up

1. Why should I invest?
2. Why should I invest in property?
3. What do I need to know to get started?
4. Could I really become seriously rich?
5. Should I buy commercial or residential property?
6. What do I need to know to be a great investor?
7. What kind of goals should I set for my success?
8. What investment strategy is best for me?
9. How to get a great deal
10. How to find great properties
11. How do I check out a property?
12. How do I structure my property ownership?
13. What do I do about paying tax or getting tax rebates?
14. How can I find the money to invest in property?
15. What is a revolving credit or offset account?
16. Fixed vs Floating interest rates
17. How can I save money on my mortgage?
18. What type of loan is right for me?
19. How to structure your loan
20. What do I need to know about accounting and taxation?
21. Depreciation: making it as simple as possible
22. Renovate, redecorate and revalue
23. What do I need to know about valuations?
24. Keeping your investment safe
25. Managing your property
26. How to minimise the risks
27. Don’t derail your own success
28. How to prepare an offer
29. Due diligence
30. Education
31. Useful websites
32. Glossary
33. Index

Sunday Star Times Book Review

Leading financial journalist Greg Ninness of the Sunday Star Times reviewed Invest and Prosper With Property in today’s business section:

OF ALL the useful advice contained in David Whitburn’s book Invest and Prosper With Property, one particular paragraph stands out.  It is a section of the second chapter which asks if property investing will be hard work. ‘The short answer is yes’ the book says…

Whitburn now works as a property mentor and is the president of the Auckland Property Investors Association.  The book draws on his experience, and of others he has seen succeed or fail, to provide a guide that should help investors avoid many common pitfalls and structure their activities in a way that will help them succeed.”

Where do I buy Invest and Prosper With Property?

Now this is available in all good bookstores nationwide with official release date being Friday 7 October 2011, but some bookstores have it already.  This is also sold by a few international online bookstores including a couple of physical bookstores in Australia too. Very shortly the book will be for sale on www.investandprosper.co.nz.

I think it will be an excellent investment for anyone wanting to improve their knowledge on property investment at $37.99, so firmly recommend that you buy it.  I also hope that you enjoy reading it as much as I enjoyed writing Invest and Prosper With Property.

David Whitburn – 2 October 2011

I have had a few questions lately about the difference between LIMs (Land Information Memorandum) and PIMs (Project Information Memorandum). There is no point in re-inventing the wheel, so take a look at this website for a great table that state what they are: http://www.consumerbuild.org.nz/publish/legal/legal-other-pimspims.php

PIMs

These are specific to a certain proposed construction building, pursuant to the Building Act 2004.  A Project Information Memorandum is a request for the council to provide information on a proposed construction project that may have an impact on the proposal, eg. drainage location and geo-technical information.  You can apply for a building consent without applying for a PIM in certain circumstances, and then your consent is treated as if you were applying for a PIM as well.  Otherwise you can apply for a PIM at the preliminary design stage of the project.

LIMs

A Land Information Memorandum is a comprehensive report containing all relevant information that a council or territorial authority knows about a property or section.  They can’t tell you what they don’t know about, so if you see a double garage on the property and nothing in the LIM about this, you may well have an issue to talk to your lawyer or conveyancer about!  Councils will charge a fee and take up to 10 workings days to send you this information – e.g. a LIM report from Wellington City Council (within 10 working days) currently costs $306.50 including GST for a residential property, and $715.50 including GST for a commercial property.

Some clients have emailed or texted me with positive feedback on my interview with Alastair Wilkinson for the 6pm TV3 News today on the Home Energy Rating Scheme as proposed by the NZ Green Building Council. This scheme seeks to rate houses out of 10, and it is hoped Vendors will get a rating to advertise their listing to prospective purchasers who can make an informed decision.

It is a voluntary scheme which had a big launch today. I don’t think this scheme will get massive traction as most houses will get a fail rating of 4 or below.  This is because most houses are not new and built to the latest performance standards with ideal sun orientation, double glazing, and the highest ratings of underfloor, wall or ceiling insulation.  So only the very newest homes with a big budget to spend to get the highest 9 or 10 ratings are likely to use this voluntary scheme.

