Auckland Property Investors Association

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We are Auckland's only non-profit incorporated society that provides property investors and landlords with support, education and networking opportunities.  Join us at our next property event.


CGT - Lunacy much?

Tuesday, April 15, 2014

Just this Sunday, Labour's David Cunliffe was on Q+A lambasting a tax regime that hands out tax free capital gains to property speculators as nothing but pure lunacy.  And he would not be wrong. 

Problem is, he is wrong.  In a press release issued yesterday, the New Zealand Property Investors' Federation Executive Officer, Andrew King, rightly pointed out, 'Those who buy and sell property are already taxed on the income from this activity,' whereas the majority of rental property owners are investors not speculators - a distinction that Mr Cunliffe's Labour Party seems to have failed to grasp if their leader's frequent interchange of the two labels is anything to go by.

Property speculators are those who derive a living (i.e. an income) out of selling appreciated assets (i.e. properties) which had increased in capital value.  They are driven by capital gains which are already captured by our income tax regime each time they are made.  In essence, New Zealand already has a capital gains tax in all but name.  

Property investors are driven by reasons that are far more diverse:

  • Providing a passive income stream to supplement our retirement;

  • To have total control over the value of our investments (rather than investing in shares, currencies or finance companies the value of which investors cannot affect); 

  • To invest in an industry (accommodation supply) that continues to have strong demand (housing); 

While any incidental capital gains made throughout would not be un-welcomed, they are only illusionary (because they will be exhausted the moment investors buy back into the market).  

'So,' you wonder, 'where does a CGT leave investors?'  But perhaps more pressingly for me, 'Where does a CGT leave tenants?'  With or without a CGT, demands on the Auckland housing market will always make properties a realistic prospect for investors.  A tax raising scheme designed to dis-incentivise investors will only result in the increased costs be passed on to the tenants who, ironically, are the ordinary Kiwis Mr Cunliffe set out to protect.  

Back to basics - Warren Buffett's 5 Investment Fundamentals For Property Investors

Friday, February 28, 2014

Arguably the most successful investor of our age whose name is synonymous with the very act of investing, Warren Buffett is known the world over for his staggering successes as well as folksy demeanour.  In his eagerly anticipated annual shareholder letter, the Berkshire Hathaway chairman this week shares some sage but startlingly simple investment advice.  

Stripping out all the high-browed jargons and toning down on financial rhetorics, Warren Buffett reflected on two small parcels of real estate investment he made to "... illustrate certain fundamentals of investing:

  • You don’t need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognise [sic] your limitations and follow a course certain to work reasonably well. Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick “no.”
  • Focus on the future productivity of the asset you are considering. If you don’t feel comfortable making a rough estimate of the asset’s future earnings, just forget it and move on. No one has the ability to evaluate every investment possibility. But omniscience isn’t necessary; you only need to understand the actions you undertake.
  • If you instead focus on the prospective price change of a contemplated purchase, you are speculating. There is nothing improper about that. I know, however, that I am unable to speculate successfully, and I am skeptical of those who claim sustained success at doing so. Half of all coin-flippers will win their first toss; none of those winners has an expectation of profit if he continues to play the game. And the fact that a given asset has appreciated in the recent past is never a reason to buy it
  • With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations. Games are won by players who focus on the playing field – not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays. 
  • Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important. (When I hear TV commentators glibly opine on what the market will do next, I am reminded of Mickey Mantle’s scathing comment: “You don’t know how easy this game is until you get into that broadcasting booth.”) "
To read the entirety of the 2013 annual Berkshire Hathaway shareholder letter, click here.  

3 things you need start doing right now to make your life easier

Monday, February 10, 2014

If you think being a landlord is more hassle than it is worth then I challenge you to think again.  

The life of a landlord does not need to be a drag.  True, there are always extra obligations and risks you take on when you become a property investor.  But then the same thing could be said of all business endeavours.  By being clever with your time and more selective with (superfluous) tasks, you will be well on your way to keeping the extra stress under control.

  1. Stop checking your (rental) bank account everyday - No no, I am not saying to let your tenant get away with not paying on time.  That said, most people do not get their jollies on at the prospect of doing accounts and administration.  If you have multiple tenancies, streamline your accounting practice by aligning all your tenancies so that all rents are due on the same day.  Pick a day of the week when you do not have many other commitments so that you can spend an hour or so to go through your rent arrears protocol should you need to.  

  2. Stop calling your property manager all the time - Don't (over-) manage your property manager.  Good property managers have systems in place to keep you in the loop.  Most will furnish you with a monthly report on the state of the property as well as the rent account.  If you feel the need to keep constant tabs on your property manager, you should start asking yourself whether you should be trusting them with your investment properties.

  3. Stop scatter-gunning your maintenance/repair routine - Regular maintenance and occasional repairs are part-and-parcel to being a landlord.  Instead of going into a blind panic each time your tenant rings about a leaking pipe, have a protocol in place so that you know exactly what you should be doing.  A typical maintenance and repair protocol includes a contact list of trustworthy tradesmen, pre-existing email template for you to give adequate notice to your tenant, as well as an amount of buffer money sitting in your account ready to pay for the job.

What are some of your stress-less tips for your fellow landlords?  Sound out and share below!

Your notice is served

Thursday, December 19, 2013

From time to time, you will find yourself having to communicate with your tenant formally during a tenancy.  This is done by way of serving your tenant a notice/document (which is really legal talk for someone to legally receive your communication and be notified of its contents).  

