Table of Contents

1. How can I afford to buy an investment property
2. How much will I have to pay each month
3. What if I don't have a property now
4. Do I need a deposit
5. What sort of property should I buy
6. How do I know where to Buy
7. I don't have time to research the right area
8. I don't have time to manage a property
9. Who finds tenants & watches the property
10. What happens if I have no tenants
11. When do I get paid
12. Who takes care of maintenance issues
13. Who takes care of tenant damage
14. I already have a business why would I want a property
15. I have shares, why would I want to have property
16. How long does it take to get a property
17. How long does it take to make money with property
18. How soon can I sell my property
19. Are the profits taxable
20. Depreciation
21. How do I know the property is worth what I am paying for it
22. How do I know the rents are realistic
23. What if rents drop
24. Is my existing house safe
25. How do I know I can trust the Company
26. What happens if the Company collapses
27. How do I know I won't loose my deposit
28. I see other Property Businesses in trouble
29. What if rental manager doesn't pay me my rent
30. What if I loose my job
31. What if house prices drop
32. Is this property trading or investing
33. Do I need a company to own investment property
34. What do I do if I make a FORTUNE with my Property

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How can I afford to buy an investment property

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How much will I have to pay each month

The amount you need to top up the mortgage each month will depend upon the price of the property, the rent received on the property, the size of the loan, interest rate on the loan, other expenses such as rates & insurance & Body Corp levies & your personal income.

The aim is borrow all the money required to purchase the property and to have the property pay for itself after you have received tax rebates on your income, however with high interest rates at present and rents not yet catching up to the interest rate increases, typical top up is around $100 per week after you have received tax rebates from IRD. (which you can get in your weekly pay packet)

eg

For your $100 per week , your asset will typically be earning you $500 -$700 per week when capital gain is considered. That's a "No -Brainer" as far as most people are concerned !

That's a fantastic return on your investment, it's low risk & it remains Tax free (unless you begin trading your properties)

You can use that capital gain by borrowing against it to purchase further property and have several properties growing .

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What if I don't have a property now

To secure an investment property, you require a 10% deposit,
the 90% is borrowed against the property itself.
(exception being when buying off plan & the property appreciates before settlement, in which case you can secure the loan 100% on the investment property. You still need to put up 10% up front but that could be borrowed short term then repaid on settlement)

So if you don't currently have a property, you can still finance an investment property if you can come up with the 10% deposit, either as cash savings, borrowings against other significant assets(boats, cash investments, shares etc) or by obtaining security and borrowing against some-elses property (parents, partners, friends)

In these days of high prices for first homes, it can be very economic to rent where you want to live while you own an investment property elsewhere, often at a lot lower cost than it might cost to own a property where you want to live, e.g. live in Auckland, invest in Invercargill.

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Do I need a deposit

Yes, in general 10%
see above for alternate ways of funding the 10%.

Work with us & we will find you a way to get into a property.

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What sort of property should I buy

The type of property depends upon your personal circumstances, and the location, however in general We deal with Brand New 3 - 4 bedroom Brick & Tile houses with double garage on their own section.

The properties must be in a good location : high growth area, or an area expected to become high growth, good population base, good employment base, good facilities nearby, schools, transport, shops.

If the property is to be managed for you, then it is essential to have a good property manager. We recommend Easystart Rental Management ERM as they will lease your property from you for 10 years and get you the best market rent each year.
In order to provide this 10 year rental guarantee, ERM must be sure that they will be able to have your property tenanted for as long as possible, therefore they are choosey as to which properties they take on. This is yet another mechanism of ensuring that the area you are buying in is a good rental area and meets the requirements listed above.

The properties should be Brand new because the depreciation allowable by the IRD is 20% higher for a new house than for a used one. This is important in making the weekly cash outlay as low as possible.
Older Houses are likely to have already depreciated significantly, leaving little to claim back as ongoing depreciation.

In Auckland, some apartments do stack up as far as rental returns, but may be less likely to achieve high capital gain. This type of property can be used to provide cash flow to support a property elsewhere that may expect better capital gain but gets less rent.

The properties may be in any of 3 states of completion at the time of signing the sale and purchase agreement, depending upon where and when you want to purchase.

1) Completed and ready to occupy, or in some cases already occupied with long term lease in place.

