Dean Letfus

It’s difficult to talk Real Estate as I look around our nation and the world.

Christchurch’s devastation seems to never end and last night they were under snow like they hadn’t seen for decades as well.  I guess it is a poignant reminder that for all our attempts to control our lives and our environment there are forces much larger than us.

I apologise for the delay between newsletters but I have been regrouping my online systems and things were a bit weird for a while.  There are a couple of urgent things to tell you about so if you have any mortgages or you are in any way involved in buying and selling property then I hope you’ll take the time to read on.

PROPERTY UPDATE BY DEAN LETFUS

I have discussed at length my position on the NZ market and it is playing out as predicted.  Auckland is kind of doing OK compared with most of the country but basically the recession is grinding on and people are finding it harder and harder to deal with as there is no end in sight yet.  Mindset plays a massive role here with some people doing well and many doing badly in the same market.

What we are seeing is a much deeper layer of stressed sales going on for longer than anticipated and that still means bargains to be had, however we may be seeing the interest rate window just starting to be closed a bit so there may be a bit more action required.  More comment on that from Kris below.

What I do want to urgently bring to your attention however is the steadily tightening noose around all our necks from recent test cases and legislation.

There are some underlying principles we have to understand here.  The Real Estate Industry in certain quarters has always been against any non industry activity partly, to be fair, in an attempt to regulate activity and catch bad behaviour.  However also there has simply been a “jealousy” component of lost commissions to private transactions.  In most Western nations there is a vibrant non agent industry because it is understood that people like choice.   but not in New Zealand.

I have a friend who is on the complaints board and at their induction they were told that the desired result is simple, anybody who is buying and selling property needs to be an agent then they can “do what they like providing they are registered”.

So that sounds harmless enough but hear me now, IT ISN’T!

The recent court case and lost appeal against Premium Realty proves that the law can be an ass and once a precedent is set, that bad law can continue. So without debating the minutiae of that particular case a precedent has been set that says if a property is sold and then on-sold again in a short time frame for a profit there is potential to sue for the difference.  What this means is that any trader or finder who has an unhappy vendor or the original vendor discovers the subsequent sale that can sue them.  Them being the agent if an agency is involved or them being the trader/finder if a private sale.

You stop and think about that for a minute, it makes every transaction a potential law suit.  Now the solution supposedly for traders is to register as agents right?  But hang on, it was an agent who got done in the Premium case.

Oh ok, so the deal is do what you like once you’re an agent because then you are even more easily prosecuted without costly civil action.

Can you see the sinister side of this yet?

Now I know one finder who has solved the problem by disclosing both sides of her trade to the initial vendor. So if the vendor has signed a contract that clearly states this property is being on-sold for $XXXX more then surely the trader is safe.  And it appears yes this is a sound solution.  But how many traders are going to do this?  It means losing nine out of ten deals in an already difficult environment.  And the disclosure requirements for a licensed agent would make trading impossible anyway.

I can’t give you a solution because there isn’t one.  When I first raised this situation last week I had a number of lawyers email me thanking me for bringing this to public attention and they all agree, it is both a travesty and a big, big problem.

I suggest you talk to your solicitor before you contract anther property and expect more and more agents to decline presenting your offers.  Many of them are under instructions to not deal with any of us because it is the agency that was successfully fined in the test case.

Kris Pedersen

FINANCE UPDATE BY KRIS PEDERSEN

Hi everybody.  It’s funny what a difference a day makes, (as the song says).  Suddenly there is a lot of talk and debate over mortgages and interest rates because the world simply isn’t behaving how economists think it should.

So we come into a “highest probability” scenario, which as a numbers man I don’t really enjoy.  I want to accurately know what is going to happen so I can get the best results for my clients but right now we just don’t have that certainty, so……….

My emphatic position on mortgages in the New Zealand market is that you should CONSIDER fixing!

Why not just do it?  Well in my opinion some commentators are being very optimistic in regards to their expectations of economic growth in the short term and I am not convinced that they are correct.  I believe events both global and domestic are not going to keep rates low for longer than expected. Much has been made about the headline inflation numbers released last week but it needs to be remembered that a lot of this was caused by the GST rise.

Let’s not forget there are still many concerns about the global economy and outside of Auckland and the rural market there are lots of parts of the domestic economy still struggling.

So here’s the quandary, IF we behave like sheep as we often do and a large amount of people fix right now this removes the governments ability to quickly affect our fiscal position through  OCR manipulation and this tends to push up swap rates which will in turn push up fixed rates.
Already short term swap rates have jumped a fair bit over the last week or so meaning that it may get harder to get the discounts that we have been getting out of the banks.

Yeah, yeah just tell me what to do!

As I said we are trying to predict the unpredictable right now but the highest probability in terms of minimising risk and “staying safe” as Dean likes to say is to keep some floating but consider whether it is time to fix some loans.  When you are floating at say 5.75 and you could fix for 6% there is a lot of volatility removed from your position by choosing the latter.