I am worried that this may make a move towards compulsion of this Scheme a reality.  The Green party would like this to happen.  I don’t see the point of creating this industry.  What is the harm in asking for an invoice to prove the level of insulation installed and the date of this.  On some hosues you just know they will be cold in winter.  For example they are clad with concrete block or tilt slab concrete walls, they face south or west, or have no underfloor or ceiling insulation.  You can easily inspect underfloor insulation on most older houses as you can peak under the house. Remember to take a torch along to each property inspection you do as part of your due-diligence. There is nothing stopping you taking a ladder and peering into the manhole space at the ceiling insulation – otherwise you can get someone to do this for you.  I have a couple of builders on tap that I pay a box of beer to do such inspections for me.

I will watch whether the home energy rating scheme takes off – I doubt it will for at least 5 years.

On a stunning summer’s day yesterday at the well appointed Exhibition Hall in Waipuna Conference Centre, overlooking the Panmure lagoon, I was the keynote presenter at Property Masterclass run by NZ Wealth Mentor.

David Leon - Property Masterclass Master of Ceremonies on 27 November 2010

I covered a lot of topics as the keynote presenter, and those attending particularly enjoyed my take on the market, drawing attention to where we are at in this current stage of the property cycle and my predictions for the future in terms of the various Auckland sub-markets.  I gave a thorough analysis of all of the key market drivers, showing and interpreting graphs from the economics and research of the major trading banks, Reserve Bank of New Zealand, Statistics New Zealand, Quotable Value and the Real Estate Institute.

In another segment on stage I talked about how we as investors are running a property business and the fact that we have to wear a number of hats.  One of the leading property educators in the United Kingdom Gill Fielding talked about the importance of being skilled in a number of different disciplines wear you have a number of buckets to control or hats to wear.  I love this analogy so I talked about the various hats we have to wear as property investors in terms of the CEO hat – managing everything in our business; CFO hat checking our bank statements, keeping accounts, monitoring the financial performance of our portfolio, paying taxes, Renovations/Maintenance hat – looking at how we maintain our very valuable assets and renovating to increase our cashflow and equity; Legal hat – when doing due diligence on properties, looking at legislation changes and ownership structures; and Property Management hat on – where you have to manage your tenants or your property manager, to ensure you minimise vacancies, charge market rent and collect your rent and take the appropriate action when tenants are not behaving,  I also covered ownership structures, including the key changes in light of LAQCs losing their potency in that they lose the ability to offset losses against personally earned income.  The new tax structure the Look Through Company (“LTC”) was introduced too, with Chartered Accountant and my colleague from Deloitte Tax many years ago Amanda Macdonald (Tasman Tax and Accounting Services based in Albany) also presented on this topic being the tax and accounting expert she is.

Finally I gave covered my opinions on US tax deeds and liens that have been promoted in New Zealand heavily over the past couple of years, and I covered the good, the bad and the ugly things about lease options, giving an example of the massive win-win situation created in my last lease option deal that resulted in my tenant buyers settling the property and giving me a giant hug as they achieved their dream of being home owners in New Zealand, as well as the sheer joy of meeting their goal.  I also enjoyed presenting on the strategies I am using in today’s market and covered my revamped and intense mentoring programme where I take my mentoring clients out to do deals with me.  I have some new clients from this event and am looking forward to training them shortly.

Other speakers

Senior Resource Management lawyer Andrew Braggins talked about the spatial plan for Auckland the Supercity, which highlit the growth areas in the Auckland region, major infrastructure and planning thoughts from the head planner and CEO at Auckland Council, who are in Andrew’s network.  This presentation was enjoyed by attendees who were impressed with Andrew’s knowledge and communication skills, as he enlightened them about the hot spots in Auckland.

Andrew also briefly covered how to dispute council fees, levies and contributions both under the Building Act (including seeking a determination from the Department of Building & Housing) and also the Resource Management Act (including a judical review application he recently did on a property he rents out).

