Archive for April, 2011
Cash Flow to burn??
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Dean Letfus
Hard to believe it’s nearly May 2011 and things just keep on keeping on.
PROPERTY UPDATE BY DEAN LETFUS
Property investment, straight buy and hold long term is safe as well, houses right now. We have low interest rates, low demand and the only barrier is either a shortage of funds or our own fear.
We haven’t seen any wholesale collapse of values like many countries, in fact one could say we have been incredibly stubborn in keeping our retail prices pretty high. Sales volumes are negligible of course but so far things are panning out pretty much as expected.
Auckland was always my pick for safety pre Christchurch and the tragedy there has certainly soaked up any surplus stock in Auckland and we should see strong rental demand and even a mini boom this year for owner occupier housing once the insurance companies pay out the former South Island owners.
On the legal front there are all sorts of issues for traders and lease optioners. I and many of my peers have spent a lot of time and money trying to get through the mire and get real answers to what is now legal and what is not.
To date there is little definitive news with some traders being prosecuted, others having cases dropped and some others ignoring the new rules and so far not being touched.
So all I can tell you officially is that we believe that assignments, double settlements when you can’t show proof you could settle and lease options are all breaching some area of legislation, so execute them at your peril.
There’s not much more to say really, the situation is relatively unchanged overall, we should be buying if we can and we need to be very careful if we are trading. Buy it, settle it then onsell if you are trading.
None of us can predict what will happen next with our market here, there are too many micro drivers distorting the picture. So until we are past the World Cup, (I bet we lose 
, Christchurch has some firm recovery plan in place and we get through winter without any more left field events we should assume that all bets are off. Buy based on what the property will do for you today, not what it may do in the next 12 or 24 months. remember that even if we are coming through the recession, we still have the inflationary phase to get through. We must be owners of property before that hits but it isn’t going to be fun for anybody either. You think milk, bread and petrol are expensive now, just wait. (Of course rents and values will do the same THAT’S why we need to be property owners, preferably in Auckland)
FINANCE UPDATE BY KRIS PEDERSEN
It’s definitely not easy to tell what the next year will bring with the earthquakes experienced both locally and overseas, the recent shock of potentially having the Government have to bail out Christchurch’s biggest insurer AMI, business confidence falling, another Europe country needing a bailout etc etc.
However the property tide does seem to be starting to turn with the number of mortgage approvals recorded in the last week is the highest across the country since November 2009. This is definitely something I have been experiencing in dealing with the banks with turnaround times being delayed and many bank staff currently working overtime to deal with the increased workflows.
While economists are still definitely divided about exactly where the property market sits Tony Alexander has (correctly) continued to be one who has said that there was no chance we would hit the 30-40% drops that some of the scaremongers have been talking about over the last few years. In his latest weekly piece he spends a bit of time concentrating on the recovering Auckland market in particular and the resurgence in rents.
It is worth noting that with the increase in rents more and more tenants will start questioning the validity of continuing to rent with 95% mortgages available again at all time historically low interest rates. This will put more competition back into the market making it harder for investors to pick up bargains as home owners are by nature more likely to purchase on emotion and thus pay more than investors will. I am already hearing stories like this in some central Auckland suburbs and also Hillcrest on the North Shore where I am hearing more and more rhetoric about houses selling above market value again.
Interest Rates
One thing that is certain is that if there are no more large economic shocks either locally or globally, that while floating rates will stay low for a while the fixed rates will start to climb. What is difficult is that with both the local and global economies still being so fragile we don’t know what is around the corner.
I looked recently at some economists prediction that were being made in May last year on what the floating rate would be now. They were predicting about 7.25% rather than the mid 5% rates we are experiencing now which gives you an idea on how far out it is possible to be at the moment.
My suggestion is to note that the banks are definitely discounting their fixed rates at the moment so definitely don’t just take the quoted rate if you are coming off a fixed rate term now. Whether it is best to fix, float or have a mix depends very much on your personal circumstances and also which lender you are with. If you would like me to help you with this please contact me, kris@propertyfs.co.nz
And remember……. There is always a solution!!
BREAKING NEWS FROM ONE MAJOR LENDER!!!!!!
Pre-approval
- BANKS pre-approval offer has been extended to 6 months.
Maximum LVR for Refinance
- If your customer is re-financing from another lender, we can look to re-finance their home lending up to 95% LVR.
