Forum Replies Created
as little as about $650
masteraccountants.co.nz
company – online for $55 bucks
NZ companies registerbut might be better to do this through an accountant if you don’t live there
“Debt can pay for debt.and its tax deductible (?)”
Michael, this is absolutely killer stuff!
Wicked! – I think that absolutely nails it.I’m mulling that one right now!
deals are available all over NZ, in cities as well as smaller towns.
realenz.co.nz
has the deals and also the market rental stats
(free)
You can also buy region overviews and e-valuations (i.e. comparison sales in an area for the last 6 months to a year, all sorts,)
at qv.co.nzThe last two excellent deals I purchased myself have been through a local NZ spotter who knows the market backwards, and is there to grab the best deals and latest listings before they even make the web in many cases, this sort of thing is priceless in my opinion
cheers-
miniThe worse your property is and the less you want to keep it maintained and spend money on it, the more problems your property manager will have getting top dollar for it. then you will blame your rental manager and it might not be their fault.!
Basically if you have a decent property and are a good landlord and attend to things promptly, when your rental manager says fix a paling on the fence then do it, when the stove is busted then get it fixed within 3 days and keep your tenant happy, etc etc, then your rental manager will love you, you will love them, you will get good service from them, their life will be easier so they will prioritise you and your properties, not to mention your properties will stay fully tenanted and your rental manager will be asking you when you are going to buy some more for them to rent!
I bought some ‘disgusting dumps’ on purchase and did them up prior to tenanting and they have worked very well for me and been very popular with my rental manager and tenants, with less frequent changeovers (i.e. tenants staying longer) than my un-renovated properties.
Hi Loanwolf,
I am replying as a first-time small developer i.e. haven’t even done my first one yet which is two townhouses in a residential area. they will be similar in style to other existing housing in that street.
>I am assuming you all have enough cashflow >coming off your investments to fund your >lifestyle completely.
I do live off my properties these days and I only started investing 2 years ago. Basically I make money from ‘doing deals’ – is the most all-encompassing way to describe what I actually live off, the reality is there are about 8 different ways I do this and it would take me all day to explain!
>Can some one please tell me how you started.
Steve McKnight seminar, cheap undervalued high CF houses with 24 percent CF yields which doubled or tripled in value in a short time. Using buy, do up, raise rent/value strategy too for extra velocity. Zoomed ahead this way much faster than expected.
>Anyone work part time to pay their own bills >whilst also doing a development on the side?.
I am still busy all day and night but it’s not ‘work’ as an employee, it’s ‘doing deals’ work.
I expected that as I progress I will do fewer larger deals for the same or more $$$ rather than many smaller deals as I am doing now.>stop ‘working for somebody else’
Does not compute – because have never done that as an employee except as an under-20 year old. The rest has been freelance, i.e. for selfThanks Michael, I get how the interest is capitalised i.e. part of the cost of the development, but are you saying that you use equity to pay off interest, i.e. sell stuff? Or do you take out a loan and use some of the lump loaned to service itself?
I also understand that banks will sort of let you provide equity instead of serviceability. But are you actually able to service the loans, or not, because they are negatively geared? I suppose I don’t understand where you take the shortfall from…
positive gearing is just negative gearing in denial
– Minimogul
“take charge of your life as your own boss”
indeed, and my mother tells me I did this age two
and yeah – I heard 9-5 sucks, and I don’t know many people that actually do it. I did have one friend who was an employee but she was investing on the side (v. smart cookie) and bought a bazillion properties and now just grooves around various countries buying up large and living off her portfolio. Oh, i do love a woman of independent means.
Me, I work *whenever* until *whenever*, zero commuting time and all that, but define ‘work’ anyway? Does typing on the forum count? Does making an offer on a property count? Does starting a company constitute work? Does trademarking an intellectual property constitute work? Does developing a property constitute work?
