Archive for safe investing
Hubble, bubble, toil and trouble
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Interesting times here in New Zealand. We can see the beginnings of a bubble in Auckland and Christchurch as the Auckland rental market is under supplied, caused in part by so many Mainlanders joining the JAFA brigade.
And in Christchurch the beginning of the rebuild plus all the vultures and speculators looking for how to profit from the rebuild are fueling extraordinary interest there.
Of course this is in stark contrast to the ever deepening recessionary pressures both here and globally which begs the question:
What exactly will happen if one market is so called booming while the country is going backwards. Is it possible for these 2 cities to be leaping ahead property wise defying the rest of the nation?
I guess the simple answer is yes it can happen as we are already seeing it happen in suburbs like Grey Lynn where houses are fetching mad money and competition is fierce at auctions.
But as investors what should we do?
Let’s take a pessimistic view that the country/world is going to be a mess for another 5 to 10 years. If we have a bubble in Auckland and prices increase we can potentially profit by trading in a rising market. That is childs play. But the enormous risk is that the bubble bursts driven by banks not lending to the levels properties are selling for in Auckland or an ever worsening economic outlook causing lending to tighten again.
Most active investors seem to be doing one of the following two:
Running around in Manurewa and Otara and other very low socio economic areas buying and renoing or buying and holding.
I think this will ultimately be a disaster for most of them. We sold out of South Auckland as soon as we could and would never go back there. Maintenance, rental issues and most importantly sliding values make it a very bad idea. (NOTE: I do not include Papakura in South Auckland, that market has consistently performed amazingly well.)
OR they are basically doing nothing. I think this is quite a good strategy right now. Sit out things in NZ or look offshore is not a bad idea. I talk to agents daily and professional finders around the country and the overall outlook is somewhere between muted and terrible so we can’t afford to get bullish yet.
Keep your powder dry!! Don’t be rushing in in New Zealand, there is much uncertainty ahead!
Dean
PS: Our next training webinar is going to be “HOW to research a property/area in the USA”. Book HERE
USA real results
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We have been investing in the USA long enough now to prove the theories around the market there, especially in Memphis, our favourite city.
So here is an example of a package of 3 properties brought 13 months ago.
Purchase Price June 2010 = $133,900
Quoted Net Return = 12.1%
So how is this package doing?
Well actual return over 12 months = 14.81%, over 20% above quoted returns!
And I asked Jim what we could sell these for today to another investor, (not a retail sale but a wholesale sell).
Answer = $150,000.
Current Valuation is around $165,000
So in the worst recession in modern history in the worst housing collapse in USA’s history we have a 14% net return ACHIEVED and over 10% in capital growth plus around 30% equity.
This is not a hoped for outcome, this is actual results.
If you 50% financed these you would have put in say 70K in total including set up.
You could sell today and pocket around 25K, over a 30% return in 12 months. But why would you when you are getting nearly a 15% return and the properties will be paid off completely in 7 years if you put the cashflow into paying down the debt?
And if you wait for 2 years you can refinance, take all your cash out and turn the 3 houses into 9!!
Any questions??
Any reason why you shouldn’t be enjoying these results??
Get Going and Stay Safe ~ Dean Letfus
PS: We have a half share available in the commercial property and another larger residential project returning 16% net, email me if you’d like more info, dean@massiveaction.co.nz
Maori land coming home to roost
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I have never been a fan of leasehold land having seen many people end up with worthless houses paying enormous leases and in some cases simply walk away leaving the land owner rubbing their hands together and inheriting yet another property.
So it was no surprise this week to see the maori commercial land leases in the CBD finally kick in making many businesses there completely unprofitable.
It was always going to happen of course. The land owners have done nothing wrong at all, they are simply actioning what they are entitled to. It will however end in tears, as it must. The leasehold model, popular in parts of Meadowbank and Greenlane in Auckland is a proven failure in terms of the lessee.
You see the thing I have never understood about leasehold land is simply this. It is specifically designed as a win/lose process. It completely ignores the fact that the land value will increase and therefore the land owner is the dominant player who will profit. The building owner/land renter is on a hiding to nothing from the outset. The only certainty is that the earlier in the lease period they purchase the larger their losses are going to be.
