More options for retirement than just your home and kiwisaver!

So, nothing has really made me fire up lately like this particular article posted in nzherald.co.nz today.  Although in saying that I have been off busy getting married, so that has been on the forefront of my mind these past few months.

Correct me if i'm wrong but the girl in this article, Chelsea, sounds as if the only option she and her husband have to a financial free life is kiwisaver and paying off their home... Does the average person really think this is the only way to retirement?  Sure, I am in absolute agreement that it is a great way IF it is all you have, but surely a couple who are 25 years old know that they can come up with more than that over 30 years?? Clearly, based on this article, this is not the case!

And to say if they pay off a certain amount off the mortgage they can get blinds??? Just blinds??? Gosh, they can get a lot more than that if they wanted to create more financial wealth.

A very frustrating article me thinks...

Young & Singles Guide to Property Investment

It occurred to me just now that I have never actually written a blog post promoting the book I wrote in 2007.  Actually I never really did any promotion at all.  However, in spite of this, the book has done rather well all on its own and I thought i'd take the opportunity to share some thoughts on it.

This book has sold approximately 500 copies in over 130 book stores throughout New Zealand and approximately 600 privately.

What's it about...? Well, it answers the questions that buyers don't necessarily know to ask.  For example:

1. What’s the difference between a registered valuation and a government valuation?
2. What reports do I need?
3. What conditions should I have on the sale & purchase agreement and what do they all mean?
4. What do the different titles mean?
5. How should I pay off my debt?  Do I need to pay off my student loan first?
6. What is the difference between all the ownership structures?  
7. What are my mortgage options and what do they mean?
8. What is the Mortgage/Purchase process?

This book is just my opinions/explanations on topics that I learnt about by default when I went through owning six investment properties by the age of 21.  I explain the issues I faced being on one income and being young.

So, if you haven't already got it or read it, feel free to order it from this website :-)

Going forward, I am planning two more books - Young & Singles Guide to Business and Young & Singles Guide to Alternative Investments.  I am however, commencing an MBA from AKL Uni next year (3 year degree), so by the time I come out of that, i'll be 'Old & Married', so the name of the book could change.... hahaha, watch this space.

Thanks for reading.

:-)

Spot the Obvious!

A Survey out recently explained that 1 in 7 people are not keen on buying an investment property today v's the 1 in 4 people a year ago.  To that my immediate thought was, duh, spot the obvious!!! Would you, Mr Joe Bloggs, be keen to by an investment property when everywhere you look there is yet another article telling you the property market is stagnant and the returns are next to nothing???  Of course this is potentially going to knock confidence a bit with a general consumer.

From my research (that anyone who logs on to REINZ.co.nz can get), I have discovered the following:

I have highlighted the two times where the drop in price actually happened which is 1998 - 1999 and again in 2008 - 2009.   If you work out the percentages it is less than a 5% drop - oh my goodness, big deal! right?  Agh no, not really.

Ok, so i've only done this for Auckland (for now) and sure, I know that some parts of the country and some suburbs were effected a lot worse than this picture I've painted above (Manawatu - where i have property for one), but I am just trying to indicate that I don't think it is really that bad (from my basic research anyway).

I just do not understand why there is so much involvement from so many people talking a property market down when the fact is, who can really predict past tomorrow?  The property market in my eyes is just doing what it does, its going cold for a few years, we are probably another 2-3 years away from it picking up but I don't think it is the end of property investment as we know it.  In fact, for me, I want to start buying up a couple of properties per year over the next few years, pay down the mortgages as much as possible to gear me up for the eventual return of the next rise (however big or small it might be).  There are more benefits to property than just Capital Gain.

Property, bricks & mortar, like it or lump it, is safe.  Supply and demand, employment, immigration, overseas  dramas, all major factors in property markets all around the world.

I'll leave you with this question; we aren't making anymore land are we?

Social Media for Real Estate Agents, made simple...

I read a brilliant report by Stefan Swanepoel & Mel Aclaro over the weekend and if you are a Real Estate Agent and haven't seen this book, I highly recommend it.  Its called, Swanepoel Social Media Report 2010.

The one thing I really liked about it was the comparison they make with Social Media to a Symphony Orchestra.  There is a very good diagram outlining this.  In short, you are the conductor and all the social media tools are your instruments, you need all to reach your full online potential.  Blogs, Micro-Blogs (twitter), Networks (linked in, facebook) are all really important.  This is another form of prospecting that shouldn't be ignored.

I can almost hear what some agents are saying now... "I don't have time", well, make time, its important, and so much easier than walking the streets with letterbox drops, especially in the freezing cold!

Stefan & Mel have made it really easy, at the back of this book they have a 10 day plan, which is brilliant.  It starts with writing your 'Purpose Statement' which is very important as it's easy to become lost within Social Media and get nowhere, so starting with this gives you direction and precision.

Hope this helps...

Jodi

Contemporaneous Settlements - What they don't tell you...

Just an explanation of what they are first.  Contemporaneous Settlements aka Double Settlements are a property transaction whereby a property is brought and settled twice on the same day; brought once by the property finder, who will have gotten the property at a very discounted rate, and then sold by the property finder and brought again by the end purchaser.