2) Partially completed, maybe 3 - 4 months until settlement.

3) Off Plan, with build dates anywhere up to 18 months away.
These can be particularly good investments, as you settle in 18 months at today's price, so immediately pocket any capital gain that has occurred during that period.
The cost has only been the servicing cost on the 10% deposit. Thus typically it will cost you a few thousand to make 80 to 100 thousand.
This is No Brainer stuff when your intention is to keep the property.
The risk only comes if you intended to try to resell the property before settlement and are unable to do so and are forced to settle.
That is Trading and is a whole different field.

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How do I know where to Buy

The properties must be in a good location : high growth area, or an area expected to become high growth, good population base, good employment base, good facilities nearby, schools transport, shops.

See above re Property manager acceptance of area.

All our Properties have been through a rigorous assessment to ensure the likelyhood of  it being a successful investment is maximised.

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I don't have time to research the right area

This is where We have done the homework for you.

It is in the interest of the Company, & the interest of the Property Managers to ensure this research is correct, since the futures of both companies rely on the performance of the investment for the client. Good performance promotes repeat business, bad performance will see client selling the property & no repeat business.

We put our money where our mouth is and stand behind the research by purchasing the land in the areas identified.
We aren't acting as sales agent for someone elses property, we sell our own property. This is a huge incentive to Get It Right.

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I don't have time to manage a property

This is exactly where a good Property Manager fits in.

If the property is outside the area you live, then a Property Manager is essential, plus you can gain the added security of the 10 year rental guarantee.

If the property is local  then you have the choice of managing it yourself or using a good Property Manager.

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Who finds tenants & watches the property

If you are managing the property, you find & manage tenants.
Since the idea of these properties is to provide you with a Hands Off investment, then you will most likely use a Property Manager in which case they find you tenants.

Be aware of added costs charged by some managers for finding tenants. This can cost you  a week or more rent

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What happens if I have no tenants

If you are managing the property yourself then it is up to you to find new tenants.

If your property is managed by someone else, it is still up to you or them.

If ERM are managing your property & have given a 10 year rental guarantee, you will receive rent each month based on the rental floor for the period that there are no tenants & at market rents for the periods that there are tenants .

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When do I get paid by ERM

ERM pays your rent into your account at the end of each month.

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Who takes care of maintenance issues

If you are managing the property yourself then it is up to you to take care of any maintenance.

If your property is managed by someone else, it is still up to you or them.

If ERM manage your property, they will arrange any maintenance to be taken care of & advise you of the cost, which, upon agreement will then be invoiced separately or deducted from incoming rent.

 Tenant damage is covered below.

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Who takes care of Tenant damage

If you are managing the property yourself then it is up to you to take care of any damage & recoup from the Tenants, either directly or more often than not through the Bond system, or as last resort the Tenancy Tribunal.

If your property is managed by someone else, it is still up to you depending on your arrangement with the manager.

If ERM manage your property, they will arrange any repairs to be taken care of & recoup from the Tenant.
They will also take  care of any Tenancy Tribunal cases (since they have leased from you then sublet to the Tenant, they become the Tenants landlord)

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I already have a Business why would I want  a property

The Seriously rich use a three pronged approach to spread risk & generate Passive Income:

1) Own a business to generate cash, reinvest back into the business, but also spread the risk by investing some of that cash into shares & property for long term return.

2)Use the share market to generate cash flow. Use that cash flow to support property that does not support itself through rent, but is expected to achieve good capital gain.

3)Invest in property split between high rental return property that may provide low capital gain & high capital gain properties that may not provide good rental return.

There are other very good reasons that business shares & property work well together, the main one is tax efficiency.
Property gives tax rebates & allows losses to be offset against personal income.
Unless you are a share trader, it is unlikely you can do that with shares.
Unless the company is an LAQC you cannot do it with a business, & even with an LAQC, the shareholding of the business determines the split of any offsets.
The Structure you want for your Trading business shareholding is likely to be different to that wanted for Investment Property.
(Generally you set up a trading company to isolate the shareholders assets from the business assets in order to minimise the Risk of shareholder loosing their assets in the case of business failure.
Using an LAQC as a trading business would negate the whole purpose of setting up the company. )

However Combining your Trading Business with a second Property Business as an LAQC can be a very lucrative money maker.

