Archive for the ‘Property Investment Strategy’ 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

There are a number of international issues impacting property investors and business owners currently. These include:

• Greece’s debt crisis – Greece had its sovereign credit rating downgraded 3 notches from B to a total junk rating of CCC by Standard and Poors this week.  They are looking likely to default and will need an European Central Bank loan, investors in Greek Government bonds to take a hair cut, combined with Greece’s efforts of implementing higher taxes and slashing Government expenditure (hence the massive scale riots in Athens this week).
• weaker Australian job growth - Australian employment numbers released last week showed 7,800 jobs were added in May whereas 25,600 where expected.  Australia’s unemployment rate stayed at 4.9% (New Zealand is at 6.6%, USA is struggling still at 9.1%).  The Australian Dollar has been hit by international markets because of this.  The other impact is that this means the Reserve Bank of Australia is under less pressure to have the RBA raise the cash rate from 4.75% over the coming months.
• Japan’s continued struggles – these have been compounded by their devastating 9.0-magnitude earthquake and ensuing tsunami that devastated the north-east cost of Honshu Island on 11 March this year.  I watch CNBC a fair bit and note the comments by their Japanese correspondent, economist Takuji Okubo who has warned of political unrest in light of Japan continuing to have the highest level of public debt of all developed countries at over 200% of GDP.  Combined with deflation persisting, a reliance on exports to drive growth, and an aging and shrinking population are major long-term challenges for the economy.  The IMF has predicted Japan’s growth to shrink by 0.7% this year.

There is confidence coming back to NZ businesses, and the rural sector continues to be buoyed by very strong commodity prices. There should be an excellent turnout (well over 100,000 people) at Fieldays in Mystery Creek, Hamilton this weekend.  The NZ housing market is again being led by Auckland with another quarter of stronger sales, and prices having risen 4.1% in Auckland in the past 3 months.  Construction is heading into a deepening recession.

From meeting with Presidents at other property investor associations from around the country and looking at the QV and REINZ regional data, outside of Auckland house prices are essentially doing nothing.  Rents are moving up strongly in Auckland, and you are likely to be under-renting your 3 bedroom house in South and West Auckland if this is rented at less than $350/week.  With the OCR staying at 2.50%, there were fears of inflation meaning this would have to rise by the end of 2011. Whilst this of course could still happen it is less likely to in light of yet another significant Christchurch earthquake.

There is a massive undersupply issue of housing in Auckland right now.  This is not helped by high council contributions and levies and a tougher environment to raise development and construction finance.  The demand for housing in Auckland is huge.  The Auckland Plan discussion document recently released has suggested we need 330,000 houses by 2040.  In the next 20 years we will have an increased demand in housing of nearly 40%.

It doesn’t take a tax lawyer to work out what direction rents and house prices will go in with demand like this, and continual undersupply.  I will be going into detail for this at the NZ Wealth Mentor Advanced Investment Strategies event this weekend for our mentoring clients.

I have been preparing this week for the NZ Wealth Mentor Property Masterclass Event is on this weekend at our Newmarket, central Auckland offices.  It will be another great event, with very useful information for those looking to invest in property and those with property looking for further direction and wanting to accelerate their path towards financial freedom.

Residential Loan Expiry Dates at 31 March 2011

This is not a graph of NZ political parties in Parliament.  The excel doughnut chart I used to plot the data from the Reserve Bank gave me these colours as a default.  For the first time in a great many years there is a higher value of residential loans ($84.6 billion) on floating rates, than residential loans ($83.1 billion) on fixed rates.

There were only $35.9 billion of residential floating loans 2 years earlier in March 2009, and fixed interest loans with greater than two years to expire amount to less than $10 billion.  This will please the Reserve Bank hugely as the OCR will have much faster effect when it eventually rises (which in my opinion will not happen within at least the next 6 months).  The OCR is exceptionally strongly correlated to floating rates and short term (say < 18 months) interest rates.