Jan Galloway then gave a masterclass in property management, including listing out the issues in relation to the Residential Tenancies Amendment Act with the fines for unlawful acts by Landlords and Tenants all covered – luckily these were included in the comprehensive bound manual we gave our event attendees.

Renovations expert Mark Trafford told attendees about a number of ways not to do renovations in a photo driven presentation.

Gary Hey, a director and shareholder of large mortgage broking firm, Mortgage People, then address the property cycle from a finance perspective.  He talked about how lenders’ criteria are changing and it is much easier to get finance for property now (compared to say 6 months, 1 and 2 years ago).

On Saturday the 27th of November 2010 I will be the keynote presenter at NZ Property Masterclass – a full day seminar at Waipuna Hotel & Conference Centre in Mt Wellington, Auckland (near Sylvia Park on the edge of the Panmure Basin), with standard tickets at just $29, and gold tickets at $98.

Improve your financial knowledge, get updated on the current market and learn what strategies I am using for wealth creation for the remainder of this year and in 2011.

My topics covered

Come hear me present live at NZ Property Masterclass event, where I will be talking about:

• Loss Attributing Qualifying Companies (“LAQCs”) being abolished and introducing the new tax structure, the Look Through Company (“LTC”)
• a Market Update with my opinions on where the market is heading for 2011 backed up by graphs and facts
• the untold truth about US Tax Deeds and Liens to follow up from my popular blog in March
• the good, the bad and the ugly with Lease Options, and a number of lease option promoters
• how you can create wealth in 2011, using the strategies I am successfully using on NZ properties in the current market.

Also included in the low $29 ticket price is access to 5 other fantastic speakers.

Your other speakers

Speaker #2:  ANDREW BRAGGINS  LL.B, BSc - Buddle Findlay

1. Local government, environment & resource management, litigation and dispute resolution expert
2. Andrew advises a range of clients, including developers, network utility operators, local authorities and financiers
3. Andrew has an in-depth insight into how local authorities work, having spent 3 years as a local government in-house council, and acting for many councils
4. Member of the Resource Management Law Association & Water NZ
5. Barrister & Solicitor of the High Court of New Zealand

Learn all you need to know about how to deal with councils, the structure of the new Supercity and the Supercity’s impact on you as a property investor.

Speaker #3: JAN GALLOWAY  BA Cert. Crim (Criminology) - Corinthian Management

1. Principal Corinthian Property Management
2. Over 25 years as a property manager
3. Multi-millionaire property investor
4. Managed a leading central auckland property management division
5. Auckland Property Investors Association Board Secretary
6. Multiple award winner (property management related)

Jan knows all you ever needed to know about tenancies and the issues that arise from them.

Speaker #4: MARK TRAFFORD - Owner of Renovate to Profit

1. Principal of Renovate to Profit and Maintain to Profit
2. Renovating properties for over 20 years!
3. Accomplished Property Investor
4. Regular Contributor to Property Investor Magazine
5. Sought after speaker

Mark is an excellent property investors knows everything there is to know about renovating properties having done many dozens of properties.  He is an excellent project manager with unparalleled networks of quality tradespeople.  Join us and learn more about creating wealth through smart renovations!

Speaker #5: GARY HEY BCom - Mortgage People

1. Owner and Director of Mortgage People, a leading Auckland based mortgage broking firm
2. Bachelor of Commerce, member of the NZ Mortgage Brokers’ Association
3. Commercial, Industrial and Residential developments advisor as well as residential investment properties financing expert
4. Sought after speaker having a background in education

The banks and other major lenders criteria are changing and it is easier to get finance for property now.  Gary loves finding funding for your deals.  Bring on your best questions forward and he and his team will be there to assist you.

Overview of key topics covered during the day

1. The current market cycle – using current & historic data to identify our current position & determine where, when & how to purchase your next property deal
2. LAQCs & LTCs & what it means to your investment portfolio
3. Practical strategies to increase your rent easily in the current market
4. Hot strategies for 2011 – the strategies NZ Wealth Mentor’s principals and mentoring are using to make money from NZ property today, and how you can meet your financial goals in 2011
5. Understanding the new paradigm for obtaining finance – How to get banks to lend you $$
6. Where are the best strategies to use in 2011?
7. The untold truth about US Tax Liens & Lease Options – what you must know before you ever think of investing on them.