Get Financial advice on how you should set up your business and property affairs. These are things our advisors are experts on.

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I have shares, why would I want to have property

see above- invest in Shares for cash flow, Property for long term growth.

Of course share prices can be a lot more volatile than property prices & companies can completely collapse, meaning a total loss of your money.
(Share index currently down over 25% from Nov 07
 Bear Stearns shares trading US $170 end of last year, sold mid Mar 08  US $2)

Property can't completely collapse - at worst you get left with an empty block of land which is probably still appreciating !

Gearing (ability to put up $1 to get control over investment of $1,000...   $10,000... $100,000.. )for property tends to have a much lower risk than gearing for shares, and gives a more reliable return..
It could cost you $6000 a year to subsidise a $400k property, on which you may gain 10% ($40k) in capital growth (or no capital growth, or negative growth. either way it will cost you $6000 per year).
The same $6000 could be used to buy shares directly which may gain lets say 20 % , so that's $1200, or loose the same 20%
Or use $6000 to get $600k of CFD (Contracts for Difference) & make 20% on that, that's $120k, or just as easily loose the same 20%, so you just lost $120k, not just your initial $6k !! Very High Risk with potential for high return.

From hundreds of years of history averaging 10% growth per year, it is obvious that you are more likely to make the $40k on your property and it is a whole lot less risky.

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How long does it take to get a property

You can buy a property in a week if it is already completed.

If buying off plan, it depends upon what stage the building is at. For some it may be 3-4 months to completion, for others 12 months or more (during which time you are probably getting capital gain).

In some developments that are built in phases, it may be possible to buy off plan a development that is not due to be complete for 18 months or more.

In other developments, your particular house will be built to order.

Generally the houses are built in small lots  3-4 houses at a time.

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How long does it take to make money with property

Making money with Property Investment (as opposed to Trading) is about buying the right type of property in the right location.
It is also a medium to long term investment 5 - 10 years minimum.

You can make money on an investment property the minute you settle it.
It may be a capital gain between when you agree to buy it & when you settle.
It may be that you are able to buy it for less than it is currently valued at (similar effect to buying off plan & waiting, but without the waiting) e.g. someone needs to sell  quickly.
It may be that the rent on the property you are buying covers all your costs & more, so you make money each week (although this is less & less likely at present with high house prices).

History has shown that on average good quality property rises by 10% per year,
or put another way, it doubles in price every 10 years.

We have seen doubling in  5 years or less in some areas, while for example 1 bedroom apartments in Auckland's CBD have struggled to make 5% a year for the last 3 or 4 years. (a good example of wrong area or wrong type of property)

Quotable value www.qv.co.nz will give you the latest growth rates.

But on the whole the property cycle is 7-10 years from one peak to the next peak.

Your aim as an investor is to use that cycle to buy  well & hold while your property appreciates in value, so that after a couple of years it has gained in value enough to borrow against for the deposit on the next property. Do this several times and after 10 years you now have numerous properties with good rent coming in that is sufficient to cover the costs, i.e. you have a Passive income.

Remember the Big Picture & what it is you are trying to achieve. Don't get overly concerned about the little things.
Because you are buying for the long term, and history has shown an average 10% increase, and while it is desirable to get as low a price as possible, it is  more important to consider the strategic value of the property than the actual cash price paid. 

If you pay a little too much for the Right property, it is not really a big issue as you will soon recoup the value through capital gain, tax credits  or maybe even rent.
If you put off buying something because you think you can find something cheaper that is just as strategically valuable, that's good if it happens.
More often than not you don't find the bargain and a year later you still have no asset & the prices have become even more expensive.
Meanwhile the person that may have paid a little too much has already recouped the overpayment and have an asset that has probably appreciated twice as much as the overpayment. Thus they have even  more equity they can draw on to secure their next property. ie they are onto their second while you still can't make up your mind on the first.
Who do you think is going to be financially independent in 10 - 15 years time & who is still going to be waiting for the Bargain to appear ? 