- Where the refinancing customer is also looking to consolidate personal debt on to their home loan, then the maximum LVR will be 90%.
Maximum loan term for high LVR lending
- 30 year loan terms are available for home lending up to 95% LVR.
USA UPDATE
It’s coming up a year now since I started looking seriously at the US market again and I know have dozens of friends and clients in several countries enjoying the cashflow on offer and basking in the glory of knowing they will be completely freehold if they choose to be in under ten years.
We have now also developed a system to get you into the US banking system in around 24 months meaning you can then recycle all your own money back out.
The numbers out of the USA are so good that even the great US (stock) marketing machine is acknowledging just how good their own market is.
A recent article in Fortune by Shawn Tully is almost unbelievable considering how much the US don’t like property.
From his wide-rimmed cowboy hat to his roper boots, Mike Castleman fits moviedom’s image of the lanky Texas rancher. “I’m a dirt-road economist who sees what’s happening on the ground, and in 35 years I’ve never seen a shortage of new construction like the one I’m seeing today,” declares Castleman, 70, now offering a biscuit to his miniature donkey Thumper. “The talking heads who are down on real estate will hate to hear this, but America needs to build a lot more houses. And in most markets the price of new homes is fixin’ to rise, not fall.”
Today Castleman is witnessing an extraordinary reversal of the new-home glut that helped sink prices just a few years ago. In the 41 cities Metrostudy covers, a total of 78,000 houses are now either vacant and for sale, or under construction. That’s less than one-fourth of the 343,000 units in those two categories at the peak of the frenzy in mid-2006, and well below the level of a decade ago. “If we had anything like normal levels of buying, those houses would sell in 2½ months,” says Castleman. “We’d see an incredible shortage. And that’s where we’re heading.”
So let’s state it simply and forcibly: Housing is back. (more)
(Shawn Tully has been writing feature stories for Fortune since 1980. He specializes in banking, federal budget and spending issues, and health care. Tully holds a B.A. in English from Princeton University, an M.B.A. from the University of Chicago, and a master’s in Applied Economics from the Universite Catholique de Louvain in Belgium.)
More info and register your interest HERE
<<TELL ME MORE ABOUT THE USA CASHFLOW SOLUTION>>
.MINDSET SCIENCE BY DEAN LETFUS
I discussed in my blog this week the fundamental shift I am watching happen in business created by Gen Y starting to become the business people in our societies. As I have worked with Gen Y and in particular watched them operate in Asia I am frankly quite scared about our future.
The shift is so foreign to us boomers and even Gen X that we need to understand them as we will have to either survive in business under them and know how to negotiate with them in property etc.
1. Sophisticated and educated. Gen Y’s have been uniquely exposed to more information and education than any other generation in history. Their ability to learn from a young age is quite frankly unbelievable. I am already meeting older Gen Y’s on their 3rd and 4th degrees.
So the application is to know that in any interaction with a Gen Y they are likely to be more informed than you, however they will not have any real world experience yet. This often creates unrealistic demands and intolerant responses in negotiations.
2. Self Aware. Gen Y’s are often referred to as selfish but as I work with them I find it is more they know what they want and they are used to getting it, so their world view is based around the expectation that they will benefit and get their needs met. Labeling it selfish is to miss out on the fundamental shift in the way they think. I can see psychology books being rewritten in the next 20 years to cope with the “new” species we are seeing develop in front of our eyes.
The thing to understand here is that negotiations that play on charity or altruism, tugging at heart strings etc. will not fly with Gen Y. It is a foreign language to them.
3. Conscienceless. (Not sure if that’s a word). The biggest thing I have seen and the scariest by far is that Gen Y’s. especially in business seem to have no conscience at all. I have recently been involved in multiple situations where contracts are completely violated, people lie to your face even when you have the proof in front of them and there is no understanding of “doing the right thing”.
This is much more prevalent in Asia perhaps than NZ currently, but I see it happening here more and more.
Sadly the application of this is to understand that you cannot trust this generation. They will go straight to litigation and bullying every time to get their own way so you have to have everything contracted to the smallest detail and be sure you are prepared for a full on war if necessary. This may sound harsh but I am only sharing my own experience with you. Better to err on the side of being overly prepared than getting blind sided.
And understand it is not necessarily a deliberate act on the part of this generation. In many cases I think it is just that the consequences of what they are doing do not enter their heads.
