Whenever people ask me if they should be buying or where in the cycle do I think we are I always hear them saying “Are we there yet?”

We all want to be told that now is the time to buy or we should wait for various reasons.  Now I understand that timing can be critical however I think we like to ask these questions sometimes hoping that we will be told to do nothing.  And this removes the need for us to take responsibility for our own situation and allows us to feel good that we took action by asking a question.

Overcoming this takes a bit of a mental push into a space where we begin to say to ourselves there is always something I need to be doing to keep in charge of my own financial destiny.  So the question is never “Should I do anything?” but “What should I be doing in this particular phase?”.

I watch people make money as the market goes up, down and sideways.   All we do is tweak a strategy here, modify a rule there, change focus over there, but we keep moving towards our goals and our future.

As a wise man once said: “Faith without works is dead”.

Having faith in property investment without taking consistent long term action is like reading books about swimming but never ever getting in a pool!

Stay Inspired and Stay Safe ~ Dean Letfus

The Ethical Investor

1.  Stick your money into managed funds.  Managed funds are a great way to create fee based income fro fund managers but talk to any older solicitor, as I did yesterday and they will tell you they are a rort.  My solicitor told me of 2 clients with significant funds in a managed fund. One of them achieved 14% cumulative increase over 10 years and another averaged 2.5% over the same decade. So managed funds lose you money as they don’t even keep pace with inflation

2.  Finance Companies.  It has been shown to most kiwi’s satisfaction that too many finance companies are operating ponzi schemes so it will take a long time before we ever go there again.

3.  Shares.  Well rightly or wrongly, average mum and dad think shares are legalised gambling and they just don’t understand it, so it will never get the traction it has in the USA for example

4.  Property.  So property is easily understood, has feel good factors and a long history of increasing values.  Compared with 1,2 or 3 you would be stupid to not consider property.

This is not me talking as a property educator now. I got into property BECAUSE I reached this conclusion when I was looking for ways to create wealth.

It’s time the governments stopped complaining about us loving property and understanding that we love property because it is low risk.  Business owners bang on about how unfair it is and how hard it is for them to get funding. Well that’s because 90% of them go under. The government doesn’t want to fund high risk lending but wants its constituents to??

That is simply irresponsible governance.

If we look at Australia where they forced people to save a significant percentage of their income for retirement and then allowed them to invest directly in property.  End result is a wealthy nation with a robust economy.  (Yes there are other factors but compulsory super is a huge foundation to their peoples wealth.)

So as an investor today be proud that you are investing in the safest and lowest risk asset class possible, which is responsible investing, and ignore the whiners and complainers who like to attack those who are taking control of their own futures.

Let’s celebrate our obsession with securing our financial futures, leaving a legacy for our children and not wanting to throw money down the drain on riskier ventures

Stay Inspired and Stay Safe ~ Dean Letfus

The Ethical Investor

“Days to sell in my area increased by 33 in last month.   Feb sales lowest for years but Property Press over the last few weeks have been larger than normal.

Maybe a bundle of investors trying to sell off 1 of their rentals prior to new tax laws?

Plenty of cashed up buyers just slow to act unless its a deal!”

This is of course of no surprise to me as it is exactly what I have been predicting, right down to the cashed up buyers.

So my question is why does the government keep talking about this recovery we are having and our slow ascent out of recession etc.?

At our Auckland event we spent a lot of time encouraging and inspiring people to counter the negative noise many of us battle with and teh change in people is incredible. So it occurred to me today that maybe the political spin doctors are trying to do the same thing?  Maybe because things are so uncertain and potentially bad economically they have said to John Key:

“Look let’s talk things up for a bit so people feel better. At least then when the bovine eschatology hits the whirly thing they are at a better emotional level and then when we can’t hide the bad news any longer they will have more depth to fall before hitting rock bottom”.

Maybe that’s a plan Stan, maybe that is a valid way to try and manage a long term bad news position to try and not push a country into despondency??

What do you think??  I’d love to get your comments!

Stay Inspired and Stay Safe ~ Dean Letfus

The Ethical Investor

There is an amazing thing happens when you get so much concentrated positive reinforcement.  People’s mindsets shift significantly in a short space of time.  My inbox is full this morning from people who have completed a property deal last night, made their first offer this morning, set up their trademe alerts, opened their facebook account, decided they will not give up etc. etc.