Should you need to, it is also feasible to sell off  a property or two in order to pay off the mortgages on the others.
(Be aware that if your intention of buying the property at the start is to make money on it by selling, then the IRD would most likely class the proceeds as taxable. Be sure you obtain financial advice & record your intention before you purchase)

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How soon can I sell my property

The Property is yours on the day you settle, so should you need to, you can sell off  a property at any stage.
(Be aware that if your intention of buying the property at the start is to make money on it by selling, then the IRD would most likely class the proceeds as taxable income. Be sure you obtain financial advice & record your intention before you purchase)

While we all find our circumstances change from time to time, your intention as a passive investor should be to buy and hold the property (leave the trading to Active Property traders- that's a whole different game with lot higher risks)

Selling should be the last option (even with loss of job etc) and can often be avoided by actually borrowing more against the built up equity you have in the property. The extra borrowings are used to make monthly interest payments (on the existing amount plus the extra borrowings)
Its much more tax efficient to do that than to use your own tax paid cash.

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Are the profits taxable

Face it, there are only two things certain in this life: Death & Taxes

Believe it or not having to pay Tax is good -   it shows  that you are making money,   however you are only required to pay the correct amount.
As an investor, it is your task to legitimately increase your Wealth and pay Tax only on what you are required to pay.

Profits on rental income are taxable, however in practice most rental properties run at a tax loss, i.e. the rent does not cover the outgoings (mortgage, rates insurance, depreciation etc)

However structured correctly, a lot of properties can break even on cash flow and only make a loss when depreciation is brought into the equation. i.e. they cost you no real cash to hold month to month, the depreciation only catches up with you after a number of years, e.g. carpets need replacing, appliances need replacing etc

So the structure of the ownership & the borrowing is very important in determining if you get tax rebates, or pay tax on rental profits.
If you are making huge losses after your tax credits and they are not being offset by capital gain, then you need to seriously look at your business.

As discussed above, profits on the sale of the properties may or may not be taxable depending upon your intention at the time you purchased & whether or not you Trade property as opposed to Invest in it.

You must seek financial advice  appropriate for your  situation.

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Depreciation

Depreciation is the natural reduction in value of items over a period of time.
We all know our cars loose value every year, well so do our houses.
Property prices generally grow because of the increase in land value not the building value.
Depreciation is claimed on the assets that loose value (building and chattels -carpet, curtains, appliances etc), it is not claimed on the land, since land does not generally depreciate.

The IRD want us to claim depreciation each year so that we don't have big claims every 5th year or whatever.
eg carpets in a rental property tend to need replacing every 4-5 years, so we can claim the gradual loss in value each year rather than a total loss after 5 years. This also tells us what our buildings & chattels are really worth each year (book value).

One of the major reasons it is economic to carry the monthly cost of an investment property in its early stages (during the time rents take to increase) is because of the depreciation that can be claimed. It provides cash rebates today, while it is probably not necessary to actually spend it for a number of years.
These cash rebates can be used to make up the difference between the mortgage and the rent each month.

Depreciation on a new asset is 20% higher than an old one, which is a major reason to buy brand new property. Most of the time buying an older property will cost a lot more each month in cash because the same amount of rebate cannot be claimed as can be on a new property.

A difficulty can arise if the property is sold and the depreciable assets (building & chattels) are sold for more than book value, in which case there is a profit on the assets, which is taxable (ie you have claimed more depreciation than has actually occurred). Thus it is important that before you buy or sell, you have a proper valuation that identifies the land value and the asset value separately.

Remember as an Investor your intention is generally not to sell the property except in exceptional circumstances, otherwise you risk being classed as a Trader. So if you are thinking that you won't claim depreciation because of a tax liability on profits from the sale of assets in the future, then you have much bigger issues than a bit of tax on asset profits. Your attitude shows your intention is to sell the property for a profit, which makes you a Trader, in which case the profit on the whole property is taxable, not just a profit on the depreciable assets.
ALWAYS REMEMBER THE BIGGER PICTURE,    WHAT ARE YOU TRYING TO ACHIEVE WITH YOUR PROPERTY?
For most of us it is FINANCIAL INDEPENDENCE from a PASSIVE INCOME (ongoing rent) 

All of these issues are easily taken care of by your professionals (Accountants, Valuers etc).
You must seek financial advice appropriate for your  situation.

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How do I know the property is worth what I am paying for it

All Properties offered are sold at the price set by Registered Valuation by independent valuers at the time of signing the agreement.

If the property is already built, that will be current market value.