An example on how this works:

Key
Purchaser 1 (P1) - Property Finder
Purchaser 2 (P2) - End Purchaser/Owner

P1 negotiates the purchase price on a property for $200,000
P1 finds P2 and signs up P2 to purchase the property for $250,000
Registered valuation on this property: $260,000

When the settlement day roles around, hopefully everything will go through smoothly and P2 makes $50,000 as their fee, less any agent/solicitor fees etc and P2 purchases a property $10,000 under valuation.

Very simply, this is how it works.

So effectively everybody wins and all is good, right?  Well.... I have some views on this...

I agree that property finders can provide a valuable service.  Their role is to find incredible property deals and because they have the time and resource to do this it can really help some purchasers who potentially wouldn't have brought otherwise.  Property Finders obviously need to get paid on their service and so, a contemporaneous settlement is a good way to ensure this happens.

HOWEVER, what I fear some Property Finders don't tell you is how the banks view these deals and how hard they can be to get approved.

Firstly, if the vendors name on the sale & purchase agreement is not on the title, the bank could want to look into this further and request to see the original sale & purchase agreement between the original vendor and Property Finder.  Banks now look at titles on each purchase.  They didn't used to which is why these deals used to be so frequent.  This is not the case anymore.

So, (referring to key and example above) if the bank sees that P1 has got a contract on the property for $200,000 and P2 is trying to obtain mortgage finance of $200,000 which is 80% of their purchase price of $250,000; the bank will more than likely turn around and say that they will only lend on the original contract.
What does this mean?   It means that the bank will only lend 80% against the $200,000 NOT 80% against the $250,000.  What this effectively means is that you need to come up with another $40,000 for your deposit as the mortgage the bank will approve in this case will be $160,000 (80% of $200,000 - original purchase price).

So, ask questions around the final mortgage approval if you are considering purchasing a property through a property finder.  Check with your bank if they would lend in these circumstances and tell your bank everything; don't hide this as they will find out.

This is based off my market research into this and own personal experience with trying to get these deals through when I was a mortgage broker.

New REAA booklet - NZ Residential Property Sale & Purchase Agreement

Just got off the phone with the REAA and this is quite an important post so I hope you buyers out there are reading!  Feel free to pass this on also - spread the love...

As the Author of Young & Singles Guide to Property Investment, a book I wrote and designed specifically for newbies to the property market, (you should REALLY think about ordering yourself a copy if you don't have one by the way, especially if you are buying anytime soon), I feel a sense of duty to advise you of your rights as a buyer in regards to this booklet that the REAA have put out.  You, as the buyer, need to read this booklet if you are making an offer on a property, you will then need to sign a form to say you have received and understood the contents of this booklet.

So, with that said, on page 5 of this booklet, I found the wording to be a little bit unclear.  All's I will say is I have researched it and my findings are as follows (always chat to your solicitor though before you sign the agreement - please):

The wording in the REAA booklet reads that you pay your deposit on Acceptance and the commission is then paid to the Agents when the contract goes Unconditional.  Let me start by saying, you DO NOT have to pay a deposit on the Acceptance of the Sale & Purchase Agreement.  In my opinion, I would advise you to pay the deposit on the Unconditional day, you can even hold the whole amount and pay all of it on Settlement day if you really wanted to (might be a bit tougher to get the Vendor to agree to that though).  

Please keep in mind that you as the buyer can be in just as much control as the vendor, you can negotiate the terms of sale too.  So for example, if you only want to pay $10,000 as your deposit on Unconditional day and the rest on Settlement day, as long as the vendor agrees, then you can do that.  This example is common, especially when you have a smaller deposit to start with.

If you have comments to add, please do, be good to get the feedback on this issue.

Right, now I can sleep easy.

;-)

The new Real Estate Agents Act and what does this mean for you as a buyer?

Ok, thought I'd explain a few of the changes in this new Real Estate Agents Act (2008) that came into effect last Tuesday on 17th November 2009 after going unchanged for 33 years.

The nitty gritty of the new act is explained in Alistair Helm's blog who is the CEO of Realestate.co.nz, well worth subscribing to his blog by the way.

There is also good information in Ross Brader's Blog, a successful Agent in Pt Chev.

Of course you can also go to the actual REAA website (Real Estate Agents Authority).

Few bullet points as to the key changes:

1. Cost for agents to stay working in the industry are going to increase. They now need to be individually licensed, this wasn't the case in the past. They had to be qualified of course, but not individually licensed as either a sales person, branch manager or licensee.
2. Agents need to now disclose to the vendor all discounts off marketing/advertising they might be privy to; and the commission they receive from the sale.
3. As a buyer you will need to sign a disclosure confirming you have received 'The New Zealand Residential Property Sale & Purchase Guide' BEFORE you sign the Sale & Purchase Agreement. The vendor will also need to sign one similar.
4. Licensee's now need to produce a market appraisal on each property listed. The price they come up with must be supported by comparative sales and must meet expectations of the Vendor.
5. Fines toward Agents or Agencies are now not in the hundreds they are in the thousands and tens of thousands.

My take on the new Act is that it's definitely been needed. It is going to professionalize the industry even more than it was which can only be a good thing. It is basically going to make everything very transparent, which again, is a good thing.

One thing I would mention is, think really hard if you are going to make a formal complaint to REAA about an Agent... not only will they be taken through a very lengthly battle of paperwork and drama, but they could be fined thousands and thousands of dollars. Ok, absolutely fair enough if what they did was purely wrong and the mistake is valid, but just keep in mind what you could be ruining by making that complaint.