I just love the fact that even though you run a “property” event, people can get impacted in every area of their lives and become more positive, more motivated and ultimately more successful.

Probably the highlight for me was to see so many people who I know from so many different streams of the industry all loving interacting.  There were agents, journalists, old school retired investors, 11 and 12 year olds, grandmas and Gen Y’s all learning about and encouraging each other to achieve financial freedom through property investment!!

A huge thanks to everybody who attended and the crew and speakers who made it possible.

Stay Inspired and Stay Safe ~ Dean Letfus

The Ethical Investor

I saw this yesterday and it just “struck me” quite profoundly.  I’m not going to elaborate on it as it says it all. I’ll leave you to ponder how it might play out in your life.

I have discovered the secret 3 step process to never get criticized:

1.   Say Nothing

2.  Do Nothing

3.  Be Nothing

Stay Inspired and Stay Safe ~ Dean Letfus

The Ethical Investor

Well I can’t believe it’s Thursday again!!

Only 2 more sleeps till Saturday!!

It’s quite an act making sure a 2 day event for 500 plus people goes well and I must confess the organisation part is not my bag. Were it not for my gorgeous wife it would be nightmare.

What is exciting though is to know that people are willing ot invest in themselves and not turn their back on securing their financial futures.

As you know being around people fills me up so I’m going ot need extra tanks on the weekend

Stay Inspired and Stay Safe ~ Dean

The Ethical Investing Strategist

PROPERTY UPDATE BY DEAN LETFUS

Of one thing we can be certain currently and that is nobody hsa a clue what is going on.

It’s a bit like trawling a cage across the seabed.  You know it’s on the bottom because the chain goes slack but when you start moving you spend all your time feeling the bumps and reversing to unjam it.

This really is a good analogy for the property market here in NZ.  We know the tide has gone out because the evidence is everywhere but each survey or report or leading/lagging indicator paints a different picture.

Right now we “know” that

• We are coming out of recession
• We are yet to see the worst
• Property prices are increasing
• Property prices are stable
• Property prices are falling
• There is a shortage of housing
• There is a shortage of new buildings
• There is no housing shortage
• Rents are increasing due to demand
• Rents are stagnant due to lack of demand
• Evil Property Investors caused the current housing bubble problem
• Councils caused the current housing bubble problem
• George Bush caused the current housing bubble problem
• Evil banks caused the current housing bubble problem
• Councils will solve the current housing bubble problem
• Obama will solve everything for everybody everywhere

I could go on but you get my drift.  Nobody knows what is going on.  So given that what should you and I do?

Well I think a sound investing strategy needs to work in any market so for right now our main focus should be on minimising risk and maximising opportunity.

Minimising risk simply involves ensuring anything we buy right now is cashflow positive pretax so we are not affected by any tax changes and ensuring we buy below current valuation.  I have talked about this a great deal but it is the golden rule for a market like this. 

Buy cashflow and buy undervalue.

Now doing this also creates opportunity of course however right now the maximum opportunity is to buy quality property that would normally be out of reach. Vulture funds are appearing daily in New Zealand as sophisticated investors start to move on top quality assets in prime locations at Tokoroa prices .

So look for undervalued and value add assets. I’m talking about his on the weekend to show you how but this is Golden Rule Number 2 for the next 12 months.

Quality locations with strong population

FINANCE UPDATE BY KRIS PEDERSEN

It is an incredible time for me as a financier in this market.  My years of making sure I always do the right thing and staying on teh cutting edge of what is happening is really paying off right now.

I have access to a variety of nominee funds and private money to help facilitate deals that couldn’t get done in this market, we are now able to offer insurance to our clients at better rates than the banks and generally in a difficult finance market I can get people across the line when others can’t.

So not exactly about finance but I wanted to give you my version of something I have heard Dean say from stage many times:

“You don’t have to tell lies or be a prick to be a successful financier”.

In fact the opposite is true.  Because I have always insisted on full disclosure with lenders I now get preferential treatment from them.  I think it’s funny sometimes that the odd client complains about the level of information I want from them because they don’t understand how much power there is in transparency and truth.

Anyway better get back to my desk, still a few applications to get approved

Looking forward to seeing you all on Saturday!!

