Hi Wolly!

“After the offer has been accepted, is there a cooling-off period?”

Yes. that is unless you make a totally unconditional offer! Usually you make an offer subject to this and that (touch base with a solicitor prior to your first purchase and talk through the process with them. Run all offers past them first especially initially.)

Cooling off period = unconditional period. How long that is is up to your offer. Obviously vendors like them short or not at all, and purchasers like them long, so you find a happy medium. 5-15 days is usually good. 3 days if you are really crazed on the deal and want to be more competitive and have the money ready for a deposit and are confident you can get builder’s and val. But for me – 5 working days is an absolutel minimum.

“How long is the usual period from deposit to going unconditional?”

Deposit is not due until unconditional. In Aus the trend of offering a deposit on signing has not caught on so basically it costs you nothing to sign an offer, and if accepted, the deposit (usually 5-10 percent) is payable on unconditional.

Once unconditional you have to settle the property. I.e. your ‘out’ is prior to unconditional.

” I gather this is the time to do your due diligence (property valuation, number crunching etc). What is the typical time until settlement/exhange of contracts?”

Yes. as I said 5-15 working days is good. If you can get it.

“It is typical to do both pest and building reports?”

Typical for me, but you’d be surprised how many don’t bother. Pest – not so typical. NZ doesn’t have termites, it has borer. Borer is more laid back, eats slower, not as big a deal, can be ‘bombed’ and killed cheaply. Borer is picked up in the builder’s report so I don’t know anyone who bothers with separate pest inspection in NZ.

” In OZ, I’ve been advised that it is wise to make sure there is a clause in the contract ‘subject to pest and building…’.”

Yes, in Aus it is more difficult to get vendors to accept many more clauses than that – but we write in all sorts of things. that we want access before settlement, that the contract can be done via fax, that we want keys on settlement, that we want the vendor to fix up this and that before settlement, we need access to the tenancy details, that we want access to fix/kick out tenant and re-let/renovate prior to settlement, all sorts! You may not get them over the line, but we always try, anyway!
If you haven’t done it before do get a lawyer to word the clauses for you.

Settlement – usually we ask for 45 days from unconditional especially if it has a tenant, and
you may not want to settle the property with a bad tenant put in there by the current owner.

So you may want vacant posession. As you have to give 42 days notice, therefore 45 days to settle is needed. If the house is vacant or you want to keep the tenant or you can settle quicker (perhaps for a discount?) then 21 days should be about the shortest. Shorter than that and you may be struggling, especially if finance is involved.

If you are settling in cash, then just ask your lawyer how quickly you can settle.

cheers-
mini

Hi Guys.

At the same time as castle dreamer was in NZ on the ground and couldn’t find a thing, I *finally* got to contract a great yielding property in a suburb of a town expected to double in population within 2 years. (yes I have that in writing, but it is not yet published yet – but it will be!)

Yeah – heaps of problems (where do I start!) but
for 70k down odd, under valuation, 4 months to settle and I can make a 200k upside in that space of time, it is SO worth the trouble to sign it up (took me a month – don’t ask!) and the trouble to get it sorted (I.E. what I’ll have to do to earn that 200k!- don’t ask!).

The cheapie high cashflow deals, well every man and his dog is after those. get in line!

And if you find one, make an offer, and don’t muck around and waste time and second- guess and dilly dally – grab it, get it off the market, pronto! Or else someone else will by the time you’ve decided it might be a good deal after all.

what the clients on our list don’t necessarily know when we elegantly present 20-30 pages of a neatly signed up cashflow positive property to them complete with 50-100 photos, title, rental assessment, etc etc etc- is the amount of rottweiler-like wrangling, haggling, nagging, persistence, back-up offers, negotiations, schmoozing, driving around, photographing, faxing,and generally WORK that goes into getting a good deal signed up.

also they don’t necessarily know that for any deals we got, there were several offers we put in for deals we didn’t get.

So my advice would be – if you see a deal, put a contract on it and get it OFF the market so can investigate it properly, as soon as possible.! make the most competitive offer you can. As bird dogs, we of course have to have due diligence and this and that and fax and assignment AND a good price, but you guys – you can make cleaner offers.

so go get ’em!

cheers-
Mini

Yes indeed the bulk purchasing of apartment blocks (for example.) That’s why I don’t really see what we are finding in NZ as competition to richmastery as they tend to go for a different sort of property to us. We mainly do houses, duplexes, smaller blocks of units, not so much into the apartment thing. If you were into that sort of thing I would recommend richmastery, well I would recommend joining up their list anyway, why not, you might learn something even if you don’t buy. I’m on it! But then again you might see a great deal!

cheers-
Mini

Hi Westan, yeah, that sure does gladden my heart.