On Tuesday the 12th of April, international super investor Kevin Green lands in New Zealand.  He is delivering a very special event in Auckland with leading education company NZ Wealth Mentor with two full days packed with practical strategies and tools delivered by a master of property investment, on Saturday 16th – Sunday 17th April 2011. Kevin is scheduled to be on TV One’s Close Up on Wednesday 13th April at 7:00pm talking live with Mark Sainsbury about this successes and thoughts on how you can improve your life as he did.  Learn how Kevin went from being an unsuccessful dairy farmer to becoming one of the largest private landlords in the United Kingdom with almost 400 properties to his name worth around NZ$80 million in just over 12 years.

KEVIN GREEN: The BBC Secret Millionaire Star with nearly NZ$80 million portfolio

Here is Kevin Green on the BBC Secret Millionaire programme:

Kevin was star of the hit BBC series The Secret Millionaire. He is the largest Social Housing landlord in the UK and he runs one of the most successful lease options businesses in the world.  His lease options strategy to success is definitely worth the ticket investment. His other specialty is asset stripping and he will explain how he made his first $250,000 using this strategy, and much more more so you can profit from this method too.

Kevin Green’s Property Profit Strategies event is all about giving you an easy to follow action plan to improve your cashflow.  This event is sold out apart from the Auckland Property Investors’ Association special ticket allotment.  However there is a wait list for tickets as we had a number of booking from Christchurch prior to the devastating February 22nd earthquake, and if anyone can’t make it NZ Wealth Mentor is issuing full refunds if you are unwilling or unable to attend, which could free up a ticket for you.  In addition there is a small chance APIA members will not take up their allotment, so please don’t call me about this, just simply go to the booking page and click the put me on the waitlist button immediately. 

So whilst the sold out signs are up, there may be a few tickets given to those on the wait list, so please don’t give up as we are doing our best to accommodate everyone. Leave you name, email address and phone number and we will contact you if a ticket becomes available.

Kevin Green at APIA

Finally Kevin Green is talking to the Auckland Property Investors’ Association on Tuesday 12th April.  What can you learn in just 55 minutes?  Quite a lot.  This will give you a taste of what Kevin Green and NZ Wealth Mentor are about. We have sponsored this meeting and have 50 tickets that we negotiated with APIA as a special allotment for the Kevin Green event.  So come to APIA to hear from the investor with the largest residential property investment portfolio that we have ever had present to our members since APIA’s inception in 1995.

Me in yesterday's Herald Homes, Ask an Expert section

I was asked by the NZ Herald to assist as a property investment expert in the Herald Homes supplement this week.  The question was:

With interest rates so low at the moment, we are considering buying a couple of units in Auckland as an investment. Is now a good time to enter the market?  What sort of returns should we be looking for?

I think that it is a good time to enter the Auckland property market right now.  This is because the property market moves in cycles and we are well in the downturn phase of this cycle.  Properties can be purchased below true value with good cashflow.  I am a passionate believer in buying for cashflow, equity and growth.

The returns that an investor can expect do differ widely, including upon which market you are looking at.  In my property coaching business NZ Wealth Mentor, one of the things I teach my clients is the importance of cashflow. This is because interest rates are at emergency low levels so you need to have a buffer for when they rise.  In terms of the various submarkets in Auckland, there are a number of very high-yielding inner-city freehold apartments.  Whilst the cashflow is very high I don’t foresee the capital growth to be spectacular.  If you are looking for positive cashflow there is an abundance of this in South Auckland, and a number of positive cashflow properties in West Auckland, as well as parts of Central Auckland. David Whitburn

Source: New Zealand Herald, Herald Homes supplement 30 March 2011.  Ask an Expert – David Whitburn

I appeared live on Close Up on TV1 on Wednesday in response to the “rental crisis” hitting Auckland. I let the host Mark Sainsbury know that this is in response to the supply and demand equilibrium, and that it is the inner suburbs of Auckland like Herne Bay, St Marys Bay, Ponsonby and Parnell that are the most effected, and in the Green Room before hand that rents are rising steadily but at lower levels elsewhere in Auckland too.

