Archive for June, 2010
Dusty Budgets
Posted by: | Comments
Now that the “dust has settled” so to speak on the budget, hopefully the more nervous investors among you are getting back on track with your further investing.
The below article arrived in my inbox today and is great reassurance around the depreciation issue.
From Gilligan Rowe and Associates
Depreciation vs Tax Cuts
“Let’s take an example of a typical property investor who has taxable income from their job of $75,000 per annum and owns two rental properties that are currently worth $700,000 but were bought in 2002 and 2006 respectively for a total of $550,000.
For the 2011/12 income year if depreciation was still able to be claimed on buildings, they would have been expecting to make a $6,800 depreciation claim which would have a maximum tax benefit of $2,200.
At the same time due to the cuts in personal tax rates there is an increase to their after tax income of $2,400.
Following this rationale, the investor would have been $200 better off (from a cash flow perspective) in the 2011/12 year.
It is also worth noting that of course depreciation is usually claimed on a diminishing value basis so the amount that would have been claimed on the building moving forward would be reducing over time.
Finally, there is also the fact that in many instances depreciation claims produce a timing benefit only in that any depreciation claimed is then recovered on the sale of the corresponding asset.
Following this, we see the removal of depreciation claims as being mitigated by the drop in income tax rates (of course there will be additional private GST costs).”
(For more specific help with the tax changes contact GRA HERE)
So as Dad’s Army used to say:
“Don’t panic, don’t panic!”
Stay Inspired and Stay Safe ~ Dean Letfus
The Wandering Investor
PS: We have pushed the button on the next Auckland NZPG event in July 
.
More info over at http://bit.ly/bBZ88D
Noo zulland
Posted by: | Comments
It’s always funny when you’re overseas to see your own country or city advertised in foreign media. Yesterday I saw 2 unrelated adverts in different papers talking about Auckland.
The first was advertising Eclipse apartments, which apparently are in a “quiet tree lined boulevard” in the centre of the Auckland CBD. Most of the advertising was innocuous enough except the last line which said Malaysian buyers should take advantage of NZ’s “very weak currency”.
I am currently looking at some US opportunities with property specifically because our dollar is so strong so to see this misinformation was amusing. The risk of an exchange loss against the kiwi is very high so taking off shore funds into NZ right now is quite silly.
The funnier NZ related promotion was in an in-flight magazine promoting Auckland where the main picture was an antique silver teapot and a hideous looking selection of sandwiches designed to look like an English High Tea.
What that has to do with Auckland and why it would make anybody want to go there was beyond me.
Alongside gorgeous beaches in India and tropical hideaways in South America you can just picture potential visitors picking us.
“Wow let’s go to NZ and visit Auckland. Just look at those tomato club sandwiches and that silver service tray, let’s get packing, woo hoo”
To be fair I guess we all look at life through filters that make our perception reality but given the number of cool things about Auckland/New Zealand I do find it bizarre the ways we are promoted sometimes.
Stay Inspired and Stay Safe ~ Dean Letfus
The Wandering Investor
Inside Outside under my skin
Posted by: | CommentsI was discussing last night with my mentoring students our propensity to internalise failure and externalise success. As property investors this means we are often quick to blame our failures on our own stupidity, ineptitude or laziness and always attribute any successes to external forces like the market, (a monkey could make money in this market), or assistance from others, (It only worked because so and so found me a buyer).
The problem with this sort of thinking is that we never learn from our mistakes because we decide we ARE the mistake.
Internalising Failure
I experienced this in living colour in late 08 when, due to a raft of circumstances, my own position became very difficult.
I’ve discussed this many times before so I won’t bore you with the details again but the bottom line was I had a massive problem and didn’t know how to fix it. I can point to my buyers not settling and even fleeing the country leaving me in the $^@*! and that is true but fundamentally I blamed myself and decided that I was simply “bad”. There is a line between accepting personal responsibility and taking failure on board personally and for a period I crossed it.
Fortunately, because I have spent so many years working on myself I realised what was going on before I gave up and started to reframe my position.
I had to acknowledge and act on the fact that I am a sophisticated and well equipped property investor and businessman and I was the only one going to get me out of where I was. I knew God loved me and I would go to heaven when I die but that was not going to keep me afloat today .
I had a money problem and I was more than capable and resourceful enough to find a solution.
I have to say also that 3 friends of mine also helped enormously in staying on my team and being part of the brainstorming required to find answers. ( Many thanks to Matt G., Kris P., and Kerry C).
So 19 months later I have now added a huge raft of negotiating skills to my tool box and have learned heaps about working with banks, knowledge I can pass on to my clients and students that I would never have learned had I not walked through it.
I have learned to be much more objective as an investor. Instead of wringing my hands when I had properties I couldn’t sell I accepted the fact that I was going to have to keep them and find a better solution.
I lost more money than most people ever accumulate but am still standing and better equipped to increase my wealth exponentially in the future
At any point I could have rolled over and that would have been a way less stressful path. Staying alive can be hard work and take some time to resolve. I expect another year or so at least before I am back to where I want to be. But I will get there and THAT is the point.
Reframing the situation has meant:
I am a far better qualified mentor than I could ever be if everything had always gone well for me.
I have unique experience in dealing with every bank in New Zealand and finding what the rules really are and what you can really do to find solutions to impossible situations.
I have learned to make the hard calls when I don’t want to and keep the main thing the main thing.
I’ve also witnessed the best and worst of others behaviour in similar situations to mine and that makes me appreciate my wife, my God, my kids and my friends all the more.
So my friends do you need to do an about face on what YOU internalise in your life??