If the property is yet to be built, i.e. Off Plan, that valuation will represent what the valuer determines the property would be worth TODAY if it was already completed, Not a guess of what the market price may be in 12 months or so.
Thus in a rising market, by the time the property is due to settle, it is common for the property to have gained a further 10% in value, yet settlement price is what was agreed 12 months earlier.
e.g. property in Huntly purchased off plan Jan 2006 for $220k settled 2007 for 220k but was valued at $330k.
an immediate $110k capital gain to the clients on settling.
It also made getting a loan from the bank simple, as the bank was happy to lend 80% of the current valuation - up to $264k yet the client only needed to borrow $220k.

The extra equity was immediately available to finance a deposit on a new property.

Should you believe that the current press doom & gloom forecasts & the property is worth no more when you settle, then you have still not lost anything.

Should you think the prices will somehow drop & you end up paying more than the property is supposedly worth at the time then you have 2 things to consider:

In the end, the settlement price will be  the lesser of the price you agree on the Sale and Purchase agreement, or the registered valuation at settlement time (since the Banks will only lend based on the valuation).
You can't loose- you either have a discounted property due to the capital gain that has occurred, or you are paying the current market value at the time.

Apart the above discussion, the most important thing to remember is that it is costing you peanuts to buy a property that may cost $300 to $400k.
Typically over 10 years, it will cost you only 20% of the actual purchase price.

Of the rest, 40% is paid by the Tax Man- money that you would otherwise not have anyway
and the Tenant pays the remaining 40%.
 

So on a $350k property, the Tenants will pay for $140k, the Taxman will pay for $140k and you will pay just $70k !!!

That's $70k to earn $350k  - that's a pretty good return in my books !

Forget the petty details and look at the Big Picture !!!!

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How do I know the rents are realistic

The rents charged are market rents, as closely monitored by the Property Managers (ERM).

It is in their interest to keep rents at market value since their income depends upon their administration fee - 9.5% of the rent coming in.

If rents get too high, there will be no tenants for the property, in which case the property managers (ERM) will end up having to pay out of their own pockets to pay you the rent specified on the rental guarantee.
Remember this is a 10 year guarantee, so if ERM put unrealistic rents in their lease contract with you, it will be them that suffers, not you.
 
Of Course, If you use some other Property Manager, then it will be you that sets the rent and carries the cost of vacant property (unless you get a guarantee from them.).

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What if rents drop

Market rents are subject to some variation, but generally go up not down.

Rents tend to go down where there is too much accommodation available & not enough tenants, such as the Auckland CBD. This is why the location of your property is crucial.

If your property is managed by ERM then the lowest rent you will receive is the rent floor agreed in the lease.

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Is my existing house safe

Ideally our aim is to avoid putting up any personal security for the purchase of a business asset, which is what an investment property is.

However, Since our aim is to 100% finance the investment property, for maximum tax efficiency, rather than using any cash we may have available, it is likely that our personal assets will be used as security.

When borrowing from Banks, they will try to secure their lending in every possible way. This will generally mean they try to take security over your home, either by way of mortgage, or by personal guarantee, or both.

In the case of a company borrowing to buy an investment property, the banks will generally try to get personal guarantees from the company directors if the company does not have sufficient assets by itself.

So even with an LAQC (a company for which shareholders take on the liabilities of the company in exchange for being able to claim any losses against their personal income) it is likely that you will be putting up personal security (your house or other assets)

So it is essential that you obtain good legal & accounting advice BEFORE signing away your personal assets to any lender.

Your personal assets are only put at risk in extreme circumstances, such as inability to pay the loans secured by those assets (home loan or investment property loan)
Inability to sell any of the assets used as security (investment property or home)

It takes time for things to get in a state so bad as to result in either of the above, & part of the initial financial setup is to ensure you have sufficient income to cover short term debts, or sufficient borrowing capacity to borrow more to cover any temporary short term debts. This is where spending time with our financial specialist is essential in the setting up of the correct structures and borrowings.

Even in today's so-called housing slump, it is generally those that have not properly planned for adverse effects that can get into trouble.

A downturn in house prices does not affect an investment property owner unless they want to / have to sell it.
Rents do not immediately follow house prices & in fact often go the opposite direction, so if the numbers worked when you bought the investment property, they will still work during a downturn, & will work even better over time, as rents increase.