David Whitburn and Mark Sainsbury live on TVNZ's Close Up on 9 March 2011

David Whitburn on Close Up

It was an interesting experience and I felt comfortable with Mark’s knowledgeable questions and his producer’s professionalism as they screened me at lunchtime and took me from reception to the makeup room (for a light powder). Then I went to the Green Room along the corridor from the live studio.  After watching the tearjerking first article of Michelle Rambaud who is terminally ill and got married in hospital in the Green Room, I was escorted to the live studio. Then it was showtime. I start 3 mins 36 seconds through it (so feel free to scroll through until then):

Where rents are heading?

Rents are heading upwards in Auckland, based on underlying demand and some restrictions on supply with us underbuilding.  Only 15,602 building consents were issued last year and we needed to see over 25,000 to just keep up with population growth, let alone cater for people moving up from Canterbury in light of the horrific earthquakes.  The councils charging what they do with the comparatively new development contributions and the illogical denial of minor dwellings or granny flats in the previous Auckland City boundaries (ie. Avondale and Blockhouse Bay to the West, Otahuhu to the South and Glendowie in the far east), as well as the difficulties in getting construction and in particular development project finance, have all contributed to this.  Also many people are happy being tenants as they can live in a nicer area with the costs and perceived inflexibility of home-ownership.

Last APIA rent review

At the last APIA meeting as MC I decided to do a rent review and around 15 members put their hands up with properties they have let. Not a single member had lowered their rents and many had raised them quite significantly. From talking to NZ Wealth Mentor clients as well as property managers in Auckland and around the country I know that all of them are looking to raise their rents and the 6 month lock out under the Residential Tenancies Act 1986 is one of the main things preventing this.

In South and West Auckland there are stories of over 10 different prospective tenants wanting to rent properties and it is not hard to get at least a $20/week rent increase currently. In areas like Mt Wellington and Onehunga investors are raising their rents $40/week and when tenants complain to check what the rents are they are putting up with it, or leaving and the investors are finding that they can get even higher rents when they try to put on a higher price on TradeMe rentals. The mini boom that I predicted for the end of this year, has begun early!

The volume of house sales is very slow and this has characterised the last 3 downturns.  I have been to 6 auctions and looked at over 30 properties this week which in itself is not very interesting and is particularly normal for me.  However what I am surprised about is the level of enthusiasm from some auctioneers and real estate agents in the past week, who tell me that the market is about to boom with the Rugby World Cup on and all this immigration. On looking at the statistics and being in the market I have to introduce a small dose of reality, to inform that we are not going to see a boom in New Zealand anytime soon.  I don’t see it beginning in the next two years either.  The previous property cycles that I have studied have shown that in the downturn phase the volumes of sales are very slow.  Where are the Mitre10 dream home and DIY rescue style programmes?  Look at this in terms of the median line from the annual statistics are from REINZ as graphed above.  Clearly volumes drive values and with low volumes in 1998, 2000, 2008 and 2010 we saw negative equity years as regards property prices.

In my opinion we are technically in a double dip recession and this is more clearly seen if you back out the affects of inflation which is running high now with food price rises, petrol over $2/Litre at the pump again, tobacco and alcohol price rises, and of course the impact of the 2.5% GST rise.  Yet the nominal (inflation adjusted) house prices don’t get reported by Quotable or REINZ sadly.  Back out inflation and house prices are going down and are over 10% below their November 2007 peak.

Does that mean it is doom and gloom and you can’t make money out of property? No – I like my mentoring students and property investor friends are able to get great deals well below true value and in many cases with the ability to buy below value right now.  Recently my sister and soon to be brother-in-law bought their home in One Tree Hill around 10% below value.  There are investors selling thanks to tax changes, media doom and gloom headlines, fear and lack of understanding of the market and the property cycle.

Which market are you looking at?

