Back to the home page REVIEW: POST-BUDGET SPECIAL BRIEFING and PROPERTY Q&A by Peter Aranyi If you missed our special post budget briefing last week, you can still get the benefit of our three experts' terrific advice -- we recorded the whole night (presentations and Q&A) and Audio CDs are now in production. Here's my review of the evening and some of what we covered... After a welcome and warm up meet-and-greet, the night kicked off with Mark Withers (author of Property Tax - A New Zealand Investor's Guide) calling the Budget the biggest thing in 25 years for tax accountants. The tax cuts announced were 'monumentus' he said, and their impact wide-ranging. The loss of claimable depreciation for property investors is a hit, a price to pay, make no mistake, but not that big a deal given that depreciation claims were always only a timing advantage and subject to clawback. LAQCs (Loss Attributing Qualifying Companies) can no longer be seen as the 'go to' solution for holding investment properties, Mark said -- but they still had some advantages. Mark spoke at length and in some detail about the issues around property owning entities (as you would expect) and his comments were both thoughtful and worthwhile. He referred to the Budget's deductible loss changes as 'almost ring fencing by stealth' -- which was news to me -- but pointed out it may not be a big problem for most investors. LAQCs will be taxed as a 'flow-through entity' and any disposal of property (as always) triggers certain implications and changes in tax treatment. He shared his advice for clients today -- including his answer to the vexed question: "If you were buying tomorrow what structure would you use?" Mark encouraged investors to look beyond their immediate tax position. Remember the big picture, he said. Yes. He sounded a warning in response to the news of the announced beef-up to the IRD's audit section -- it's paid big dividends for IRD and they (rightly) see the millions they've spent on this um, er, activity as a good investment (Drat!) Mark helped us get a handle on the new status of 'improvements' to rental properties as 'black hole expenditure' (tax wise) and encouraged us landlords to create a strategy of programmed, routine repairs and maintenance as a regular (claimable) expense instead of sporadic, more substantial bursts more likely to attract unwanted 'attention'. Listen to Mark's opening remarks here: © 2010 Copyright. All rights reserved. Lawyer Tony Steindle (author of Property Law - A New Zealand Investor's Guide) shared his view of the 'fish hooks' in LAQCs now and suggested a 'safe bet' strategy if buying tomorrow. He talked about the usefulness of 'un-complicating' your life and working in terms of long term planning ' e.g. if a trust might be where you're going to end up, and since it can do things a company can't... it may actually be best to get that in place. Like Mark, he said tax is not everything -- creditor protection is vital. (And that's a lawyer talking!) Tony also discussed the challenges the banks are facing with widespread mortgage stress and he lifted the lid on some of the unhelpful things some bankers are doing to pressure their clients! He shared the problems banks are creating for their investor clients who want to buy now ... and some of the steps you can take to keep yourself safe from them ... well, as safe as you can. He shared some practical steps for keeping your deposit secure when buying. Tony said he's seeing this becoming more and more of an issue in this market -- and he talked about new 'tricks and opportunities' arising because of the current state of the market. He touched on weather tightness issues -- how the fix-ups may create a different kind of mini-boom, discussed the changes to the Unit Titles Act -- and the upcoming changes to the financial advisor regulations which he says will catch the cowboy 'advisors' selling property on the side. Listen to a bit of Tony here... © 2010 Copyright. All rights reserved. Olly Newland opened his session with the dramatic statement that NOW is the best time to buy property -- we're at the bottom of the market cycle he said, we may bump along for a while but this is the time to act -- as he himself is. He's buying right now, and he explained what he just bought last week and how. There's a good chance we're going to be in for some inflation, Olly suggested, and residential rents WILL rise. He talked about the differing prospects for various classes of property -- and painted a picture of the commercial sector still with some way to go. Olly shared some experiences, good and bad, with financiers and banks recently... and gave us a few pointers. He also talked about dealing with (commercial) tenants and why he prefers to lease to tenants who are weaker than him. He spent quite a bit of time talking about his views of the inner city apartment market - the ins and outs, recent history - and freely gave his