I remember spotting four deals for one of my first clients. We got her 4 x houses in Stratford for 80k ( as in, 20k each.)
CF+ve like mad, of course. She bought them as a portfolio so we actually bargained the price down from 100k to 80k.

Cheapest house on the market right now today in Stratford is 89k. So, based on that being the new bottom of the market price for a house, hey, I helped my friend make 276k in capital gains in two years – ‘free money’ – not to mention 35k or more in cashflow.
Gee, that feels really good!

Especially when you calculate the cash on cash return on 20 percent deposit on 80, which is
16k down for 19 times your cash in the deal back.
a cash on cash return of, er, 1900% in two years.
(if you sold your houses now for 89k each give or take closing costs etc).

If you halve that it’s 950 percent COCR per annum.

Wraps aim for 20-40 percent cash on cash return, don’t they, which is why people do them – cashflow. So it’s like up to a 46 times better performing investment than a wrap. Wow!

If I hadn’t got the same sort of result with my own portfolio I wouldn’t have believed me either!

Thanks, steve McKnight seminar, yes, the $900 I paid to attend was worth it.!

cheers-
mini

Well I was never too crazed on it, but it has been making the news as a place on the up, so…maybe it has proved me wrong. I don’t have any money there though.

westan who lives close by is vibing it though, there is loads of stuff planned for the area, so it may be quite a good place, who knows really!

check rental demand, that’s a good first port of call

“It has really friendly people that would do anything for you,that’s if you take the time to get to know them.”

well, aint’ that the truth! For many towns in NZ.
I just found, the slower pace of life means that everyone has more time for everyone else, which is so refreshing when you’re used to the fast pace of Sydney. You could say that about any country or regional towns, like in Aus, but I have been to them too, and until you go to NZ and experience it yourself you won’t get the true ‘thing’ that NZ has goin; on which is so unique.

I don’t have so many personal relationships in Tok as I do in other towns in NZ because they are sorta by way of my local investing and spotting compadre, however
speaking of said source of all knowledge of Tok, she is very excited about Tok at the moment – VERY.

what can I say!

> Don’t they say ‘one sparrow doesn’t make a summer’?

Yes, they do say that.
I wasn’t the only sparrow, however there were all these big squawking magpies who were louder and there were much more of them, so nobody heard the sparrows, and said, hey, you’re just a sparrow, and you were just lucky, and I don’t believe you anyway, etc etc, yeah, I’ve heard it all for the last 2 years, and it bores me senseless, however I do consider it my public duty to correct the mis-information that is spread on these forums by people that don’t know any better.

> If long term sustained growth is so good

hang on, UHHHHMMMMM, don’t put words in my mouth.
I am not expecting that to happen every year to the same property.
You wouldn’t expect it on your blue chip properties either, would you?
Well, then you’re in denial about periods of negative or flat (non) growth.

In fact, I’d go as far as to say that the more blue chip you go, the bigger the risk is of capital loss. I.e. Walsh Bay apartments. People bought them off the plan for 2.5, 3.5 million and more. 65 percent sold to owner occupiers, and 35 percent to people as an ‘investment’ – to onsell for capital gains, or rent out (I suppose.) Now these are not only absolute waterfront, they have amazing views of the harbour, and they have not just one side of the apartment on the water but both sides, They are incredible. I don’t even like apartments that much ( poor people’s accom strumped up and sold to rich people!!-) but these are really amazing. Now they are having trouble renting them for a two percent yield, and they can’t sell them either – unless for a million dollar loss per property. I had a great chat with a RE agent onsite last weekend checking out the absolute carnage that is going on there.

Oh yeah, so the rent (2 percent on asking price) – nobody was willing to pay it, it had been vacant since December. We were going in to negotiate the price down a third and the agent said we absolutely had a good chance. This would have taken it down to a 1.4 percent yield.

I am just trying to contrast two extremes to show that somewhere between the cheapie houses and the 3M+ houses you get a difference in yield from 20, through 10, down to 7, to 5, 4, 3, and then 1.4.