PS Developments are negatively geared while you build them, so they should be in my opinion part of a positively geared portfolio and done in proportion so they don’t propel you back to employment, if you just left
sort of how melbourne compares to adelaide. both are lovely and both well worth going to on the same trip.
dunedin has this cool old edinburgh-ish flavour to it, amazing place, and it has water – a harbour – peninsulas etc
CHCH is very flat with a beach a few miles out of town – city looks like oxford england ‘punting on the avon’ – literally – chch is more $$$ than the same property in dunedin generallychch’s original town planner was the same as adelaide’s apparently i seem to remember reading somewhere
and then there’s oamaru, another gem of a town, and timaru, it’s uglier but bigger and less cool sister
and while you ‘re in chc check out AKAROA – stay the night, eat in a french restaurant, ride horses up to the ridge – and LYTTLETON scene of peter jackson’s film frighteners, in fact have a drink in the wunderbar in lyttleton, you will never forget it EVER!
such a cool part of the world. and then while you are there it would be a shame not to visit queenstown, mt cook, milford…ah…
Guys, what a breath of fresh air, and thanks for that.
Don and Liz I have been really enjoying your guys’ posts and some have hinted that your portfolio has become nice and hefty and I think that’s awesome, congrats.> From memory your new developement/s are in NZ. I thought the whole idea was
> growth. Not just in the financial sense but also personal growth through new
> ideas and experiences.
Absolutely and totally and utterly.
My first property purchase sort of did me in emotionally and mentally for about 3 months, with the self-doubt kicking in like mad, had I done the right thing, was it going to work out. Well it did and I bought three more in the next 8 months.There are fairly cheap ways to build, using various leveraged methods, (I am dying to work my way up to building tilt-slab townhouses but being the first in an area to do it not the last.) NZ is a world leader in many building techniques which they export to all over the world, such as Russia (very into concrete and steel apparently) and Asia. Anyway if you build with a financially viable method, the rent that you will get for these places very much works out. The valuation off the plan is a great risk mitigator and even if the valuation is the same value as the land + building costs and I *don’t* get the expected 26-45 percent equity on completion, then it’s still going to be a better rental cashflow investment than anything i could buy in the current market.
So another assumption that people have made is that everyone sells their developments. well I am sure that many do because they have to or because they live on their realised profits but the great thing about CF+ve is that you can live on that. How cool to have an investment property that should need virtually zero maintenance for years and years, is still under ‘guarantee’ for ages! that will certainly be a first, and makes the CF+ve return mean even more than it would normally. So if I’m not selling, am I a trader? Well, no, I’m not. So my tax situation is way different than someone who is selling. So many people made assumptions about this that and the other and really I am disclosing more than I meant to sort of in self-defence, but just to point out to people who don’t realise, how many judgements they make that they don’t realise they are making.
.
> You will no doubt learn skills through this new venture that will be
> invaluable throughout the rest of your investing career.
Absolutely, I am currently negotiating and signing up deals about 10 times the size of the deals I used to do, and it just feels utterly natural, but 2 years ago I wouldn’t have believed I would be doing that now plus developing to boot. And I will say that when you move up a notch everything gets much easier, it’s like you get treated a bit more special by all the people in your team whether that be lawyers, agents, etc, I’m finding it a real blast actually.
.
> I got the sarcasm re the OS structures. It’s not hard to see that you need to
> be paying loads of tax before you go to those lengths to avoid paying a bit.
Yeah – I am not paying loads of tax, (and not avoiding any either) because I am self-employed and therefore almost everything I do is tax deductible, it’s amazing. -if not for one business, then for one of the others I do.
It’s actually a bit of a rort that is one of the ‘tax benefits’ of the self-employed rather than the employees. However the downside of that is that I don’t look as good to a lender as I should do, ah, swings and roundabouts, I’m ok with it all.
> .
> Forget about the naysayers. Do your due dilligence and steam forward with the
> new project.
Absolutely!!!!!!
call me some time and I’ll fill you in! we can have coffee and shoot the breeze!> I am amazed with the amount of property work you seem to have on,
well you’re not wrong, and both my business partner and I both have PA’s now part time. I look forward to having one full-time, all fully tax deductible, of course! I use film-industry freelancers (much brighter higher class of person than your average boring temp agency backpacker) and they invoice me – fully tax deductible of course!>get them to invoice me. you can
> afford the time to write such lengthy posts…not complaining mind you – enjoy
> reading them, just must be a drain on your time resources.