suggestions and advice (and even buying rules!) He shared his advice regarding do-ups (hint: this is a great time to do it if you do it right.) He poo-poohed the parade of so-called 'statistics' as confusing and misleading and described how some of his clients are doing very well through the recession thank you very much ... and described the problems other people are facing as it grinds them down. Listen to a preview of Olly here ... © 2010 Copyright. All rights reserved. After a hot tea/coffee and monster-sized biscuits, we kicked off the Q&A session. Always good. Fascinating! One early question was aimed at getting Olly to elaborate on his 'Now is the best time' comment, and to expand it into building projects -- no such luck, really, but if you love it, do it, he said. The question of what special conditions clauses to use on your Sale and Purchase agreements was nicely handled by Tony and discussion about getting capital gains out of an LAQC safely tax-wise was a hot topic for quite a few of the more than 100 people at the evening. Some questions about commercial property were very interesting. (So were the answers!) The speakers' comments about banks and other sources of finance were brought up and they expanded their advice -- including tips on how best to apply for finance these days. More discussion on the legal structures to use -- and what to do if you feel cross-footed in a structure now was canvassed with the clear advice about what NOT to do. (i.e. don't panic and abandon your LAQC.) I never thought I'd write these words but one question was answered with, effectively, 'The Tax Administration Act rides to the rescue!' (Ha!) Olly's prediction of inflation was examined, with past experiences discussed and the likelihood of a 'spike' in interest rates considered by the panel -- and what to do going forward (fix? float? split?) Trusts -- pros and cons were discussed, with the challenges of the Budget announcements put into context. Investors looking for capital growth heard some good advice and got some useful tips from these three experienced experts. Body corporate issues were raised and some real-world advice shared on how to protect yourself as a buyer from 'missing' body corp minutes or issues that weren't immediately apparent -- but could potentially impact on your investment. Tony talked about S&P clauses to use to require ALL the information you need. We talked about banks and mortgage documents and negotiating priority amounts etc. The state of the inner city apartment market came in for a rigorous examination and the distinctions between different types of titles: "There's leasehold and there's leasehold" Mark said ... and explained the differences. This is'important stuff if you want to play in that game. Tony mentioned how the town planning rules and economics/market forces will keep new development out of cities for a while, which will only make the good ones even more valuable. We discussed negotiating commercial leases -- from Olly's 'take-no-prisoners!' approach to the annual CPI adjustment way -- again, pros and cons of both. I ended the evening with a short wrap and illustration about how what's going on in your head can affect how you approach any opportunity in any market. As always, I recommended you seek good impartial advice on your own situation rather than being sucked into an investment deal by a smooth-talking salesman and their associated parties, of which there are plenty. The audio CDs of the evening are being produced now, and you can order a set here: Post Budget Special Briefing and Property Investment Q&A (June 2010) Audio set Two edited CDs: Disc 1 -- The three speakers' introductory comments and update on the Budget Mark 15 min, Tony 17 min, Olly 22 min Disc 2 -- The Q&A session and concluding remarks - 56 min The cost is $69 + P&H and you can order it here. Best wishes, Peter Aranyi Empower Education 15/6/10 PS You can see details of the speakers' other books and audio programmes on our website. --- A handbook for changing times ... How to Survive and Prosper in a Falling Property Market Get the inside story on what happens as the property cycle turns... and how to invest for profit and safety in a changing property market. $39.95 + P&H In How to Survive and Prosper in a Falling Property Market, veteran investors and expert authors Andrew King, Mike McCombie, Mark Withers and Tony Steindle share essential facts, advice and wealth-building strategies for today's property investor. Clear and accessible, this up-to-date and comprehensive handbook will show you how to both safeguard and increase your real estate values as the market changes. Visit our website to download the table of contents and a free chapter. --- Empower Education - Empowering You For Success PO Box 39-155 Howick Auckland New Zealand. Phone 09 535 2415 info@EmpowerEducation.com www.EmpowerEducation.com Copyright 2010 Empower Education Ltd. All rights reserved.