So to allow it on large scale apartment buildings and commercial property in our city centre is a massive failure of local and mainstream government.
There isn’t much anyone can do, it will probably end up in court for some time.
However what we can do all do is remember to never, ever, ever go near leasehold property as an investor or business owner. It has failed in the past and is going to really cause some carnage now in Auckland city.
Get Going and Stay Safe ~ Dean Letfus
Property Tip ~ BE CAREFUL!!
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In sadly typical (underhanded) fashion the first prosecution has been initiated against a property trader.
Not bad enough that they can’t interpret their own legislation and refuse to communicate reasonably they have resorted to basically setting someone up to make an example of them.
It is impossible to give anybody comprehensive advice in this area because nobody including the body governing the legislation actually knows what the rules are but it appears that the REAA, as we expected, will try to remove anybody who is not a real estate agent from being involved in any sort of property transaction.
Hopefully their initial case will be lost and we may see some sense in terms of interpretation of the new act but let’s take a paranoid view for a moment and be clear on a couple of points for you.
1. Double settlements. Do them at your peril. I even saw a fellow trader talking of one of his deals in his newsletter this week. They are at the moment definitely going to get you prosecuted UNLESS you can prove 100% that you can settle on the property yourself.
2. Assignments. Previously a QC ruled that assignments were a contractual transaction NOT a property transaction so in theory these are ok under the current rules, however I would ensure you novate the contracts until we know where we stand.
3. Options. The good news is that options could become the way of the future. They are clearly not caught under the rules and make an ideal solution to a wild untamed landscape created through this churlish legislation. I have used and taught them for some years and now finally they may become more common.
4. The other alternative of course is to become a real estate agent. This is not as punitive as it used to be and there are a large number of licensees who understand what traders do and would happily take you under their wing. It does constrain some activity but is a workable solution for many of us.
So Get Going and Stay Safe ~ Dean Letfus
PS: Watch yourself in any transaction with an agent who is acting weird or asking a lot of questions. I have heard numerous stories of low agents looking for people to set up. (Obviously all the bad eggs haven’t yet left the fold)
If you feel like you are being interrogated or suddenly have the licensee wanting to talk to you, DON’T DO THE DEAL!!
Strongly suggest staying close to your trusted agent also to be kept up with any skulduggery being promulgated by REAA!
I see blood and fire and, and, and I haven’t got a clue!
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Trying to predict the future economically is a lot like smelling the colour nine, yet as humans we feel we need to try and figure out the future.
With property this has always been based on a premise that over time values ALWAYS increase as do rents and an unspoken assumption has been that the ability to borrow money etc. will always be “normal”.
What I have laerned form the last 24 months is that these fundamentals principles are in fact built on varying degrees of quicksand and we must establish a better system and a more understandable floor to our investing.
This is not as daunting as it first sounds because basically what it means is that we need a wealth creation strategy that works when the so called fundamentals don’t.
I read a column by an Australian friend of mine this week telling people to invest in Australia because of Australia’s growth potential. In a normal world this would be a good statement, (although investment yields are so bad in OZ I would never recommend going there currently).
Should we be investing based on growth right now??
Answer = NO!!
Not because it is a bad idea but because it is a “flawed floor”.
Our goals and strategies must be aligned to the new/current reality of possibly no growth and possible mid term inflation. Even falling values with a 20 year recovery is possible right now.
So to be safe with that we must focus on maximum cash-flow and a workable system of debt reduction.
So time to haul out your investing goals and look at where things need tweaking/reinforcing or setting fire to and burning 
Get Going and Stay Safe ~ Dean
PS: The interest in US property is something off the charts so I have asked 2 top USA experts to join me for a 2 hour webinar next week to discuss the opportunities and pitfalls. It’s free and there is no up-sell to another event or anything else, just lots of professional info. You can register at: http://bit.ly/hYaiRZ
Listing shortage = Good News
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OK so you hear all the news about no listings and people paying good money for property, life is good, the agents are polishing up the BMW and the D&G sunnies are back on their foreheads right?