Hah, well the time I don’t notice if I am enjoying myself (funny that!) and I am a hugely fast typer because I had piano lessons since I was 2 (not joking) and my lil’ fingers fly!> The topic of offshore co’s and trusts however, in general, does not frighten
> or scare me as we set up a company in some tin pot little island in the WI
> about 2 years ago for a very modest sum ($3K USD). Have never been there and
> really see no need to, but I’m told at high tide the country pretty much
> disappears for a few hours !!That is so cool!
yes, I have an offshore resident structure for my offshore development and I am in the process of starting up a dinky lil set-up just for the fun of it with
designertrust.com
I am not going to put anything in it for a while. just look at it, play with it, and get it out at parties (joking), but the rest was serious> We’ve had no grief about it, no intricate paperwork and certainly ne need /
> desire to consult with way over the top, high priced lawyers.
Exactly> Humans are funny really when some are literally petrified at the thought of an
> action, where another is quite calm and blaise about the identical action.
ExactlyGuys – don and liz and dazzling – it’s been a pleasure
I too think that (surprise, surprise) +ve CF is the only sort of deal to get. Oh, I did by some land once speculatively, but my portfolio is always +ve CF overall – the surplus was paying the rates on the land. Anyway +ve cashflow lets you continue to invest. I heard steve say ‘I have never bought a negatively geared property’. And hey look how well it worked for him. Another fallacy is that the CF+ve don’t go up in value – they do so! They have more capital growth than the negative geared properties, in my experience – though I haven’t yet found out a way to prove this with data – it’s only anecdotally. The other sorts, you can buy one or two or three depending on your income but then you have to stop because you can’t service any more debt. Then you could have loads of equity but still not be able to ‘afford’ to buy any more investment properties.
However with +ve CF you can keep buying more as each one you purchase gives you a surplus. No matter how small, this adds to your income and serviceability so you can keep going. And of course even with +ve CF properties you can still write off expenses just the same.
cheers-
Mini>good grief MiniMogul… the effort you put into tax dodging must be mind boggling!
Ausprop, I have never dodged tax in my life – tax evasion is illegal anyway in case you didn’t know.
It sort of pains me that you would even write that about me, that I must ‘put a lot of effort into tax dodging’,
I mean – whoa! Like where did THAT come from!It disturbs me that you didn’t GET my satire. This also brings up one of the problems with internet forums –
I write something, something so obviously ridiculous, non-sensical, made-up, and for amusement, to poke fun at the spaghetti of information
out there that I would have thought that any would-be developer would laugh at, be able to relate to.
The Bermuda Triangle, the granny, the 48.9 percent, all of that whole bit was completely BOGUS!! okay!
I thought I had written it in a way that would have made that totally obvious, but…hey, all forms of communication are flawed –
either at the sending end or the recieving end, and for anything that was unclear, I apologise!It does disturb me that people are so quick to judge, and though I like to post on forums, I am also doing business
in the real world and everything I do is fully compliant with the applicable tax laws.
it’s too easy for people who are ignorant/fearful (these are so often linked!) to point the finger and say
‘that must be dodgy’ but believe me it’s not, it’s actually very standard.comments like that wouldn’t be allowed in the real world either, and lawsuits have been flung around for less!
Yes – getting the right advice can be arduous, a brain strain, and expensive especially once you move into the international arena.
The skeptic in me sometimes wonders if accountants and lawyers just want to make it tricky so you pay them on-going fees.“any angle you look at has been thought of before and the door slammed firmly shut. And if it isn’t shut now it can be shut retrospectively.”
Again, a paradigm of failure and negativity – yours, not mine.
Possibly borne from having many doors shut in your face and coming to a conclusion about the world because of your personal ‘story’.
Fine, your right. I have made a living for years by ‘solving problems’ of various sorts, and developing to me is just another form of
problem plus solution equals profits. Profits mean income, which mean taxes – which mean accountants and lawyers fees to get advice.
Yeah, fine. Some people give up at the first obstacle and others don’t.>You’ve certainly got some guts to go down this path
you have no idea what path I am going down, and the fact that you think you do is only because you can’t tell satire from fact –
hopefully now this is explained>the sort of advice that the average punter with a couple of mill
Oh, is assets of a couple of mill the new ‘average’? I didn’t know that.>Thanks for the pointers though.