So it is important to remember what market you are looking at.  Is it New Zealand?  Is it Auckland?  Is it Epsom, Remuera and Parnell near Auckland’s CBD?  Is it Papakura and Takanini?  Is it small Waikato and Bay of Plenty Towns?  Is is Christchurch houses within 5km of the CBD?  We have a number of sub-markets in New Zealand and some are feeling the pinch a lot more than others, and some (eg. the Epsom, Remuera and Parnell) are selling well in excess of CV and having massive rental rises and give the appearance of being in a more advanced phase of the cycle and in a recovery.  Yet friends with a house in Taupo haven’t been able to sell it for over 12 months and will sell it under CV…  Unfortunately statistics tend to generalise though, which is the same in stockmarkets, as some stocks are performing extremely well, and other are really struggling.

Auction strategy 4 (low opening and irregular bidding pattern)

I opened an Unlimited Potential (“UP”) auction up by bidding on a property being auctioned in Sandringham at $100,000.  That low initial bid in itself isn’t a crime! It is a little bit low on a property with CV of $440,000 and my tools and research indicating that houses within a 500 metre radius of it selling in the past 12 month at 12.62% above CV on average. However when he questioned the bid I followed up that with the supporting fact that it is a double dip recession.  I wasn’t trying to throw the auctioneer (Mark Sumich) off his stride, I wanted to outline the case for my bid to get him to accept it as I wanted that property to convert into a 3 bedroom under the same roof line to transform and add significant value to what wasn’t a fabulous renovation or layout.  I then used my auction strategy four of bidding assertively with irregular increments ranging from $200 (not accepted) so bumped up to $250 – $10,000, including some increments of $300, $1650 and $800.  On chatting to a UP agent he said my bidding pattern was irregular yet sophisticated and through off his buyer as they were not up with the play being pretty new to auctions.  Unfortunately I didn’t win this well located property as it exceeded my maximum bid, as I was up against two home-owner who don’t need to buy properties tens of thousands of dollars below true value.

At Barfoot and Thompson’s Chancery CBD HQ, the loquacious Marian Tolich stated “it always a good time to buy property” and then followed it up with a very emotional statement in “you can never pay too much for a good property” while engaging both a middle eastern looking and chinese buyer for a nicely done up 3 bedroom home in Epsom (so it obviously has the extremely coveted Auckland Boys Grammar and Epsom Girls Grammar dual zones).  The battle of egos ensued and the price paid was nearly $100,000 higher than the Vendor’s reserve (when it was “on the market”) and if my memory serves me right over $250,000 over CV.  The Epsom Vendors did very well indeed.  Yet other properties in the suburbs further out from the CBD had far less attention and didn’t meet vendor’s reserve, necessitating lots of offer crunching to make a deal happen.

REINZ House Price Index

Just a quick one to respond to two reader’s emails after my Quarterly Market Update seminar on Tuesday – here’s a statistic from REINZ mentoring students of mine have asked about.  It is the REINZ House Price Index.  I like REINZ and their work and the many fantastic agents we have in NZ, but I don’t rate this index as highly as the Quotable Value Quarterly House Price Index and nor does the Dr John McDermott (former Chief Economist of National Bank and a current Deputy Governor of the Reserve Bank).  Yes the market was low in January 2009 and that shows well, but it doesn’t show the 2010 mini dip very well at all, whereas the QV one does.

The take home message is that the market is a confusingly large one and there are many sub-markets.  Rents are skyrocketing in inner suburbs and eastern beaches (Kohi, Mission Bay etc) of Auckland and well located areas of the North Shore (eg. eastern beach suburbs) – more on that later.  There are opportunities in this market.  Ensure you buy below value and renovate to add value.

Property Masterclass

If you want to know more on how you can do this come along to Property Masterclass on Saturday 19th and Sunday 20th of March.  I will be presenting for 2 days on relevant market conditions, strategies and techniques to succeed in this environment, as well as covering off property investment basics for those contemplating investing.  Hope to see you there!

Earlier this week I got back from holiday at the idyllic Otama Beach in the Coromandels.  I had a very relaxing time, but something disturbed me in the papers.  It wasn’t the article about the dangers of swimming in the ocean for fear of a shark attack.