MINDSET SCIENCE BY DEAN LETFUS

Once again I have had a blog post elicit an incredible response from readers so I am going to share a New Zealander’s story with you here.  It’s sad, it’s inspiring, it’s poignant and it is a reminder of why property is a solid, safe investment strategy.

Our Story

What not to do!

“I have been a topdressing pilot for more years than I care to remember. I have always been on a good income, flying all sorts of machines in all sorts of places including Australia, UK, Scandinavia and Africa.

After resettling back in NZ in 1987 I began flying for a farmer owned co-op, once again earning good income but like most people always seemed to be running out of cash. In 1991 I met Fran a local high school teacher and in late 1992 we were married. Now we were on some really serious money but lo and behold we still didn’t seem to have any.

In the late 90s I read a book by Dolf DeRoos and thought this property investment lark could be a good thing. After attending a couple of seminars we used some of our equity and got a 100% loan to buy our first rental, negatively geared of course. We were told this was the thing to do. As time went by we built up quite a large portfolio as well as some subdivision on our small 200 acre farm. Including our own home and holiday batch at Hawea we had 21 properties. We had great cash flow and a 7 figure net worth. We had all the toys and ate out three or four times a week. We have no kids so we always had a few bucks in our pocket. As time went by our net worth, cashflow and equity increased.

The co-op that I was flying for decided it had done its job as a co-op and decided to disband. They offered the business to us for a very good price. As I loved the aviation business and flying so we decided to go for it. All went well and we were paying down our debt faster than budgeted, things were good. After operating for a year or so we were offered our competitors business as he wanted to retire. He would sell us his plant and business and lease us his two aircraft. How were we going to fund this purchase? I know lets sell some of our rentals and use the surplus cash from that, we would soon be able to buy more with the money we were going to make.

Yeah right.

We had just made the biggest mistake of our life.

Not long after we purchased this business the engine in the plane we owned threw a fit and cost us $US70k. The farming industry was going south and our services to the farming industry would be put on the back burner. Reduction in work and huge fixed costs were killing us, what were we going to do.

Out went the last of the rentals. As work decreased even further we would have to cut costs so when the lease on one of the aircraft was due for renewal, we decided to ditch it. The other aircraft we kept on and duly signed a new lease. Once signed we were locked in for the next year. Unbeknown to us the lessors had changed a couple of words in the lease to our disadvantage (how stupid of us for not reading it first) and were busy negotiating with another operator to lease the plane we ditched.  One of our pilots would join them and go into direct competition to us, all against their restraint of trade. They knew we didn’t have the resources to fight it. This was disastrous. With further downturn in work and our ex pilot now with the opposition, they were running around buying our work and subsidizing it from another area.

We had many sleepless nights, what were we going to do, don’t panic  we thought etc etc. We were screwed. We met with our bankers and finance company to try and work out a plan. We had a huge debt to pay so it was decided to downsize and quietly liquidate assets. This included our house and land and we would have to try and get someone to buy what was left of our business. With tears in our eyes we sold our house. We sold everything we could find, furniture cars, toys, junk. It’s amazing what people will buy. In the end we managed to sell the business but for $715k less than it owed us. No one else in their right mind would buy it. I would continue to run it on a small salary.

I could continue on with this story but to make a long story short, except for each other, we lost but everything.

We still have a roof over our heads (a converted shed which we love) and a small piece of land but still with a mortgage and at 56 this is not a good scenario.

All through this we didn’t panic, we supported each other and really knuckled down to some serious budgeting. Real-estate investing and doing the numbers have been our passion and we are determined to get back into it, we have absolute faith in that.

In fact we have more passion for that now than anything, even flying.  I’ve done my apprenticeship in the aviation business and its time to take action and move on. With planning and budgeting our debt is reducing every day and feeling more and more confident. There is a light at the end of that tunnel after all.

Did we learn anything from all this? You bet we did.

1.     Don’t buy anything I mean anything on emotion
2.    Always, always do your homework
3.    Always do “what if” scenarios
4.    Keep things simple
5.    Don’t panic if things turn to custard
6.    Don’t be a smart arse and get too big too quick
7.    If something is working well, don’t change it
8.    Don’t be proud, get help
9.    Don’t get greedy
10.  Don’t try and impress anyone with “things” they only resent you
11.   Always be accountable”

Thanks guys for your honesty and willingness to share your story!!