And with CG’s, you get 300 percent (I would have told you about my friend’s property which 5 timesed in value in a year, but I thought you wouldn’t believe me!!!) at one end of the market, through to 25 percent p/a/ in the ‘top suburbs’ at the height of the boom, down to 1/3 capital losses or more at the very very top.

In fact I have been looking at properties in Double Bay, and let me tell you, they are absolutely giving them away at half price compared to a year or so ago.! No bull!!!

>why is it that property in smaller
> towns/regional centres etc is generally cheaper than cities?

Um, because the land is worth less. (Is this a trick question?)

> And while percentages sound impressive – raw dollars are equally as important.
Yes, I am sorry this was not clear, but I meant this: high percentages of return (either CF or CG) equate to a high percentage of ‘raw dollars’ back, in relation to the amount of ‘raw dollars’ you have in the deal.

> And – if someone is spotting (whatever) in a smallish location it is possible
> to manipulate the market to create such results.

Yes indeed, and (if you are talking about ‘moi’, I wouldn’t be so brazen to suggest that little old me could cause a boom in a town of 5000 by name-checking it on a forum, but I’m flattered that you think I could!
It has been suggested to me before, actually!

However, if you think that these figures were only achieved by buying in a ‘smallish location’ then telling everyone else to do the same, – it wasn’t just me. People all over the place were getting the same results, in places I wasn’t buying in. Also, for something you Aussies will be able to relate to, prior to NZ (before I was investing) the same story was going on in places like Elizabeth, South Australia where you could pick up a high yielding property for 30k or so, and then a few years later it was worth 90k.

> Speaking from experience we did it for our members in a suburb of Perth and
> also within another similarly coonfined area in Perth.
> We ‘took out’ a great many suitable, right priced properties in the two areas
> and then left while maintaining the services to our purchasers.

Controlling the market, yeah sure, if you are big enough, you can do anything, but it doesn’t make you right. I.e. bill gates and microsoft,
the crappest operating system got the most popular. Or remember VHS vs Beta, beta was fabulous, and VHS was crap, but VHS got the monopoly.

It’s just manipulation. I didn’t manipulate the market to ‘make’ my properties do this, honest!

> All of a sudden there is nothing suitable left at the previous prices,

Yes, it’s called capital growth.

>people
> are paying the next tier of price, property sales stats are up and real estate
> agents start talking the areas up and the areas gain a momentum of their own.

Yes, and my job is to purchase in the areas *before* this happens, by looking for the same patterns and conditions. For example, let’s say you hear of plans for a westfield shopping mall going in to an area. Now if you buy there as soon as it’s built, you will beat a whole bunch of people who will only notice the area is ‘going off’ when the westfield actually starts construction. And then those people will buy there. And those people will beat a whole other group of people who will wait until the westfield actually exists, and then notice it and say ‘wow, that suburb used to be crap but it’s become quite trendy now’ and buy there. Where are the prices now? And who is controlling the market? who made that happen? me? westfield? people? real estate agents?

Westfield is an investor, just like me. They do their research, and plan to build their complex. developers hear about it and build apartments ‘just near the new westfield’. Councils design new bus routes to stop ‘at the new westfield’. But the great unwashed don’t see it until it’s there. So I try and go in at the same time as westfield. Is it a surprise that , badabing, everything went up in value? No, duh.

So small towns. Maybe it’s not a Westfield, maybe it’s a new Bunnings warehouse, or a Warehouse (a NZ thing.) Maybe it’s a new hospital, or a school. or an extension of a motorway. Maybe it’s even just the ‘announcement’ of this ‘maybe’ happening. This is of course when is the absolute perfect time to buy! Even if that announcement doesn’t happen, you get the sign that people are ‘thinking’ about doing stuff in this town. Whatever it is, it is the sparrow of capital gains, and it can be a big or a small town.

The idea is to try to outperform the market, and so far , so good. I did it sorta accidentally before, but now I do it deliberately. I learned a lot from Westan who has done it in three countries now using this technique.

and surrey, “Only recently has there been a significant interest in regional centres”

Well, that could be true. The cities are getting bigger and uglier and more expensive, and sprawl out, and the roads get ‘faster’ with bypasses and so on, and suddenly Orewa (north of Auckland) is only 25 minutes drive not an hour’s drive.