Life was particularly stressless on Otama Beach in the Coromandels with limited cellphone coverage

Seriously there are millions of sharks in New Zealand territorial waters and there have been millions of swims and swim hours without a shark attack.  I know a bit more than this than most having my second degree at a Bachelor of Science majoring in biology, where I did a number of zoology papers, including marine biology.  I was lucky enough to have tuition from two amazing individuals Professors John Montgomery and Scott Baker, and being able to spend some quality of time at the University of Auckland’s Leigh Marine Laboratory (the ‘marine campus’) about 100km north of Auckland.  I loved my time there and thoroughly enjoyed studying for my BSc (usually more than my law degree in fact).

More New Zealanders get hurt by getting out of their parked cars, than by shark attacks – maybe we need an article on that!  Getting to the subject matter of this article and what annoyed me, was the series of articles run in the NZ Herald where tax lecturers in the University of Auckland’s commercial law department, Craig Elliffe and Chye-Ching Huang, proposed the introduction of a Capital Gains Tax. They built upon the ideas set out by columnist Fran O’Sullivan in the NZ Herald article Ten ways to beat our snowballing debt, published on 9 December 2010.  Whilst I agree with most of Fran’s ideas, I didn’t like item 5 – introducing a capital gains tax or a land tax.

Elliffe and Huang wrote about how this is a great idea to help reduce Government debt and that it is fair and equitable to have a new tax, and this would not distort investment choices adversely.  They were disappointingly emotive in stating that having a capital gains tax would help save New Zealand from ‘fiscal suicide’.  Despite being respected academics, particularly Elliffe who has worked as a tax partner in a leading commercial law firm (Chapman Tripp), they have conveniently forgotten that New Zealand’s mountain of debt is mainly not government (or sovereign) debt.  In fact New Zealand is an outstanding performer globally when compared to most other countries around the world. Below I have included a graph from visualeconomics.com so you can see where the real debt issues lie.  Like Australia and China, we have low levels of public debt.  The countries in the red zone (just look at Italy, Japan and Zimbabwe) of the following graphic are the ones with a debt problem.  As a country we are in the safe dark grey zone with Government debt at (considerably) less than 30% of GDP.

Cut Government Spending

I don’t think for a minute that it is smart for our Government to borrow $300 million each and every week.  This figure has gone up over the past year as the tax take reduces, and we have more pressures for Government spending.  Whilst there have been arguments made about the ballooning of credit that we used for investment properties, farms, credit cards over the past decade, we clearly have a spending problem at the Government level.  So instead of increasing Government income by raising taxes, which makes things tougher for people choosing to work and striving to get ahead, we should consider something even simpler.  We should just cut Government spending.  After all how prudent is it to run a household that spends a large percentage more than what it earns, and plans to do so for over 6 years?  In our electoral system we voters have the chance to elect Governments and we are supposed to tell them what we want, and they as our servants (hence the term public or civil servants) carry out these tasks for us.  Do we want to borrow several billions of dollars every year until 2016 and create a noose for the taxpayers now, our childrens’ and grandchildrens’ generations in terms of servicing the interest on this debt?

That is not a New Zealand I want to life in.  So why we persevere with a universal pension at 65 years of age, when the statistics show that we are living much longer healthier lives in general, and that we can’t afford to keep funding it is beyond me, but for one thing – fear of being turfed out of Government in this MMP consensus style of politics with a very short 3 year electoral life cycle.

How else can we cut Government spending?  Let me give you just a few of my ideas to explore further as this is already a long blog:

• Cut the number of MPs down to around 80 people
• Cut MPs perks and benefits
• Cut the entourage MPs have
• Change the Electoral Act to have a longer term of Government (4 or 5 years) to encourage longer term thinking
• Dispose of MMP and its costly consensus based politics (foreshore and seabed anyone?)
• Reduce central government bureaucracy
• Reduce local government bureaucracy (including the sheer number of civil servants and focus on customers needs, not council’s needs)
• Sell non-core Government assets that have a poor return (on asset value – eg. Power Companies, Accident Compensation Corporation)
• Make the benefit system a hand up not a hand-out (remove the ability to choose whether you work or not)
• Question the doctors who certify people (including a past tenant) as medically unable to work, except they can lift kegs of beer with their “severe back injuries” and go fishing, and put an end to those vast numbers of people rorting the costly invalid’s benefit (note the sickness benefit is the temporary and short term one)
• Raise the tax on cigarettes so they cost at least $25 per packet (that will stop a great number of smokers and therefore save a lot of money on our pressured healthcare system)
• Ditch Working For Families
• Cut the silly subsidies (did billionaire Sir Michael Fay’s daughter need a $50,000 NZ on Air grant?, revisit the SuperGold card free trips to Waiheke Island subsidy, having TVNZ + TV3 + Maori TV bid all subsidised is rather ridiculous and put the bid prices up for the International Rugby Board without any additional benefits to NZ taxpayers – we could watch private broadcasters TV3 for free or even pay for the Sky Sport service for 2 months)
• Cut spending on tertiary education (but maintain the student loan scheme)
• Charge interest on student loans
• Don’t let people leave NZ until they have paid off their student loan (as chances are you will not get it all back)

No More New Taxes

We need another tax, like Rafael Nadal (world number 1 and holder of 9 grand slams at just 24 years of age) needs to be told how to play tennis.  The idea of a new tax really offends me.  It smacks of arrogance and a neanderthal like ‘big Government is good’ mentality without really thinking about it.  Do we really want to live in a country that seeks to strongly impact on an individuals liberties and intrude further on their personal freedoms?  Do we want to run the risk of more good Kiwis going overseas?

Lets encourage and praise those that want to make a better life for themselves and not be dependent on the Government for hand outs. Lets salute those patriots of New Zealand who own assets and contribute from paying for returns on those assets (eg term deposit holders in taxes on interest income; rental property owners in taxes on rental income and land rates; home and secondary property owners who pay land rates; share owners/managed funds/Kiwisaver funds who pay taxes on dividends etc).

I want to live in a New Zealand that rewards those who receive income, pay tax on this income and don’t spend all of their net income, so they have this money left over to built their asset base.  That is after all how I like thousands of others of New Zealanders have built our property investment portfolio and retirement nest egg.  It is a simple fact of life that many older New Zealanders don’t want to or can’t manage or don’t want the additional hassle of having ownership of their rental properties as the move into their 70s, 80s and 90s, so they sell them.  Sometimes proceeds are used to pay down or pay off debt, at other times term deposits are created.  Some even invest in high yielding shares.  Again these asset owners are making income which is taxable, to help Governments of the day, and they are far more self-sufficient than most Kiwis that own no assets.  So why is punishing these people with a capital gains tax a good idea?

Impact on Housing New Zealand?

Also if there was a capital gains tax in New Zealand, I wonder how many people would invest in Australia (that has a Capital Gains Tax with some exemptions).  Australian cities and towns have a higher capital growth rate than that of New Zealand over the years and they have a higher population growth forecasts than other New Zealand cities (apart from our financial hub Auckland).

With New Zealanders investing in Australia, how much pressure would this put on Housing New Zealand to borrow more money to buy houses for our nations poorest individuals?  This social aspect of property investment is an invaluable one and is often overlooked.  It has not been taken into account by Elliffe and Huang again either.

Raising Government income by its own means?

If it was not politically achievable to cut Government spending that is disappointing.  However we could always have fun like other Governments are doing with interfering with money supply, eg. quantitative easing (money printing) or do what we have already done and get our Reserve Bank back into trading the New Zealand Dollar to suppress it to help our exporters for an export led recovery, and to make billions of dollars in FX gains.  Baring disaster there will be pressure in 2011 for the Pound (GBP) to hit 0.5000 vs the NZD, and for the US Dollar (USD) to hit 0.8000. The Reserve Bank can buy some of these currencies when our dollar is high against them, and sell them as it gets low.  Other countries do this too – why can’t we?  New Zealand needs a capital gains tax as much as we need the plague to strike us.

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).