NZ PROPERTY GURUS

Wow nearly 600 people booked and more orders today.  This really is going to be some weekend!!

Last chance to book is today for 2 days of me, Kieran Trass, Kent Leicester, Steve Goodey, Kris Pedersen, Shaun Stenning and Kerry Christian sharing our strategies for investing success with you.  Christchurch loved it and we can’t let the mainland have the last Hurrah so BOOK NOW!!

PS: Shaun will kill me but if you do it NOW the free bonus ticket link is still up

PPS:  If you’d like to attend for free and give us a hand as crew, (and get fed), please email me, we’d love a couple of extra hands ~ info@newzealandpropertygurus.com

Bonus ticket link

<<HERE>>

Promo Code Free5837

SEE YOU THERE!!

So this got me thinking about innovation in general and of course in property investing.

Real Estate has some fundamentals that don’t require much innovation.  It has predictable cycles, fairly rigid rules legally and a long track record.

So for you and I the exciting thing is that we can do well out of investing without any clever stuff, just understand the basics and do them well will get us a good result.

However if we do add some innovation we can accelerate our success and buy more of our lives back.

For example I was looking at a post on a forum recently where a young man was asking where to put his cash while he saved for a deposit for his first investment.

There were several answers regarding on call accounts, shares and the like which were answering the question but applying no innovation.

So let’s look at someone trying to save say $50,000 for a 20% deposit.  They have $5000 now and they can put away $15,000 a year.

Option 1 is they put their money in the highest interest place they can and save like mad.

They will pay tax on any interest they receive and inflation will erode the power of their dollar. Even if inflation sits at only 3% their 20% deposit will now need to be $55,000 at the end of 3 years and their $250,000 property may now be $275 to $300,000.

So at the end of 3 years they have saved $50,000 plus interest but inflation and tax means they are $50,000 ahead if they are lucky, possibly less.

If inflation increases they may never accumulate enough funds to start investing.

Option 2 is to apply one simple innovation.  For example an option.

This same person could find the property they want now and take an option to purchase it for $250,000.

By taking the option for say $1000 they have now removed the inflation problem and locked in their purchase price.

They can still save their money but they could now also potentially move into the property and lease it until they exercise their option.  This means they are no longer paying rent elsewhere and they could negotiate a portion of their lease payment as principal reduction payments.

So now their situation at the end of 3 years is they have a $275,000 to $300,000 property secured for $250,000 and they have $50,000 cash AND they may also have a further $15,000 credit against the purchase price.

So they could probably get an 80% loan against the property and after their credits not even require a cash deposit.  Which means they can immediately use their cash to buy their second investment .

I know which camp I would rather be in .

Stay Inspired and Stay Safe ~ Dean Letfus.

The Ethical Investor

Housing shortage

I guess I must be getting really cynical because I just can’t stand the way news is being presented these days.  Since late 2008 it was obvious we would have a chronic housing shortgae because every developer in teh country was going under and no one could get mezzanine funding to do small developments.

So last night the leading news article is the panic stricken warning of a chronic housing shortage and the risk of “trailer parks”.

It’s like warning people that if they hold their breath for twenty minutes they will almost definitely die.

Of course we are going to have a housing shortage. I’ve been talking about it, as have many others, for 2 years.  That’s why we must get investing now!!

I guess I should be happy that at least the media are stating the obvious for a change

Gotta run, getting ready for SATURDAY!!

Stay Inspired and Stay Safe ~ Dean Letfus

The Ethical Investor

Out of the blue this week he emailed me thanking me for the event and sending me the following letter entitled “Our Story”.

It reminded me of why property is such a safe investment and also encouraged me to get educated AND never give up, as my new friend has learned.

This is reproduced with the writers permission for which I am most grateful.

Our Story

What not to do!

“I have been a topdressing pilot for more years than I care to remember. I have always been on a good income, flying all sorts of machines in all sorts of places including Australia, UK, Scandinavia and Africa.

After resettling back in NZ in 1987 I began flying for a farmer owned co-op, once again earning good income but like most people always seemed to be running out of cash. In 1991 I met Fran a local high school teacher and in late 1992 we were married. Now we were on some really serious money but lo and behold we still didn’t seem to have any.