It’s as if the country got ‘closer’ and more doable. Couple this with the city prices getting sooo expensive, and people go, hey! look, if we just go 40 minutes out of town, we can buy all this house for our money. And once they move there, they realise that 20 minutes further they can get an absolute palace for their money. And other people go, hey, i’ll buy it for the cashflow, or to have a weekend getaway. Remember that NZ is smaller than Australia and the small towns are not ‘remote’ like you get here, i.e. coober Pedy, 6 hours drive from anywhere, not really on the way to anything. NZ towns are all perfectly spaced close together between cities.
Or close to the sea. or close to ‘something’. A lot of the CF spots in Aus are just not comparable at all. I mean, in the North Island, the furthest you can be from a major city (auckland, wellington) is generally about 3-4 hours, and if you are further than that, then at least you will be 1 hour away from a major regional town of 50-100k people. Also all the towns are lush rather than barren. They get through traffic. They are not like the Aus regional small towns. Aus is so bloomin ‘ big, that it’s hard to comprehend. but NZ is wincy. and accessible.

I sorta know that I will not convince any closed-minded people that it’s OKAY!! however, I will bloody give it my best shot to try!

Hi Guys

Although I think it is great to get a discount, I count my property manager as perhaps THE most important person on my team after purchase to ensure the property performs as expected. Therefore, I don’t try to discount the fee, until I have three or more properties, where you could argue that they have less admin.

I wouldn’t like to give my property manager any reason not to treat me as an absolutely #1 priority client. I am not sure that saving a few bucks a week wouldn’t have a potential negative effect on the service you might get – a possible ‘psychological effect’ on your rental manager, who, once screwed down in price, might feel that you don’t value their service, – and then not give you the best service.
Perhaps is not worth it in the scheme of things.

I run a business and occasionally people try to negotiate my fee down. The result is that I feel less inclined to help them, not more inclined.

However…if your tenants are on a lease, or your properties are absolutely top notch, or your rental manager is screaming out for rentals, then perhaps it is different and you do have grounds to negotiate. I mean, of course, negotiating is all part of the game. However, I would prefer to get larger discounts on larger purchases, which fund the smaller expenses. An extra $1000 negotiated off a 100k house is only 1 percent – but you will never see the vendor again. but negotiations with your property manager, who are making sure you get paid every month, (cause then they do too) – if those negotiations go wrong, they will bite you on the bum every month potentially! Your relationship with your rental manager is absolutely KEY. surely this is the one area not to scrimp on, and ‘buy quality’??

Re 10 percent surcharge, hey, $20 fee to organise a $200 new hot water cylinder is fine by me. What, you want to save $20 bucks, ring around, get a quote, by the time you’ve made a few phone calls, getting a quote, sending an email, arranging access for the tradesperson, making sure it happened, not knowing if it happened properly because you are overseas, transferring money to pay the bill, getting the bill, printing it out, filing it in your expenses file – how much time and money have you spent?

isn’t it SUCH a good deal to have someone do this for you for $20 bucks?

I’m sticking up for the rental managers, working at the coal face, they get the grittiest job of all which is screening and managing tenants, and ensuring you get paid. look after them, I say!

cheers-
Mini

I agree, it’s not so much the house, or where it is, or anything like that – it’s how you solve the problems. Hey, is being next to a gang member a problem? Not if you get 100 percent CG’s in 18 months. Is a renovation that costs 14k to get the house up to scratch a problem? No, not if you end up getting 24 percent cashflow returns on purchase price plus reno costs. Plus when you get 100 percent CG in two years to boot.

I can’t say that I didn’t have problems, and loads of them, but how you deal with them is what counts.

Now my latest ‘problem’ is that my fence is falling down and the new tenant was complaining about the lack of pantry. I am getting a new pantry for $175 put in to the kitchen which will add value to the house and keep my tenant happy, but is that a problem, or just something you do?

That one happens to be a 20 percent return and I haven’t spent a cent on it for 18 months, when I renovated it completely from top to toe.

I do hear horror stories, i.e. “help, the only rental manager in town refuses to manage my property any more.” And the answer is ‘well that was because you didn’t pay a repair bill and she got the shiznits with you”.

And so I go in and schmooze and flowers are sent and everything is solved. You see, it’s not what happens it’s what you make of it. Example, Winston Churchill.

Also note that DD specialises in Queensland which anyone savvy knows does not represent ‘the market’ – it is doing it’s own thing, so listen to DD, he really does know – he makes it his business to know.