It’s a bit like the movie Shallow Hal. Jack Black was getting so angry with his mate because he literally saw something totally different. His friend was trying to “open his eyes” but that was impossible. Dealing with Gen Y is a lot like that sometimes. May God help us all .
Queue Jumping:
Posted by: | Comments(Thanks to Matt A).
The other day I needed to go to Middlemore A & E.
Not wanting to sit there for 4 hours, I put on my blue suit and stuck a patch that I had downloaded off the Internet on to the top pocket of my jacket.
When I went into the A & E, I noticed that 3/4 of the people got up and left. I guess they decided that they weren’t that sick after all. Cut at least 3 hours off my waiting time.
It also works at Work & Income. It saved me 5 hours.
At Britomart, getting a seat on the train to Papakura, sweet as, almost had a whole carriage.
At the launderette, three minutes after entering, I had my choice of any machine, most still running.
Don’t try it at McDonald’s though…..
The whole crew got up and left and l never got my order…
Dealing with Gen Y
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Apologies in advance to and Gen Y clients or friends who do not “fit into” their culture .
I have been exposed a lot to Gen Y in the last 2 years. Especially in Asia where they are now becoming the new power brokers in business.
I mention it here because they are changing the landscape of how we do business globally. So we have little choice but to understand how they think, if that is possible and work with them accordingly.
So here’s my thoughts on the key differences between Gen Y and “normal” people.
1. Sophisticated and educated. Gen Y’s have been uniquely exposed to more information and education than any other generation in history. Their ability to learn from a young age is quite frankly unbelievable. I am already meeting older Gen Y’s on their 3rd and 4th degrees.
So the application is to know that in any interaction with a Gen Y they are likely to be more informed than you, however they will not have any real world experience yet. This often creates unrealistic demands and intolerant responses in negotiations.
2. Self Aware. Gen Y’s are often referred to as selfish but as I work with them I find it is more they know what they want and they are used to getting it, so their world view is based around the expectation that they will benefit and get their needs met. Labeling it selfish is to miss out on the fundamental shift in the way they think. I can see psychology books being rewritten in the next 20 years to cope with the “new” species we are seeing develop in front of our eyes.
The thing to understand here is that negotiations that play on charity or altruism, tugging at heart strings etc. will not fly with Gen Y. It is a foreign language to them.
3. Conscienceless. (Not sure if that’s a word). The biggest thing I have seen and the scariest by far is that Gen Y’s. especially in business seem to have no conscience at all. I have recently been involved in multiple situations where contracts are completely violated, people lie to your face even when you have the proof in front of them and there is no understanding of “doing the right thing”.
This is much more prevalent in Asia perhaps than NZ currently, but I see it happening here more and more.
Sadly the application of this is to understand that you cannot trust this generation. They will go straight to litigation and bullying every time to get their own way so you have to have everything contracted to the smallest detail and be sure you are prepared for a full on war if necessary. This may sound harsh but I am only sharing my own experience with you. Better to err on the side of being overly prepared than getting blind sided.
More on all this in this weeks newletter on Thursday
Get Going and Stay Safe ~ Dean Letfus
Are we killing ourselves?
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I loved Kerry as Magda in Gloss
It was sad to hear yesterday of Kerry Smith passing away after a battle with skin cancer. She was one of those wonderfully open announcers and presenters that made one feel goood just listening to her voice. My condolences to her friends and family.
My dad died of the same thing so it brought up a lot of anger for me about how cancer kills us. And it seems to me that almost everybody I speak to lately knows someone who has cancer or has lost a relative to it recently.
My admittedly flawed memory doesn’t seem to recall cancer being a “common” thing when I was younger so it makes me wonder if we are somehow killing ourselves through food additives, radio waves or some other combination of issues that we haven’t yet realised.
I am no conspiracy theorist but isn’t it both sad and “not quite right” that young healthy people and even old healthy people are being taken form us in such quantity these days by this all encompassing disease?
So what do you think?? Am I dreaming or is this becoming way too common. And if so, what is causing it??
Get Going and Stay Safe ~ Dean Letfus
We are addicts
Posted by: | CommentsI had a most enjoyable evening in New Plymouth last night at the PIA and was pleasantly surprised to meet so many “new, never bought anything yet” investors present.
It just goes to show that kiwi’s national sport of property investing will be hard to stamp out in spite of the government and RE industry attacks.