Even in a significant downturn, the value of your assets, House & Investment Property are still most likely well in excess of your borrowings. The banks don't like you having loans that amount to more than 70 % of your total asset value, (although 80% is obtainable). Your goal should be to get below 60% eventually, this allows plenty of room for house prices to fluctuate without putting you under any stress.

Thus the risk to your house is minimal and only poor management will increase that risk.

SEEK ADVICE before the situation gets bad.

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How do I know I can trust the Company

Over two hundred clients have benefited and bought brand new free standing homes or inner city apartments with rents guaranteed for ten long years.

The Company has no bank debt.

It has land assets that are fully paid for.

It has not been taken to court once in its 10 year history & has a reputation of being "One of the Good Guys" in  the property industry.

It has independent professional associations with Builders, Mortgage Brokers, Property management companies, but is not connected to them nor tied exclusively to them. It recommends these associated businesses because it trusts them and they have proven to be effective in the past. They are also familiar with each others products & services which can save a lot of time and cost, e.g. in lawyers reading leases etc at $200 per hour

Your Investment Property purchase is basically the same as from any other vendor, there is no tie between your property and the Company once it settles. It is yours to do with what you want.

The difference is that the Company has made the effort to make the purchase possible through a One Stop Shop mentality, whereby the client can  do as much or as little as they want too. The company and its associates then take care of the details so it becomes a hands off investment for the client.

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What happens if the Company collapses

The Company is independent of the Builder & independent of the Property Management company & the Mortgage Broker.

It has been running 10 years and has no debts.

It has land assets that are fully paid for.

Therefore it is unlikely to collapse, as it has nothing to force it to that state.

In the unlikely event of it happening:

If you have settled your property, the collapse of the Company will have no effect on you other than you won't be able to buy  another good performing investment property from us.

Your property is yours, its freehold, the bank loans are with your preferred lender, not the Company or any subsidiary & its up to you what you do with it. Either you manage it or someone else manages it, either way,  the Company  has no tie to it.

If you have not settled your property, i.e. you paid a deposit for a property to be built, your deposit will be in the solicitors trust account & will be refunded to you.

Should the property be part completed, then it is likely that the builder will ask you if you still want to complete the build & you will come to an agreement between you.

If the builder collapses, your deposit is still safe, as the building still belongs to the builder until settlement, and it is the Company's solicitor that is holding the deposit in the trust account.

If the Property Management company collapses, your lease is void & hence rents from the tenants will come directly to you or your new Property Manager.

In any case, if you have settled the property, you still have the property & the rent.

If you have not, you get back your deposit.

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How do I know I won't loose my deposit

Deposits are put into a solicitors trust account . The only exception is if you contract out of that situation & allow something else to happen to the deposit. Always seek legal advice before doing anything like that.

Money held in trust does not belong to the company, it is still yours, so even if a company collapses, no money held in trust can be claimed as part of company funds.

If money is stolen from a Solicitors trust account, the district law society insurance policy covers it.

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I see other Property Businesses in trouble

Business failures are a fact of life.
There is risk in everything the average person does every day(eg driving a car), but that does not mean we do nothing for fear of risk. (do you postpone driving your car to the local shop just because there was an accident on the motorway 50 km away?)
Any smart business person will ensure that the risks are minimised.

You must always make your decisions based on FACTS not opinions.
With Investment Property you are running a Business and are making Business Decisions.
If something works based on the facts, and you know the risks and take steps to minimise the risks, then make a Business decision, not an Emotive decision.

Don't let the failure of one business stop you from dealing in the industry altogether, take it as a warning to make sure you look carefully at all aspects of your deals.

Would you not buy a car that you wanted from one company just because you saw a different car sales company collapse ?
Would you stop buying food because the local dairy closed down ?

Of course you wouldn't

Different Businesses work on different Business Models. The same way each family operates differently, with different internal rules controlling what is and is not acceptable within the household, quite independently of the laws that govern the country.
Sometimes some models work fine until something unexpected happens, or people get greedy, or do something they shouldn't.

If you know (as we do) property is a good investment, it is irrelevant who collapses & who doesn't.
It is only your deal and the details of it that is important. 
Is your property in the right place, is it the right price, is it the right type of property, will it be managed by the right person, will my money be protected, etc.........
In the end you are buying A Property, not the Business of the Property Vendor.

