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!!