The problem is, how else do you get ahead financially in a country like New Zealand. I have talked about this endlessly before so won’t bore you again but the fact is there are few better options that make sense. Businesses are risky, shares and forex are a crap shoot, money in the bank gets destroyed by inflation, so……….
So get into your PIA’s, learn form those who are doing it and keep focusing on building your own wealth. Don’t let any person or political party steal your right to a sound financial future!!
Get Going and Stay Safe ~ Dean Letfus
And Blow!!
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I see today the first talk of inflation in our mainstream media.
I loved this quote:
“Prime Minister John Key said oil prices internationally were concerning but beyond the control of the Government.”
I have talked about the inevitability of high inflation in NZ coming out of the recession. I don’t know if it is arriving now, too early me thinks, however global price pressures may push us earlier than expected.
Our headline inflation is pushing close to 5%, although this is largely driven by the increase in GST.
So we have a bit of a complication in that the GST raise muddles the figures somewhat. We may have high inflation on our doorstep but not see it right now, or we may see the rate drop as the GST increases washes out.
Based on global data HERE, oil is driving inflation globally and we are obviously not immune to that.
So if you own property, hang in there, price increases may be round the corner. And if you’ve been holding off, it may be time to get in before it is too late.
So the big thing to watch now will be interest rates. I’ll keep you advised as we watch what is happening. Banks are already factoring in a 1 in 3 chance of an OCR rise before Christmas. OS we may need to fix loans shortly, not yet!!, but shortly MAYBE
Get Going and Stay Safe ~ Dean Letfus
The guns come out
Posted by: | CommentsI spoke recently about the legal changes making trading and educating more and more difficult. So this week I heard of another straight up operator now being legally pursued without any genuine merit. Sadly they may be another victim to this crazy regime.
I also heard the first investigation is underway of an event run since April 1st. Stay tuned, it’s going to get nasty for people trying to educate anybody for a while.
And an RE licensee friend of mine yesterday was trying to explain some information they had just received about the “compulsory zero GST rating” legislation that came into force on April 1 as well. I am still trying to get more info on this but according to the briefing my friend had, this new regime now has 2 pages of detail that must be attached to every S and P about the buyer. This current addendum is going to be incorporated into all S and P’s and will mean a new version of the current contracts.
My friends main comment after the briefing was: “Well that makes anybody trading, doing lease options or even assigning now unemployed”.
The basics seem straight forward enough:
The new GST rules apply from April 1 and provide that all land transactions are zero-rated when they are between two GST registered taxpayers, provided the purchaser intends to use the land for business purposes and the land is not used as a place of residence.
The test for satisfying these conditions is applied at the time of settlement.
However when, for example, the sale is to a non-registered purchaser, then GST is still chargeable by the vendor at the standard rate.
A Tax specialist with Deloittes explains:
“The risk to the vendor of zero-rating the sale is not adequately protected in the sale and purchase agreement.
If the vendor obtains a statement from the purchaser confirming the conditions to zero-rate the land are met, then regardless of the factual status of the purchaser, the vendor will be able to treat the transaction as zero-rated.
If a land transaction is incorrectly zero-rated, the new law will treat the purchaser as having supplied the land and in doing so will have to account for the GST at the standard rate of 15 per cent. The purchaser may then be subject to interest and penalties.
The onus, therefore, falls on the purchaser to ensure that all statements made to support the zero-rating treatment are correct to avoid being caught by an unexpected GST bill.
Compulsory zero-rating of land transactions differs to zero-rating under the going concern provisions. From April 1, the zero-rating of land will replace the going concern provisions so that any sale of a business involving a component of land will be zero-rated.
Parties looking to enter into a sale and purchase agreement for land should ensure they fully understand the GST consequences before signing up. Under the new legislation, this is particularly important for purchasers.”
So we traders now all have to figure out how to fill in forms stating purchasers intentions when we will have no idea what the purchasers intention is. OUR intention will be to onsell and that will capture our buyers in a GST nightmare.
So could it get much harder?? I hope not.
IF you have had any advice on solving this GST nightmare and want it shared please email me
I will start doing some work with my lawyer on a solution, if there is one 
. But I don’t think there is. We risk being accused of fraud every time we sign a contract OR exposing our buyers to GST issues. BE CAREFUL!!
Get Going and Stay Safe ~ Dean Letfus