We will discuss all the current hot topics so that you can leave the event well informed and ready to invest successfully.

2 Ticket Options

There are standard tickets priced at just $29 which don’t include lunch or any extra.  The Gold Tickets however are priced at $98 and these include a delicious buffet lunch in a private room with David Whitburn and many of your presenters.  You also get a portfolio review and wealth plan by NZ Wealth Mentor’s head of property mentoring and Auckland Property Investors’ Association President, David Whitburn, to help you set and reach your financial dreams.

So are you going for GOLD???

In NZ Wealth Mentor we want to make sure you get all your financial goals. If you book online before November 20th we will also include our “Financial Mastery Success Plan” in the ticket price. Financial Mastery Success Plan is designed to look at your financial situation today to build a brighter future. It retails at $175 and you will get it for free as a part of this time constrained offer (3 days to go). Make sure you don’t miss out and book your gold seat (select from the menu) for NZ Property Masterclass today.

New Zealand’s Building and Construction Minister Maurice Williamson, this afternoon announced that the Government will introduce amendments to the Building Act 2004 that will help cut red-tape and bureaucracy and make builders more accountable.

The planned changes to the Act will be phased in over time.  Some of the incentives to build it right first time to be introduced to Parliament this year include:

• explicitly stating that builders and designers are accountable for meeting Building Code requirements;
• mandatory written contracts for building work above $20,000 that set out expectations, warranties and remedies, and how any disputes will be resolved;
• requiring those doing the work to explain what, if any, financial back-up or insurance they have to remedy any faults.

The planned amendments will also see some minor, low-risk work, exempted from the need for a building consent.  Examples of such exempted work will include:

• Replacement or alteration of internal wall and floor linings and finishes in a dwelling.
• Adding lightweight stalls (eg, used at fairs and exhibitions) to the current exemption for tents and marquees.
• Fabric shade sails and associated structural supports that do not exceed 50 square metres in area (with limitations on matters such as the level on which the sails are installed and distance from a legal boundary).
• Installation, replacement or alteration of thermal insulation in existing buildings (excluding exterior walls and fire walls). This clarifies that retrofitting ceiling and underfloor insulation will not need a consent.
• Penetrations with a maximum diameter of 300mm (including associated weatherproofing, fireproofing and any other finishings) to enable the passage of pipes, cables, ducts, wires, hoses and the like through any existing building. This clarifies that for example a heat pump can be installed without needing a consent, although the wiring must be done by a registered electrician.
• Signs and associated structural supports where the sign is no more than 3 metres high and the face area of the sign does not exceed 6 square metres.
• Height restriction gantries (e.g. a vehicle height warning in a car park).
• Private playground equipment used in association with a single household where no part of the equipment extends more than 3 metres above the ground.

Mr Williamson says the Government can only make changes to the building consent process to reduce costs once it has confidence in the quality of what is being built.

The Government is proposing to introduce a ‘stepped’ approach to building consents and inspections after mid-2012 once the other improvements are in place to drive quality, including the licensing of building practitioners.

You can read the Minister’s media release and find out more on the Department of Building and Housing’s website at: www.dbh.govt.nz/buildingactreview

Leaky Buildings are an extremely topical issue at present.  There are so many home owners and investors in New Zealand that have leaky buildings, and the costs to repair can be astronomical.  Leaky building issues cause a lot of stress and there a lot of uncertainty around the issues.  As a result I couldn’t think of anyone better to answer these questions than the Managing Director of Step Up Group, Ian Holyoake.  The Step Up Group have been around a long time and have excelled nationwide in providing leaky building owners, body corporates and other interested parties with state of the art technologies, in Building Weathertightness Risk Managment, Building Inspection & Monitoring, Property Planning, Remediation and Dispute Resolution.

In light of the Leaky Homes Compensation Plan announced by the Government, and my comments in leading global newspaper, the Telegraph, I wanted to get some clarity on more of the issues surrounding leaky homes.  As a result we have the following guest blog from Ian Holyoake, answering two questions:

1. How to do the right due-diligence to prevent buying a leaky building?
2. How to fix a leaky building?

How to do the right due diligence to prevent buying a leaky building?