Do some research yourself,
Satisfy yourself with the Facts,
Look into a company before you hand over any significant amount of money to them.
A simple check of ownership will often tell you a lot, go to www.companies.govt.nz and search the company shareholders records.
Your Accountant or Lawyer can also help, often with first hand experience in dealing with a company.

Above all, take a company collapse as a lesson in risk minimisation, not The Total Collapse of a perfectly viable Industry.
 

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What if Rental Manager doesn't pay me my rent

With ERM you have a 10 year lease. If they fail to pay your rent, that lease is breached & you have legal claim against the company to recover the owed rent.

This is unlikely to happen if they want any new business, or to keep existing business.

Be sure your legal advisor explains your rights in this situation.

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What if I loose my job

The initial setup of the structure & finance is very important for risk management. That initial setup must allow for contingencies such as short term loss of job and have lending facilities in place to ensure the mortgage can always be covered no matter what. If these cannot be put in place prior to you purchasing, or as part of a planned implementation then DON'T purchase.

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What if house prices drop

As an investor, once you own the property, and have rent coming in, the only effect that a drop in house prices has is to stop you borrowing more against it to buy another. In fact if prices should drop(which they hardly ever do with good investment property), that is exactly the time to BUY.

Fortunately, in practice, the investment property  is the same one that first home buyers want, & by design will be in good growth areas with good facilities etc so is always in demand. What tends to happen to these houses in a tough market is that they stop increasing in price as fast as they used to, but vendors will usually just hold out until they get an acceptable price. Occasionally you will find vendors in real distress & may pick up a bargain, but the whole of the property market is not in that situation. If you work on that philosophy, you will always be waiting, will never buy anything, & have lost out on the capital gains that all the smart investors will have reaped in the same time you sit on the sidelines insisting the market was going to collapse.

Remember also that Building costs continue to rise. Each new lot of houses is costing more due to material cost increases, council compliance cost increases, labour increases etc.
For a builder or developer to be discounting their property, (which is generally so they can pay their bills today), their profits are being sacrificed. Sometimes they must even sell at a loss. In order for the business to stay viable these lost profits must be recouped in the future, ie the prices must go up on the next lot of houses.

So while you may see a short period of discounted property, it is likely to be followed by rapid increases.
This is easily noted on this graph, along with the proof that prices have doubled in 10 years on average and often in 5 years.

The other factors to consider are what drives the housing market and what impacts on it.

Kiwi's have a fundamental expectation to own their own home.
For a long time they have seen poor performance from normal bank type investments and in general don't save.
Most don't invest in shares due to lack of interest or knowledge.
Most recognise the Government will not provide an income in their retirement, that is sufficient to live in the style they are use to. 

Therefore most treat their own home as the retirement savings plan and many have an investment property to help ensure a decent level of income on retirement.

This creates a constant demand for houses.

Then specific events such as the 2011 Rugby World cup, and past Americas cup have an impact.
Huge numbers of people around the world see visions of NZ during these sporting events. This draws many to visit & many to move/ buy property here.   

Other political events such as the Free Trade deal with China can also impact, through more immigration of skilled workforce.

Ongoing trends such as Baby Boomer generation retiring and downsizing from bigger houses to lower end houses in order to cash up .
Baby Boomer's children wanting to buy their own houses or investment houses.

A general trend of populations to drift to safer parts of the world eg there was a big boom here after 9/11 2001

The natural and often stubborn tendency of the owner to believe the house is worth more than it really is. This means unless they need to sell quickly, they will hold out for what they think the price should be. This results in a slow market, but not in a significant drop in prices at the low Investment/ first home buyer end. 

All these factors tend to result in just small dips in the market followed by significant booms !!!