Especially if you are currently on a floating rate of 5.75% with either ASB or Sovereign contact me HERE as they have some short term specials on offer at the moment which are expiring in a few days.  You may be able to fix for the same rate you are currently floating on.

So do not delay.  Even if you don’t normally use me as your broker I can help you get the best rates right now before current specials expire and talk you through the best risk/return strategy for your current position.  EMAIL ME

USA UPDATE

The USA continues to be a lifesaver for many looking for cashflow and low cost entry in to the investment market.  We have our own clients results to back up what we researched now and it truly is a retirement solution for many.

As the US dollar stays down it is definitely a pan of choice for many kiwis and Aussies.  And the results speak for themselves. As an investor, putting aside the human element, we could hope for a US default in the next few days, it will further reduce cost of acquisition of property and increase yields

The market there is stuffed for some time, making buying well so easy, cashflow is awesome, predictable and stable and we have good funding options in place to provide some leverage.  I won’t bore you with too much detail here other than to say if you are keen to explore this I’d love to help.  EMAIL ME for more info

I post regular updates, opportunities and articles on Facebook also, “like” the page HERE

(PS: I will be in Memphis shortly if you want me to look for anything for you)

MINDSET SCIENCE BY DEAN LETFUS

2011 will without a doubt go down as my worst year in many ways, although as I have said before our darkest days often bring the most growth.  I don’t know if you have ever experienced being in a situation that is so bizarre, inexplicable and surreal that even though you know you are awake you think you must be dreaming?

Well I hadn’t till this year either and I pray you don’t have to go there, ever.

It’s actually difficult to discuss in detail because so many details I don’t know but I did want to at least discuss the principles involved and the lessons learned.

As you know I have always worked hard to try and help people, whether that be counselling or wealth creation.  My desire is and always has been to maximise the upside and minimise the down side.  So due to the size of my client list I am constantly barraged with the next best thing, literally almost daily for many years.  I try to filter through those, discarding 999 out of a thousand and looking at the odd thing that looks genuine and of benefit.

The recessions early days threw us all a huge curve ball where our traditional strategies literally burned to the ground overnight.  I and many thousands of kiwis were caught big time with property we paid too much for, deals we couldn’t complete, off plan purchases that turned into nightmares and a general collapse of wealth as finance companies fell over and we all wondered what the &$()#$&) was happening.

As I have talked about many times I was terribly caught and initially gave up and waited for the end, but eventually got myself together enough to investigate the size of the hole and whether it could be climbed out of.

So as I am a quick adopter I started looking for alternative income strategies out side of property as I couldn’t see any solutions in my own industry.

With hindsight BIG MISTAKE NUMBER ONE

This is a 2 sided coin of course, obviously we need to look at opportunities in our life but when we know something well we are at much lower risk so need to make sure we have been creative in our own sphere of expertise before we look outside.  If I had taken my own advice at the time I might have discovered the USA 2 years earlier and been in a better position and created less pain for myself.

Anyway back to the story.

I ended up looking at the internet as a strategy after entering an Australian coaching programme.  The training was expensive but the cash flow results were very, very good so I thought increasingly this was a winner.  Subsequent to this programme I met another internet specialist who became a friend and introduced me to another world of strategies and opportunities.  Because I connected so well personally with this new acquaintance I embraced him quickly and completely. I gave him access to my clients as he was getting great results for me and those I met who were already working with him.

With hindsight BIG MISTAKE NUMBER TWO.

I really stuffed up here.  I allowed my feelings to be very heavily involved in my business.  Now intuition and gut feelings are one thing but there is a definite disconnect required to think through all the what if’s and downside.

From here it gets a bit hazy because there are more unanswered questions and “don’t knows” than I can even list.

What I do know is that someone who I trusted completely and his partners who passed my due diligence at the time appear to have been professional conmen/criminals who took advantage of me and many of my friends and clients.  I can’t even find words to express my regret and devastation over what they have done and their incredible dishonesty subsequently.  Apologies don’t really cut it but I can only say how sorry I am and try to help in the recovery as much as I can.

I can’t even draw any conclusions because every question is unanswerable.  Was their plan to rip people off at the beginning, don’t know.  Based on what I knew of the people involved I literally can’t believe them capable of what they have done and can only grieve over the current situation.  Police are now involved internationally and I am hopeful of an eventual outcome of explanation and possible reparation but I feel as if my mistake has destroyed my world and impacted so many friends around me it is as I said at the beginning, almost too terrible to possibly be real.

I have always learned more from people mistakes than their successes and I share this with you to show the incredible consequences that can result from one act of bad emotional judgment.

As a Christian it creates a very real cognitive dissonance because I can never say to myself, “trust nobody ever again”.  That would be to deny who I am and what I believe.  But maybe in my business I have to adopt that policy of never trusting, recommending or promoting another simply to try and make sure this never happens again.

A sad day in my life but one I hope you can learn from.