Let the seller provide you with what could be termed ‘proof of product’ – remember the Russell Crowe & Meg Ryan movie Proof of Life – if a seller is serious they should table openly the state of the building – why should you pay to have there building tested. What you should ask for and in this order is:

• What treatment does the framing have? Poorly treated timber is what is rots from leak events. Therefore a robust building is one with high durability protection. Regrettably treatment levels have been reducing since the late 1970’s so its hard to find well treated timber outside our old State Homes. So settle for H3 (tanalised) or highly treated boron. I have underlined ‘highly’ as this is referenced to levels like the current standard H1.2 which equate to boron concentrations of 0.4% BAE which are useful to slow down rot for around 5 years only – so if the building is more than 5 years old more information is needed. I require at least 4 samples for testing from each elevation and each floor level including studs, base plates and lintels as timber is often mix and match – timber supplies are not consistent with deliveries. Get the owner to supply these test results and if they don’t have them organize for them to be done at the owner’s expense – why should you pay for testing there home?
• Is the wood decayed? Unfortunately every building leaks so those constructed with perishable wood will already have some decay in them. The secret is finding where the damage is and then determining whether the decay warrants major cost to reconstruct. It’s not illegal to have decayed framing – but if it could collapse and cause harm then council has a duty to issue a safe and sanitary to protect the occupants. The rule is its stupid to get yourself into this situation so ask for sampling results. Samples of framing can be examined (without destruction) taken from Mdu PROBE installations under every ‘at risk location’. The at risk locations are the same places water would accumulate if the building leaked – and buildings leak where complicated details are eg decks, flashings, roof and wall connections, penetrations through claddings, internal gutters, hidden gutters, high ground lines, cracks etc so obviously the more complex the more sampling is required. An average building requires around 80 samples, so more some less. The samples should be fresh ie taken within the last year otherwise more damage could have arisen. Never never let so called experts cut or drill the cladding. If they insist get the insurer to cover the building with a leak indemnity content before they start so if it leaks in the future you are covered. After all its holes in the cladding that cause leaks. Councils often require full reclads after these holes are made. Another useful test is strength testing to establish if the framing wood is suitable for the home. One major wood supplier has been found guilty of supplying under strength timber to homes. This can result in early decay (extra sugar for fungi as wood is sapwood) and extensive cracking of claddings and sealants leading to unexpected leaks.
• Monitoring of moisture over time: Never be fooled by point in time moisture checks. No single moisture reading event is reliable – and certainly not if you are to spend your money. What we discover is summer investigations find less than 10% of winter leaks – its obvious – why would it leak in summer when its not raining. Unless the target is too good to be true (which it probably is) it’s a sucker’s deal to buy on thermal or scan results or point in time assessments. Always ask for the past 2-3 years of monitoring results – including summer and winter. It’s normally the variances that are of interest. Think of this as if you were buying a car – would you pay money if it had no dash board full of gauges. If the owner has chosen not to install monitoring it is for a very good reason – they have their head in the sand – you don’t. The simplest way to monitor is to read the permanent Mdu PROBES twice yearly. Owners who look after their buildings value will be installing monitoring – so they are available.
• Maintenance plan: This is basic sense. What you want is evidence they have conducted maintenance. This starts with a maintenance plan. If they don’t have one then the chances are they haven’t a clue on what there responsibilities are to look after the home – ie is it treated, does it have decay and what are the moisture contents. A useful maintenance plan has monitoring as its cornerstone with response actions in place should leaks occur – coupled with visual condition assessments of building products – this can be done by pre-purchase inspections – but again should be at the owners cost – why should you do their maintenance? If you are considering purchasing an apartment or unit you should request full disclosure from the bodies corporate of the maintenance plan and monitoring results. Also ask if any of the buildings have had leaks or if investigations have been carried out. Be very wary if nothing is available – it shows denial and head in the sand approach.
• Who pays to get this information? If your negotiations get bogged down and you still want to proceed I find a useful thing to do is agree with the seller before any costs are undertaken that if the tests above all come up positive you will pay but if not they will pay. That puts the onus on them to think it through. They will already be thinking – you may get a pre-purchase inspector who isn’t that good and uses point in time assessment technologies so will likely miss discovering what they fear is happening hidden behind the walls. Not every expert is trained in this and don’t have the expertise in weathertightness training – and many who claim they do want to cut holes or remove the cladding first – or apply limitations on there reports yet still charge tens of thousands.
• What is on the council file? The home may already have been repaired – or it may be listed as a damaged home or a claim under WHRS been initiated. Always seek the council property file.
• Ask the seller to disclose the history of the home. This is the representations that you are entitled to rely on. If the owner says things like ‘never leaked whilst we owned it’ then write that down as that information is useful if you do discover the building is actually a leaker after you purchase it.
• Buying at auctions is fraught with problems – you may have no recourse against the seller or the agent – and it is unlikely the seller wants disclosure of anything about their property. This is where you should think ‘buyer beware’ before you buy.