In the late 90s I read a book by Dolf DeRoos and thought this property investment lark could be a good thing. After attending a couple of seminars we used some of our equity and got a 100% loan to buy our first rental, negatively geared of course. We were told this was the thing to do. As time went by we built up quite a large portfolio as well as some subdivision on our small 200 acre farm. Including our own home and holiday batch at Hawea we had 21 properties. We had great cash flow and a 7 figure net worth. We had all the toys and ate out three or four times a week. We have no kids so we always had a few bucks in our pocket. As time went by our net worth, cashflow and equity increased.

The co-op that I was flying for decided it had done its job as a co-op and decided to disband. They offered the business to us for a very good price. As I loved the aviation business and flying so we decided to go for it. All went well and we were paying down our debt faster than budgeted, things were good. After operating for a year or so we were offered our competitors business as he wanted to retire. He would sell us his plant and business and lease us his two aircraft. How were we going to fund this purchase? I know lets sell some of our rentals and use the surplus cash from that, we would soon be able to buy more with the money we were going to make.

Yeah right.

We had just made the biggest mistake of our life.

Not long after we purchased this business the engine in the plane we owned threw a fit and cost us $US70k. The farming industry was going south and our services to the farming industry would be put on the back burner. Reduction in work and huge fixed costs were killing us, what were we going to do.

Out went the last of the rentals. As work decreased even further we would have to cut costs so when the lease on one of the aircraft was due for renewal, we decided to ditch it. The other aircraft we kept on and duly signed a new lease. Once signed we were locked in for the next year. Unbeknown to us the lessors had changed a couple of words in the lease to our disadvantage (how stupid of us for not reading it first) and were busy negotiating with another operator to lease the plane we ditched.  One of our pilots would join them and go into direct competition to us, all against their restraint of trade. They knew we didn’t have the resources to fight it. This was disastrous. With further downturn in work and our ex pilot now with the opposition, they were running around buying our work and subsidizing it from another area.

We had many sleepless nights, what were we going to do, don’t panic  we thought etc etc. We were screwed. We met with our bankers and finance company to try and work out a plan. We had a huge debt to pay so it was decided to downsize and quietly liquidate assets. This included our house and land and we would have to try and get someone to buy what was left of our business. With tears in our eyes we sold our house. We sold everything we could find, furniture cars, toys, junk. It’s amazing what people will buy. In the end we managed to sell the business but for $715k less than it owed us. No one else in their right mind would buy it. I would continue to run it on a small salary.

I could continue on with this story but to make a long story short, except for each other, we lost but everything.

We still have a roof over our heads (a converted shed which we love) and a small piece of land but still with a mortgage and at 56 this is not a good scenario.

All through this we didn’t panic, we supported each other and really knuckled down to some serious budgeting. Real-estate investing and doing the numbers have been our passion and we are determined to get back into it, we have absolute faith in that.

In fact we have more passion for that now than anything, even flying.  I’ve done my apprenticeship in the aviation business and its time to take action and move on. With planning and budgeting our debt is reducing every day and feeling more and more confident. There is a light at the end of that tunnel after all.

Did we learn anything from all this? You bet we did.

1.     Don’t buy anything I mean anything on emotion
2.    Always, always do your homework
3.    Always do “what if” scenarios
4.    Keep things simple
5.    Don’t panic if things turn to custard
6.    Don’t be a smart arse and get too big too quick
7.    If something is working well, don’t change it
8.    Don’t be proud, get help
9.    Don’t get greedy
10.  Don’t try and impress anyone with “things” they only resent you
11.   Always be accountable”

Thanks guys for your honesty and willingness to share your story!!

Stay Inspired and boy oh boy STAY SAFE!!

Dean Letfus

It’s funny that in a world that has instantaneous global communication we are losing the skill of personal communication.  We can email 2 million people in ten minutes and post photos on facebook for the world to see but when was the last time you spoke to your neighbours?

When was the last time you spent an hour talking to one of your kids uninterrupted?

When was the last time you told your spouse you loved them and meant it?

When did you give a human being as much affection as you give your cat or dog?

Stay Inspired and Stay Connected ~ Dean Letfus