OK now I am really going to scream! They weren’t POINTERS! It was a made up gag of an ironic stand-up routine nature, and I really
believed that was obvious when I wrote it. Now read it again and see how funny and ridiculous it is!>I get nervous when people start talking of 49% ownership, trusts in Bologvia and any mention of the Bahamas!
I get nervous when people take something on an internet forum as gospel when it was not intented to be and I thought was made pretty
obvious that it wasn’t.I think I just need to give up here, and go about my business.
look, I am sort of used to this forum being a small percentage of go getters and problem solvers thinking up ideas, analysing them, and then taking action.
And 98 percent of people who will say it’s not possible, too risky, a bad idea, doomed to failure, it’s not worth it, and (worst of all) that I am breaking the law.
I have heard this ad nauseum even since I joined this forum hoping it was the ‘home of cashflow positive investing’ only to find it was 98 percent people that weren’t into it.
Sort of like this thread. Thought it might be nice, helpful, people would be encouraging etc, but it seems like it is full of developers who don’t want anyone else to
be a developer and will only give you reasons why not. I haven’t had any reasons why i SHOULD be a developer, but 58 reasons why not.
Sort of like 90 percent of responses to my posts dating back years now about the awesome possibilities of CF+ve investing in NZ.Hi Checker,
that is very unfortunate. I would certainly recommend that you – anyone – see a lawyer before adding, writing, or inserting any clauses – let alone signing, especially if you ‘don’t know’ – no matter how experienced you are.
Also if you mean to be able to get out of a contract on due diligence, why not add a due diligence clause? Checker now you have a bad impression of cash out clauses but really the problem was I think with you not the clause.
I only ever write conditional offers, it is much safer.
Cash out clauses – I don’t like them, but I will take them occasionally in a hot market to get my price and terms. In effect, it is unlikely that you will get a cash unconditional offer which invokes the clause – hasn’t happened to me yet.
Try to get min. 3 days cash out clause. 5 is better.
then, just start to get on with your DD straight away so that if they invoke it, you have time.
Oh and get pre-approval, so you can make cash offers. Oh, and run everything past your lawyer before you sign it!cheers-
miniGreat topic.
My partner is very supportive of ‘me’ – and although the obsession level with property between us is very different, I am happy about that as it gives me balance! It’s sometimes hard to shut the computer off (I just love my Mac which feels like an extension of my brain -) but it is so important to just…turn off the property deals and also have a life. My partner helps me do this!
I would say for me, as I am quite happy and enjoy wheeling and dealing as I see fit without having to sort of wait for anyone to approve or not, the emotional support is way more important than actually the ‘detail’ support. Other couples would be more inclined to do everything together – just depends on the relationship. Of course if you are a team, then what one person does with ‘the money’ affects the other, so there either has to be trust involved, or a water-tight risk mitigation system in place so that the investments will make money, not lose money.
Now the spending thing. I realise now that shopping to a certain extent ‘fills the hole within’. It can provide a sort of temporary fulfillment feeling, adrenaline, power boost, pleasure, fantasy, all of that – think of the pleasure of the new gadget, car, boat, golf clubs, new decor, shoes, clothes, restaurant trips, overseas trips, concerts, and beauty treatments.
All that stuff, it’s fun and all, it’s just that I seem to *want* it less now, it seems less important.
I think the more you feel fulfilled inside, the less you need to fulfill yourself by spending ‘outside’. I think for any of you with partners that just want to spend, spend, spend, I bet you they are not quite fulfilled and firing on all four cylinders – is that judgemental to say that?
well, it was true for me anyway.So I reckon work on the relationship first, and the fulfillment of the people in it. Then you will be on the same page, and hopefully feel less urge to buy nice ‘things’ to feel good, half of them that you don’t really need. Once you get to that stage, the money will start to accumulate all by itself and suddenly you will say ‘hey we should do more with this spare money than leave it in a bank account’ and then bingo you are both ready to invest.
sure but you’ll have to email me your email address, can’t do attachments through the forum
Yes Ozi
Exactly,I think one in ten would be quite likely a good buy “at the right price” of course, and 9 you wouldn’t even bother offering on. But you sort of have to be on the spot to be able to tell the 1 from the 9, you can’t really do that over the internet – at least without spending a fortune on due diligence.