How to Fix a Leaky Building?

Fixing a leaker has become an expensive matter – mainly because the remediation industry is trying to limit there risk into the future. It’s uncertain how well leakers can be dealt with – follow the tests above – what to look for after the repairs. For example if the repair method doesn’t provide for ‘highly’ treated timber it will continue decaying. Without monitoring how can we be sure it’s been fixed – and who says so – would we trust that person or would we want some physical proof like ongoing moisture contents. All buildings leak so it’s no surprise that repaired buildings will again leak. This is one reason that repaired buildings carry the stigma even after money has been spent attempting to fix it. So the things that are important in repairing leakers are:

• Discover: Getting adequate information before you make decisions and start spending. I see too many owners agree to large capital spends after getting a WHRS report or assessments based on single point in time assessments. If your money is that easy to come by then go ahead – but investigation techniques have moved on from these old style approaches. If your building has been cut apart by one of these people we will assist you recovering costs fixing the damage they have caused. A good value assessment will include the 3 steps above – checking the treatment level, taking numerous samples (non-destructively) to examine for decay and monitoring the moisture over time. We call this the ‘discovery’ phase. Spending time on this saves money and avoids over spending. A useful thought is its better to take 100 small 1% steps than try for the single 100% improvement.
• Making a plan: By slowing the decision making down and getting the discovery phase done a professional plan with options to satisfy owners objectives can be developed to address the requirements of the Building Act (which is that occupants shall be protected from harm and the home shall be healthy) and your plans for the property. You do not have to fix leaks or remove decayed framing unless the occupant’s health and safety are under threat. What is best is to build a ‘long term maintenance plan’- we call this the ‘building lifecycle plan’ so today’s decisions can be reviewed ongoing. Where damage is minor ‘tags’ are placed on timber for future removal, or cladding improvements may be required for drying (which may involve recladding a wall – but not all walls by default) and to lessen future spend changes in design may be useful – like removing complex details that are expensive to keep in good condition.
• Involving the Council: It is always useful to involve council, so you would show them this plan. After all they have become the insurer of the defunct builder in what is called the last man standing rule. Another important aspect is it is in your interests to have that plan on council files as it becomes your disclosure document if you decide to sell in the future. Council often over step the mark and want extra things like – maybe a full reclad. If you are in time (within 10 years of build and have lodged a claim and are eligible) it’s advisable to take 2 options along. One for what is termed targeted repairs and the other a reclad. If council intimate they would not accept targeted repairs then get that in writing with councils reasons – this is useful later in the claim process. If you are being forced into spending along one option path and council has chosen to blatantly ignore reasonable consideration and process adjudicators may well award greater compensation especially for stress.
• Manager: Get an outside manager not the contractor to manage the plan. Once the plan is consented always seek an independent onsite manager to avoid the trappings of the ‘variations clauses’ that inevitably result in escalating costs. You also need an independent weathertightness expert to manage council inspections.