Be it a 14-day notice to remedy, a rent increase letter, or even a notice to terminate, sections 136 and 136A of the Residential Tenancies Act set out the legal parameters within which notices can be served on a tenant.  

Here is a break-down of rules and timeframes:

Types of service Methods  The day on which notice takes effect* If served on a Monday, notice is deemed to legally commence on
In person Physically handing the notice to the tenant. If the recipient refuses to accept, than dropping it at their feet.   The following day Tuesday 
By post  Posting the document to the address for service provided (best to retain tracking details). 4 working days after the date of posting  Friday
By delivery To the address of the tenancy:
  • placing the notice in the mailbox;
  • attaching notice to the door in a prominent position; 
  • handing it to a person who appears to be over 16 and who resides at the premises.
To any other place of residence of the tenant by:
  • handing it to a person who appears to be over 16, resides at the premises and who confirms that the tenant also resides at the premises.
To the tenant's address for service (if the above do not apply) by: 
  • handing it to a person who appears to be over 16 and who resides at the premises.
To a solicitor or an agent of the tenant who is duly authorised by the tenant to receive legal notices.
2nd working day after delivery Wednesday 
By facsimile  Transmitting the notice by fax if the fax number was specified as an address for service no later than 5pm on a given day (best to retain a copy of transmission confirmation).   Next working day after it was deemed sent (before 5pm)  Tuesday (if sent before 5pm)
Wednesday (if sent after 5pm)
By email Emailing the notice to the email address specified as an address for service no later than 5pm on a given day (best to retain a copy of email) Next working day after it was deemed sent (before 5pm) Tuesday (if sent before 5pm)
Wednesday (if sent after 5pm)

*unless the tenant can produce evidence to prove that delivery was delayed or did not occur

If time is of the essence and you want your notice to take effect as soon as possible, we recommend you to serve it by facsimile or email (make sure you collect these information at the start of the tenancy as addresses for service for this exact purpose).  

10 Signs You Are A Property Addict

Wednesday, December 11, 2013

This is a public health announcement.  

Authorities in the city have noticed a growing number of deranged individuals running amok infecting the unsuspecting citizenry with an insatiable appetite for all things property.  Not since the Great Zombie Invasion of 2004 has humanity fallen victim to such well mobilised guerrilla attack.  This airborne contagion spreads in a matter of seconds and scientists have yet to formulate a cure.  

As the infectious spread is building up to be of epidemic proportion.  Health professionals are finding themselves short-staffed and out-gunned.  As such, the below symptom list has been published as a self-diagnosis guide for anyone who suspects themselves to have been infected.  The symptoms are:  

  1. You read the title of this post and thought, 'Yep, guilty.', but read it anyway.
  2. 'One' automatically corrects on your iPhone to 'LVR'.  
  3. You are seriously considering naming your twins Bob and Jones.    
  4. When an employer asks for your CV, you instinctively reply, '$350K as of 2011.'
  5. (Even worse) you then gleefully think to yourself, 'Prendos just valued it at $500K.  Now beat that!'
  6. You don't know how many kids you have got but you carry pictures of all of your renovated properties in your wallet.  
  7. If you go for 8 hours without surfing the Trade Me Property Section, you start suffering acute menopausal symptoms.  You are 25 and probably not even a woman.  
  8. Your best friend stopped inviting you to his house because the last time you went, you knocked down a wall to increase the his rental return.  He is not renting.
  9. You genuinely believe a person's property portfolio is an accurate barometer of her worth as a human being.
  10. You are the author behind the website for their repeated and arrogant insouciance towards your perfectly legitimate request to have a 'tax' button programmed into its iPhone calculator app.  How else are you going to work out your net return?!   
If you identify with 3 or more of the above symptoms then it is recommended that you seek immediate help.  Community based support groups have been set up all around the city to help you cope with your affliction.  

Good luck, and God Bless.  

Redefining Wealth

Tuesday, December 10, 2013

The fact that you are reading this blog tells me you have more than a passing interest in creating wealth.  But before there is a meaningful wealth creation plan there has to be clarity on how wealth is defined.  

Many of us are conditioned by our culture to believe that sustainable wealth is only achieved with a 9-5 job that gives you a six figure annual salary.  So we strap ourselves to our jobs for regular pay cheques.  We go all out gunning for that pay-rise by putting in extra hours and outperforming our peers.  We are both accustomed and dissatisfied by our levels of income.  So we keep doing more, in order to earn more.  But time will eventually run out.  One day, we will no longer be able to work.  What happens then?  All the tens of thousands of pay cheques we earn in one lifetime cannot buy us more time.  Even if they do buy us more time, would you want to spend it working?

So how do we conceptualise wealth in a way that gives us a realistic barometer on our real financial well-being? 

I believe the answer can only be found if we radically depart from the traditional income-based assessment and embrace the concept of achieving wealth through a cash-generating asset-base.  Consider a retirement fund (such as KiwiSaver) that sees you through your later years, that in itself is an asset-base which you would have had to invest in during your working years.  The Kiyosaki doctrine of wealth also talks about acquiring more assets rather than acquiring more income.  In fact, seasoned investors at APIA are those who may not have the highest levels of income but are incredibly well-attuned to the qualities of assets (i.e. properties) and their abilities to generate cash returns. 

I am confident that a rewarding and sustainable wealth plan is attainable by the simple understanding that the money coming in has to be greater than the money going out.  By focusing on acquiring cash generating assets, we can overcome the barrier of time and age and secure our financial well-being with a continuous stream of incoming cash. 

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