“the way the tax system works means that a trader is taxed more than twice as much as an investor,”
Haha – I am laughing ironically here because this may be true for you and for what your tax specialist has told you, but it depends, it depends, and it depends….
Ok, so if you are developing in Australia, you should do it by starting a Nevada zero-loss company which does the development as trustee for a Monaco based company whose settlor is a foundation in the Bermuda Triangle (a little known tax-haven, where ships loaded with gold bullion tend to go missing, and BTW no wonder they couldn’t ‘find’ Michael Hutchence’s assets when he died.) Make sure you only own 48.9 percent of shares in the company, because otherwise you will be audited. That’s step one. Step two is to start an International Business Corporation based in the Virgin Islands, which pays you a wage as the ‘investment fund manager’. Legitimately work from wireless while reclining on a sun-lounger at the Four Seasons in Bali! But I digress. Where was I? OK, so this company then takes a loan from the trust, but never pays it back, thus incurring a loss, which is tax deductible – and there is no income tax due because it’s not income, right? So then you distribute the loss through a Loss Attributing Qualifying Company through an Australian on/shore/offshore structure, which allows you to distribute the losses to your grandmother, your ex-wife, and your future ex-wife AKA girlfriend, but mostly to your grandmother, who needs the losses to offset her rather high income and tax bracket. Granny of course earns so much because she is the main beneficiary of your rental income from your ten other buy and hold company/trust/IBC structure clones, each of which only owns a maximum of three properties. Anyway, enough about Granny’s tax situation! I digress!
So then you start another structure, this time it’s a corporate trustee based in the Cook Islands for a Vanuatu trust with the settlor in the Bahamas. This company signs a document (which is perfectly legal in Vanuatu and compliant with the tax laws, mais bien sur,) and appoints you as director of a charitable foundation, which you ‘control’ but don’t ‘own’. Then, when the development is complete, you just gift it to the charity, and write the whole lot off as a tax loss = zero capital gains tax. And with a side benefit that your annual Carribbean Cruise is tax deductible.well, if I didn’t sound so convincing, I would be laughing more, but….
what is my point here?
You go to 5 different tax specialists, varying in levels from the ‘village accountant’ to the ‘guru that Eric Watson/Kiyosaki/Bob Jones has on retainer’ , and one will charge you $150 per trust and $500 for a company, the next $2400, and the next $10,000 not including legals and paying the Monaco settlor and the Bermuda Triangle Ship Driver. And so on. And yes it is true that as you get bigger you may grow out of your previous advisors and need to go to the next level.It’s a mine-field out there, I tell you! I am ‘reluctantly’ structuring at the moment offshore in the country where I am developing, where I have non-resident tax status. (funny that.) And as to whether or not I will be deemed a trader, well, define ‘I’.
“therefore logically a trader needs to produce more than twice as much profit as an investor to have the same net profit. “
Hang on, we are discussing developments and your assumption is that we’re all traders. define ‘trading’. Selling for a profit? Well, I’m not talking about trading – I’m talking about developing. Most developers sell, sure, but mainly because they have to. (they’re traders, and that’s how they make their living.)
Maybe they will build 6 and get to keep one. Do they pay CGT on the one they keep? Did they trade that one? Did they sell off the plan?” that’s a cold hard fact, so when crossing over from being an investor to a trader you have to be very sure you are going to go hard, because being a small time trader will see with you less dollars in your pocket than just sitting back and investing.”
I can see why if this is true for you, then yes, of course, the sensible thing to do is to stick to the ‘sitting back’ (sic) part.
One man’s cold hard fact is the next man’s fallacy, ah, what can I say other than – shake my head, then continue with my discourse for those still with me…
“There is a lot of implied value to being your own boss and running your own show – regardless of the financial implications…once again farmers come to mind.”
Yes, quite! Go the farmers. I quite relate.