So what does a good plan look like? There are two types of plans emerging. Plan 1 is if you have a claim you rebuild the whole house out of the respondent’s pocket. With the new Government package we are unsure of how long this will last – and respondents are starting to wake up to this. Plan 2 is the minimum spend possible to avoid over capitalization. Most plans fall in the middle ground. Its really up to you – it’s your money. For investors the sensible plan is building the maintenance plan to its extreme so all repairs are fully tax deductible. Where not then it’s a matter of funds available. At a minimum all the building needs is for the occupants to be safe and healthy. Don’t forget that fact. Everything other than that is discretionary spending. For example a new kitchen may be more important than some minor decay in the garage that is not threatening life or limb. This is where the RotStop injection system is useful as it stops rot from getting worse. This allows you time to create an affordable and appropriate plan that you and your partner can live with.

Ian Holyoake

Managing Director – Step Up Group

I would advise all clients and readers of my blog that have leaky buildings to consider their options and to talk to experts like the Step Up Group.  They are available on www.stepupgroup.co.nz and 0800 STEP UP.

Saturday 29 May 2010

8:30am start to 6pm finish (registrations from 8am)

Parnell Jubilee Hall, 545 Parnell Road, Parnell, Auckland

The 2010 Annual Budget has just been presented and it implements the largest tax reforms New Zealand has seen in 25 years.  To arm you with the knowledge and tools to succeed in light of the Budget and in today’s market, the not-for-profit Auckland Property Investors’ Association (APIA) have a 1 day seminar BUDGET BUSTER 2010 – Strategies for Today’s Market with tickets at just $49.

The speakers include multiple best-selling Author and NZ Property Investors’ Federation Vice President Andrew King, who provides a State of the Property Investment Nation address, then sets the theme for both newer investors and more experienced investors with substantial portfolios.  APIA’s Treasurer & Chartered Accountant Ann Loudon has the all important topic of tax changes to go through, particularly in light of the depreciation changes and the taxation treatment of LAQCs to have to become aligned to Limited Liability Partnerships.  APIA’s Honorary Solicitor & Property Lawyer Tony Steindle then talks about structures, including the legal aspects of the Limited Liability Partnership, and APIA Vice President, Property Mentor & Trust Lawyer David Whitburn talks about what to buy in today’s market, how to buy it and how to analyse just what is a good deal or not.  APIA President & former NZ Mortgage Broker of the Year Sue Tierney then talks about finance in light of the turbulent global financial crisis we are in, particularly with the highly indebted European Union countries and the relevance of this to New Zealand.  ANZ Mobile Mortgage Manager Vanessa Murch then covers off financing in New Zealand, including why fixed interest rates are so high in comparison to floating loan rates and just how we get our loans approved.  In case this wasn’t enough content, we provide further value to you in relation to tenancy management with APIA Board Manager and Principal of leading boutique Property Management Firm Corinthian Limited Jan Galloway, presenting on how you should manage your property to get the best tenants and lowest vacancy rates.  This is combined with a presentation by Tenancy Practice Lawyer Scotney Williams, giving his expert advice on the Residential Tenancies Act including recent times and also proposals to reform parts of it.

So don’t delay, BOOK YOUR TICKET for Saturday 29th May at the Parnell Jubilee Hall by emailing admin@apia.org.nz now.

An interesting and long-awaited development in the leaky homes saga occurred earlier today with Housing Minister Maurice Williamson and Prime Minister John Key announcing a massive leaky homes bailout package.  This provides that the leaky home-owner pays 50% of the cost of the repairs, 25% paid by taxpayers (the Government) and 25% paid by ratepayers (the Local Councils).  This is only available to those claiming within the 10 year legal liability limit.  The government will guarantee loans to all leaky home owners taking this compensation plan up, and has informed the major banks of the plan.  Obviously these banks are excited at the prospect of more interest income guaranteed by our Government with the powers to tax NZ’s citizens!