So let’s not even comment on the graph above which shows this to be a fallacy or I’ll really get started
Anyway my students and I are looking at more than 100 deals a week and would have over 250 properties for sale all around New Zealand. And unlike the agents who need a good market to eat I can tell you that the market is NOT recovering, prices HAVE dropped and a lot of property is still NOT selling quickly or at all for that matter.
And what this creates for savvy investors is OPPORTUNITY.
You see we must focus on using the media misinformation to our benefit and subsequent profit.
If people think they have less choice it is our God given responsibility to assist them to buy OUR property rather than another.
AND for those who believe the media position that property is still bad we need to relieve them of their terrible burdensome property .
My clients ands students are buying great deals and flipping them or keeping them depending on discount and cashflow.
The next 12 months could set you up for an early retirement, are you taking advantage of the 2 extremes of misinformation in the market?
I’ll be talking more about this on tomorrow nights webinar series, pop in for a chat and some great info. Mr tax minimisation and breaking tainting will also be joining me. Don’t miss it!!
Costs a whole $1 to learn how to make thousands Book HERE
Stay Inspired and Stay Safe ~ Dean Letfus @ www.MassiveAction.tv
To get the latest investing information on time and for free make sure you get my regular newsletter here
Unbiased Advice?
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I listened with much amusement this morning to a reporter interviewing somebody about a free property event being put on so people could get “unbiased” property advice and avoid the “dodgy players” in the property market.
The unbiased event is being run by a real estate company and a group of professional property related companies all of which, without exception, sell goods and services to property investors. In fact the advertised companies were mortgage brokers, accountants, real estate companies. Not one mention I could find of a financial planner, property education company or professional property consultant. Not one!!
So to all their advice unbiased is just plain nonsense.
Now before you get offended I’m not complaining about them running the event. Quite the reverse I think any property education is good to get people going with their wealth creation goals. But sadly we feel the need to kind of qualify everything by trying to be unbiased.
There are lines we need to watch in some areas. For example because I train property investors and need to be able to help them analyse deals etc. I don’t sell property to anybody anymore so that I am not consciously or unconsciously swayed in any particular direction.
I can therefore truthfully say my advice is independent and I have no vested interest other than ensuring my clients get wealthy.
But any real estate company is going to be biased towards its own brand and listings because that is their sole source of income. I am very biased when it comes to mentoring because I believe Massive Action provides the best mentoring services by far. I may or may not be right but I am biased .
And the point is that there is nothing inherently evil in being biased. Unfortunately we lump people’s preferences in with unscrupulous dealings where they don’t exist.
For example because some financial planners have been found out to recommend a particular product because it paid large commissions suddenly all financial planners are considered dodgy.
Because some property education companies secretly margin trade property and hide it from their education clients suddenly all property education companies are dodgy.
The simple fact is that to stay in business any company needs to make money and it does that by charging for goods or services. They are therefore “biased” towards you using their services. And there is nothing wrong with that providing they are transparent and honest about how they get paid.
Make your decisions based on the results being generated for people and the company history, not their attempts to convince you they have no interest in your money.
Any understand with real estate companies and principals, they only make money when they sell property and are therefore often unable to act in your best interests generally speaking. Any property related education coming form a Real Estate Company is designed to do one thing, get you to buy their listings.
For me personally I can look at the many people I have helped and rejoice with them in the success and financial freedom they have achieved.
I am also honest about the stuff ups I have made and use those to help me help others avoid repeating them.
So learn all yo can everywhere you can, just do some due diligence before handing over thousands to anybody!!
Stay Inspired and Stay Safe ~ Dean Letfus @ www.MassiveAction.tv
PS: I am getting loads of emails thanking me for my new property webinar series. People love getting current advice and their particular situations addressed, especially when it’s cheap as chips Tuesday the 13th is my last free trial webinar for this series so if you’re interested in Property Investment register HERE and get some totally free investment education online AND the second page tells you how to get a copy of my free DVD and register for my free webinar trial!
To get the latest investing information on time and for free make sure you get my regular newsletter here