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I might just do it myself

There's nothing to stop you doing it yourself, as we have noted above we are happy to let you have as much involvement in each aspect as you want to have. If you want to handle all the hassles yourself then go ahead. your sequence will be something like the following:

Decide what is your target market - renters, owner occupiers, investors etc
Decide on property type - houses, apartments, townhouses etc
Decide on property location - research cities, suburbs, growth rates, prospects etc
Visit location / look for property, find realestate agent that knows area
visit maybe 20 - 50 properties until you find one where the numbers add up.
Confirm schools, transport, shopping, employment security
organise sale & purchase agreement
organise deposit
organise funding approval for settlement - hope your broker is dealing with millions of dollars of other lending so can get you the best deal
organise solicitors
Check for issues on LIM - flood zones, slippage, mining
decide ownership structure
Set up LAQC if appropriate
if not yet built, organise and fund building design,
find reliable quality builder & project manager
organise building contract & council permits, resource consent, development contributions  etc
Hope that new regulations aren't introduced part way through build
monitor build
organise progress payments
organise insurance
Hope builder doesn't go broke while building your house
Hope the building delays are not after you have paid over half the building costs & still have no income from a part completed building
organise compliance & completion certificates
Organise settlement funds
find Property managers that care about your property (have some sort of vested interest in ensuring it is well managed)
determine market rent & decide your rent
If older building. refurbish between tenancies
Look for tenants
Hope you have made right decision about area & attract the right sort of tenants
choose tenants - credit check & reference check - personality judgement
tenancy agreements & Lodgement of bonds
pay for vacancy periods
Sort out initial tenancy issues during settling in period. (rules, services- phone, power, water, rubbish,-  parking, gardens, lawnmowing, noise, drugs, smoking, pets, appliances etc)
organise periodic inspections
take care of property maintenance
organise repair of tenant damage
claim damage costs from tenant
handle tenancy tribunal cases
Collect rent
monitor market rents -increasing as appropriate
pay bills -insurance, rates, water, mortgage
do accounts
claim tax rebates
claim depreciation
Claim office expenses
Hope you chose the right location & the capital gain appears
Hope you chose the right location  type of property & the rents go up
Hope you chose the right builder & design & you don't get leaky building problems
 

Alternatively you can buy a property from Us and have the majority of things listed above taken care of for you-
Your Choice. 

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Is this property trading or investing

We deal with Property Investing where the intention is to Buy and Hold and ultimately generate a passive income from rent.

Property trading uses different criteria for property selection, is less about balancing income and expenditure but more about profits between buy price & sell price.

Trading profits are also taxable income & you will be required to register for GST.

Don't try to mix the two, as the IRD will most likely class all transactions made by a Trader as taxable, regardless of whether the intention is to Buy & Hold or sell for a quick profit. (its called tainting)

Whereas an investor who expects to ultimately make money from rent (which will most likely also be taxable) generated from an asset, may not be taxed on the capital gain from the sale of a property (it depends on the intention).

Be sure your financial advisor is clear what your intentions are, as it affects structures and tax liabilities.

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Do I need a company to own investment property

A company is not required but can be more tax efficient.

An LAQC (Loss Attributing Qualifying Company) company in which the shareholders take on the responsibility of any company liabilities in exchange for being able to offset company losses against their income, can be a better way to structure investment property ownership.

Click HERE for more details on why you should use a Company.

Talk to your accountant / financial advisor, as the structure can make a big difference to who can offset what losses & therefore claim tax rebates.

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What do I do if I make a FORTUNE with my Property

You sit back and relax knowing that 10 years ago you made the BEST DECISION OF YOUR LIFE to purchase some Brand New Investment properties in high growth areas and have them looked after by one of the best property managers in the country.

While you relax beside your pool in the sunshine you can reflect on the fact that you made more money in the last 10 years than you have at any other time in your life & you didn't have to work 60 hours a week to do it.

That you made more from your property investments than your salary and saved a considerable amount of tax that you would otherwise have had to pay.

That you made your own decision based on the FACTS, not on the doomsdayers gloomy predictions.

That you followed the advice of those doing it, not those on the sidelines with the theory books in their back pockets.

That you listened to your old advisors and noted their concerns, but also noted that most of them were just as poor as you were at the time.

That you listened to the recommended Professionals that were in the industry & that were making money themselves by doing exactly what you were about to get yourself involved with.

But most importantly that you TOOK SOME ACTION
and that action gave you choices in how you live your life TODAY.
 

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Revised: 06/29/09.

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 Disclaimer
The information presented in this website is intended to be for informational purposes only and in no way intended to be specific financial advice.
You must seek advice from your own financial advisors particular to your financial situation and goals.