Hi Dvane,
I wasn’t classifying you as an A.W. – I used to live there and I have a lot of friends who ‘invest’ in Herne Bay, Matakana, Leigh, Westmere, Ponsonby, – you get my drift – they wouldn’t even touch Henderson, Papatoetoe or Otara much less Tok. Yeah, A.W.’s. And I use that lovingly as I have had many a dinner table debate about what I am doing vs. them! I’ve showed them the figures but they still can’t believe it, because in their paradigm they are still ‘investing’ in the best ‘investing areas’ there are.
They forget that once upon a time where they bought now worth 1m was a trashed dump for 100k and in what was considered then a terrible suburb.
yeah all I can say is that there still are great deals there but not every investor has the skill to get them.
The reason the Tok deals and others in NZ are pretty good in my mind apart from great cashflow so i.e. your Tok CF deals can support other investments elsewhere – are that you can buy under valuation there the same as anywhere – plus, the low entry price means your Tok deal is always going to be more liquid than the equivalent in auckland. Also because the yield is so good the ‘risk’ of holding is reduced, and you are more likely to be able to sell at a time that suits you rather than because you can’t afford to hold the property. the property affords to ‘hold itself’.
cheers-
Mini“I can’t envisage anything much that would require only an 8 page contract… demolition may be a couple of pages perhaps.”
Hi Ausprop
The contract presented to me was only 2 pages long but I saw too many holes in relation to the what? where? how? when? how much? who? what if? and so on. So the clauses I wrote or rewrote were to clarify things that had been verbally agreed and to mitigate risks, either mine or the contractor’s.
As to the length, well it’s like that lawyer joke,
a lawyer writes to his friend and says ‘Hi Mike, I would have written you a shorter letter but I didn’t have time’.
(that’s it. get it!?? i.e. it requires more skill and time to write a shorter contract and less skill and time to write a longer one, so says my lawyer!)
….
Just depends on what you’re happy with in the end – as the developer it’s your money and risk so you do what you do to make it work. For me, I needed to re-write the contract so that it reflected not only a deal that I would do but what had been verbally agreed. I obviously succeeded because I talked the contractor through it on the phone and what I intended for each clause to mean and why it was there. Everything was agreed and only a couple of tweaks were made then we both signed and money changed hands immediately after.“The biggest thing I think for people doing developments is the taxation implications. “
I think it’s one thing but not the biggest. It’s actually part of what you do prior when you are working out if a development is going to suit your overall strategy. It depends on your intentions – sell off the plan? Build then sell immediately? Build then hold as a rental? For how long?
In what structure? And what are the tax implications? Does it deem you a ‘trader’? Does that impact on the tax status of your other buy and holds? Etc etcAll of that stuff is important, I agree, but I reckon it actually comes first before the action.
>say a typical development takes at least 18 months,
Oh dear, well I am hoping to beat all the others there too, so sue me, and do it in 1/3 of the time. No wonder Michael Yardney was so worried about interest rates rising etc. 18 months is a lot different to 6 months as well. So yeah time adds to the risk (or lessens it in a rising market too)Re your Joe examples, I can’t personally relate to either of the examples, but I am sure many people can – those that work for a wage or salary or dream of quitting work, I reckon there are a lot of those people around.
“The main point is, once you cross from being a casual investor to being a developer, you need to do more than twice the amount of deals just to be in the same position.”
I don’t get that logic at all. I think the opposite. Why would I do it, otherwise, unless it’s going to get me where I want to go faster and with less effort?
cheers-
MiniSounds like it is part of the description of the title which is a cross-lease.
I.e. once upon a time NZ had quarter acre sections with a big back yard and nowadays you quite often find a section with two houses on it, one front and one back. They could have a shared driveway so it is not a true complete subdivision, because of the right of way, but you do still ‘own the land’. So it is not leasehold, it is freehold, BUT instead of owning (say) 440 square meters, you would own ‘1/2 share in 880 sm’ and then you would have something called the ‘flats plan’ which would show on the land where your bit is, where the other house’s bit is, and where the common area is.
Nowadays the councils don’t like you to do cross-leases so much, but they were very very common as a sort of cheapo way of subdividing.
nothing wrong with it, very common, get your lawyer to check the title and explain it to you.
Also I have a pdf about it, email me if you want me to send it to you.
cheers-
Mini