Williamson says the scale of the leaky homes issue is equivalent to a “natural disaster of huge proportions” and it is having a considerable impact on the wealth and health of many thousands of New Zealanders and their families:

Affected homeowners have been stuck in a complex and costly disputes process for too long with little prospect of being able to fix their leaky home”

Affected homeowners will need to make a claim under the Weathertight Homes Resolution Services Act to access the financial assistance package once it is launched.  In the meantime, homeowners can apply to the Department of Building and Housing to make a weathertight claim.  If their claim is accepted, that stops the clock on the 10-year limitation for claims.  Williamson says the financial assistance package will be voluntary and in addition to the current disputes and litigation process.

Forgo right to sue Councils

Since the Crown and their territorial authorities (councils) are contributing, leaky building owners that choose to participate in the package would “forgo the right to sue local authorities or the Crown in exchange for a combined government and local authority direct payment of 50 per cent of agreed repair costs.”  This means that leaky homeowners will still have the option to pursue other liable parties such as builders, developers and manufacturers of defective products – indeed if they are still standing, and if they have the funds to litigate.  Whilst the full details have not been working out just yet, the intention is that homeowners who currently have claims in the weathertight system yet to be resolved will still be able to apply for the financial assistance package.

Williamson’s statement concluded with “owners of leaky homes who would like more information should visit www.dbh.govt.nz or phone 0800 116 926.”

Criticism of this compensation plan

I listened to NewstalkZB yesterday before and after the Auckland Property Investors’ Association Board Meeting and noted concerns on a a few fronts.  The ones I noted were:

1. Why the Government is getting involved when it has no liability?
2. Why wasn’t there a bailout to Blue Chip, Merlot and other investors in failed finance and property development schemes as these investors clearly suffered financial loss?
3. Why wasn’t there a bailout to investors in failed finance companies?
4. Why are we socialising (making the Government responsible) for private sector losses, to increase our debt burden even further?
5. Where has the personal accountability and responsibility in New Zealand gone – why don’t people just accept blame for their mistakes, rather than blame everyone else?
6. Isn’t this an urban problem?  Why should we hard working farmers and rural communities pay for city dwellers fancy housing – we don’t have a problem with our preferred style of housing; so we should we have to pay for their indulgences!

These are mainly political questions and depend on your personal wealth, attitude and own individual circumstances.  I see some real merits in this proposal as the stress involved for many leaky home-owners is immeasurable, the health and wealth impacts are often significant, and the Government itself is only offering 25% compensation, and this is forecast by the Department of Building & Housing to be around $1 billion over the next 5 years.  The leaky home owners will be suffering the most still as they have to pay 50% and in many cases simply will have to borrow this money and pay interest to banks.  This will tidy up this late 90s and early-mid 2000s housing issue, to mean this problem goes away.  The devil is always in the details, but on balance so far, I quite like this initiative.  Lets hope it works out well for leaky building owners and our great country, New Zealand.

Yes it is about time that I build a bridge.  Not in a personal or relationship sense, but in a construction sense.  We have a property that to date no-one has dared to develop because it has been “too hard”.

That phrase I hear all too often about how hard it is to drive around Auckland, buy a home, buy an investment, build a house, save money, give up smoking, {insert next random thing}.

Well as you all know great rewards are gained by those that persevere, don’t give up and say it is just too hard.  So I am putting in the hard yards on a project that I have under due diligence in West Auckland.  It is a 3 lot residential freehold subdivision and their is a creek running through it.  This creek has freaked out a number of investors and now the property has been getting stale on the market for 3 months as those that saw it thought it was too hard.

All it needs is a bridge over it to unlock the equity of two dormant sections – sleeping financial giants.  So I have learned today a lot about bridges and how cheap section + cheap section = big money.

Note that this is not the creek or bridge I am building.  In the absence of my digital camera yesterday this is a nice place filler

Whether or not the agents have in this case done the best job they could have for their vendor client is another issue and not my primary concern, however we are the best offer that they have in front of them on paper at the moment.  The thing is we are basically getting the land for the two sections for free, with our only special cost being to build a bridge over a less than one metre wide and 50cm deep creek with around a 8 metre span to avoid a 1 in 100 year flood plain.

The site is glorious in its simplicity.  It has only been made “too hard” by people lacking vision and a solution.  Remember that Section + Solution = profit and go out with a new string to your bow – be armed and dangerous.

Enjoy your weekends.