Stay Inspired and Stay Safe ~ Dean Letfus
The Wandering Investor
Conehead time yet again :-)
Posted by: | CommentsIn their efforts to make headlines it seems we never want for someone saying something silly about property investing.
In the last 7 days we have had the usual fodder of good cop, bad cop in our papers again. In fact in the same section on the same day was an article about how bad things were and another saying how fantastic things currently were.
I’ve talked about this often so it is nothing new. However whenever I see so much of it I think it is good to remind you and myself that market sentiment is just that, sentiment.
When things are negative that drives prices down, which we like as investors.
And when market sentiment is positive that drives property prices up, which we like as traders.
So either way is good for us as long as we “observe and ignore” what we see and hear.
It is stoopid to make our investing decisions based on journalists.
What we need to remember and act on is long-term fundamentals and our own position.
So currently we are still seeing fire sales of properties and positive cash flow pre-tax possible. So it doesn’t matter whether Bernard says prices will fall 15% or Olly saying the worst is over.
They could both be right or wrong, so the real issue is should I be buying/selling/trading now and if I should then what.
One good way to help control the emotional trigger jitters is to constantly remind yourself of 2 numbers.
The first number is cash flow. What positive cash flow do I have now? Your ultimate goal should be to have enough passive income so that you never have to work again so therefore we must regularly check whether we are moving towards or away from that goal.
Any investment opportunity that increases our cash flow is worth considering in any market. I mean why wouldn’t you invest in something that pays you every week and moves you closer to retirement?
The second number is even more important and that is our overall net worth.
We tend to make a lot of investing decisions without considering this critical fact.
In fact most investors buy high and sell low in shares, forex and property because they react to a situation without consideration to their over all position.
Only our net worth is a true indicator of our investing success in my opinion. Our net worth is real wealth that will sustain us over time and allow us to leave an inheritance for our children.
So when looking at a property deal for example add it to your bottom line and project it forward say 5 or ten years then see what impact it has on your net worth. If it is positive then look closely at it and whenever you are panicked into thinking about selling it remember to look at what impact selling it will have on your bottom line.
I have fought hard many times to keep properties when the situation said I should sell because a paper loss has no impact on my net worth. But crystallizing that loss removes the opportunity for recovery and can ultimately leave me penniless.
So get out a pad, your iphone or a spreadsheet and work out what you need to do to make both numbers acceptable in your life.
Stay Inspired and Stay Safe ~ Dean Letfus
The Wandering Investor
Pushy or good business
Posted by: | CommentsI’ve been in Hong Kong this week and it is impossible to not notice the contrast between Asian style businesses and New Zealand’s more westernized approach.
I do get very sick of what I refer to as the Hong Kong 123. At every street corner I get offered 1 massage, 2 tailors and 3 watches and that gets simply annoying.
But once you get past that the general level of service everywhere is just amazing. The restaurants have people standing outside to sell you their food. The retailers proactively engage you to keep you in their store.
I guess if you boil it down the business owners in Hong Kong literally run their businesses as if their lives depended on it.
And that’s something we could all learn from. If you’re going to own a business, be an investor or even just be a good parent, tap into your internal passion and do it as if your life depended on it.
And speaking of life depending on it I couldn’t believe my eyes when I saw my first construction site in Hong Kong. These guys build 30, 40, 50 stories high using Bamboo scaffolding. I could see the NZ OSH people having multiple embolisms if we tried this in NZ.
And we worry about our kids riding their bikes without a helmet
Stay Inspired and Stay Safe ~ Dean Letfus
The Wandering Investor.
Victim or Victor
Posted by: | Comments
Can’t explain the timing but this week I have had several real estate agents contact me simply to vent their concerns over how bad the property market is in New Zealand right now from an agents point of view.
This is of course in stark contrast to my view as an investor because there are deals everywhere right now.
In listening to the agents comments I couldn’t help but wonder whether it was a reflection of the market or simply a reflection of the mindset of the agents.
The fact is that if we are exposed to sustained negativity in our lives we will naturally move from victor to victim unless we proactively prevent it.
So for the real estate industry in NZ agents have had nearly 7 years of feast. Most agents haven’t been in the industry that long so their perception of selling property is that it flies out the door and making good money is relatively easy.
Then 2008 arrives and sales go to zero. Initially the hope is that this is a blip but the blip turns into a festering sore.
Then in 2009 the REAA arrives and suddenly there is exposure to risk, prosecution and huge compliance issues for every agent.
Top that off with difficulty for people to get mortgages and the new government deciding to attack property investors and I can understand why agents are down in the dumps as it were.
Now obviously the market has an enormous impact on sales and I understand that, but teh truth is that whether we thrive or die in this market is going to be decided between our ears, not by any government or economy.
A victim mentality will drive us to blame, complain and justify our behaviour, that’s why agents ring me to complain about the market hoping that I will agree with them and they can then justify their position of blaming the government or whatever.
So what about you today, are you playing your game of life like a victor or a victim. That decision and the resulting outcomes are entirely in your own hands.
Stay Inspired and Stay Safe ~ Dean Letfus
The Wandering Investor
Funny Money
Posted by: | Comments
It is interesting to see the change in sentiment over recent months regarding interest rates. Since the RBNZ raised rates last week there would have normally a doom and gloom warning from all quarters.
But the reality is, as I advised last year, that as more people are now on floating rates slight movements in interest rates now have an effect so there is no imminent disaster looming. In fact it looks more and more like we could enjoy a low interest rate environment for some time. I have been talking to people in the industry this week and the general opinion remains the same. Stay floating until there is a clearer reason to fix mortgage rates.
And make sure YOUR focus is on reducing your debt so that when rates do rise you won’t care.
Good news for a Monday
Stay Inspired and Stay Safe ~ Dean Letfus
The Wandering Investor
