Almost on a daily basis websites are full of angry people accusing ‘speculators’ of ramping up the price of property — supposedly pushing it out of reach for ‘the poor’ and first home buyers.

'The Tax Gatherer' 1540 - Marinus Van Reymerswaele (click to enlarge)

‘Bring in a Capital Gains Tax!’ is the cry, or there are calls to ‘restrict’ lending for property purchases, or to ‘punish’ investors by removing tax advantages, or to flood the market with more undeveloped land. Some even want the government to tax gains that have not even been realised.

This cacophony of shrill envy aimed towards property investors is almost exclusively driven by those who cannot comprehend this market reality: where someone has actually taken the plunge, bought a property of some kind and then — whether immediately or over time — made a profit.

However let me tell you that it’s not ‘speculators’ who are driving up the price of property. Indeed, they are more likely driving *down* the price of property! For speculators can only really thrive by fierce haggling in order to buy at bargain prices.

Read the rest of Olly’s column at www.OllyNewland.com

Olly is one of the contributors to Commercial Real Estate Investors Guide — Making money as a commercial property investor in New Zealand — available here.

I have always been surprised by how some people react when I suggest they should investigate commercial property investment because it provides a very a good alternative to residential investment.

It’s “too complicated”, they say. Or “too hard to understand” is another common response, as well as fear of vacancies with a consequent loss of income.

Yes, I agree, residential property is the more “liquid” of the two forms of investment, but successful residential investment is, in my view, the hardest subject to master by a country mile.

We all know the advantages of residential property and they are persuasive, that has to be said, but let me give you some of the disadvantages — just for the sake of the argument.

The main problem with residential is that it’s “political” in every sense of the word. From one day to the next there is a steady drum beat, criticising those who own or invest in residential property.

The media run one story after another on overcrowding, shortage of rentals, rising rents, unfair profits, and lately pressure  to introduce a capital gains tax or reduce so-called ‘tax rorts’.

It’s no wonder that there is a growing rental crisis, and increasing homelessness, all aided and abetted by the recent tax disadvantages which have, as expected, had the exact opposite effect from what was intended.

All this was predicted by me for over a year or more. And let me quietly tell you something else in the strictest confidence mind  you. Draw close, I don’t want to shout. …

Read the rest of Olly’s column at www.OllyNewland.com

Olly is one of the contributors to Commercial Real Estate Investors Guide — Making money as a commercial property investor in New Zealand — available here.

Olly features in the March 2012 edition of NZ Property Investor magazine

Investor, best-selling author and Authorised Financial Advisor Olly Newland features in the latest edition of NZ Property Investor Magazine.

The article ‘Real Estate’s Rascal Looks Ahead‘ (a play on Olly’s book The Rascal’s Guide to Real Estate) is well worth a read.

Olly has a scan of the article over on his website available as a PDF.

Pressure building in the housing market means ...

2011 has come and gone — and for many it’s good riddance. It was a particularly tough year for some. The recession, both local and overseas, seemed to have no end.

Hopefully 2012 will be better for those of us who are investors, or who intend to be investors.

We are still battling the ding-a-lings lenders who don’t seem to have a clue about what they are doing most of the time. Even worse, we are obliged to endure the stolid hierarchy of bureaucrats at Council level, some of whom should be whipped across the soles of their bare feet until common sense penetrates.

I am proud to say that my team and I have advised and mentored many investors — guiding them along more profitable paths, ironing out problems, re-organising their financial affairs, (whether property related or in general) and sadly, sometimes acting as grief counsellors in difficult situations. …

Read the rest of Olly’s column at www.OllyNewland.com

Read Olly Newland's latest column — www.OllyNewland.co.nz (click)

Olly Newland makes the case for another property boom — and issues some warnings for those thinking of ‘jumpin’ on in’.
Read his column here at www.OllyNewland.co.nz

I say ‘controversial’ because by golly, Olly has come under fire from some of the anti-property, alarmist ‘Oh-My-God-the-world-will-never-be-the-same’ brigade.

As you’ll see from the title of the column While Mortgage Rates Are Low – Borrow More!, Olly is offering an alternative view to the current ‘crowd wisdom’ of reduce debt reduce debt reduce debt. If you read the column (link below) you’ll see that he’s NOT saying gear up for consumption or to buy flash new toys. Nor is he suggesting anything radical or revolutionary. As an Authorised Financial Advisor, property mentor and consultant he’s offering strategies and tactics for today’s investment conditions.

If there’s one thing Olly has proven, it’s that he’s willing to be a counter cyclical investor. That way lies success.

It hasn’t always been a bed of roses for Olly (Read Lost Property), but Olly is an investor who typifies what Warren Buffett refers to when he talked about ‘being fearful when others are greedy and greedy when others are fearful’.

He’s also demonstrated by his own example the value of leaving the party before the clock strikes midnight. His book ‘The Day the Bubble Bursts’ which warned of the (then) impending property slump, was greeted with similar howls of protest. Until later, when several of his most vocal critics quietly admitted they wished they’d followed his advice … to shed lower quality properties in below average areas, do your best to lock in tenants and, paradoxically, to reduce debt … when many ‘gurus’ were saying the opposite.

But that was then and this is NOW. The market has changed and the strategies to succeed in it at this point are different — the strategies, but not the principles.

Read Olly’s October column with his calls to invest (carefully, prudently) NOW … then, if you’re interested, here’s a follow up five minute audio interview recorded with Olly about some of the points he raised, and (briefly) responding to people he says are ‘hyping up’ fears.

or download an MP3 file here (5 minutes 2.5MB):
Olly Newland – Why borrowing sensibly for improvements is better than paying off your mortgage

© 2011 Empower Leaders Publishing Ltd. All rights reserved.

This may seem a little contrary to popular thinking at present but by being counter cyclical you will have a greater chance of profit and wealth creation than when interest rates are high.

A few weeks ago I spoke to a group about investment. I spoke mostly about seizing opportunities when they arise and, with my usual arm-waving, talked about how the volatility in the market is a great chance for all investors and home owners. I probably got a little carried away (as I sometimes do) because I find the volatility in the market very exciting at times.

At the end of the talk someone in the audience asked me if there were any opportunities when you had a mortgage (or mortgages) to deal with.

The common practice used by most is to apply cash to reducing debt — and not save it for investing. There are exceptions, of course, such as KiwiSaver and the like, but the general rule stands that debt should be paid off first before investment begins.

So the person in the audience, feeling a little awkward no doubt, asked me how he should deal with his debt.

Yes I agreed that money is cheap these days — so why not borrow it and then borrow some more at every chance while low interest rates last?

Some stick-in-the-mud advisers (with respect) say differently. They suggest taking the opportunity of low rates to accelerate repayments of principal and interest. After all, they say, when interest rates fall and you keep up the same monthly repayments, it will have the effect of paying off the mortgage more quickly.

When money is cheap it is easy to get carried away and lower repayments as well … so you have more money in your pocket to spend on other things.

The problem is that principal payments make up such a tiny portion of any loan that it’s hardly worth the effort. Even though it’s true that a component of each payment you make is applied to reducing the mortgage it takes years to make any sort of dent in the amount still owing through your regular payments.

Interest rates are down and ‘down for the count’ … and let me go out on a limb here and say I believe that low interest rates are here to stay for the foreseeable future- as has always been the case in most Western economies for decades and especially these days.

One day interest rates will rise … but that day is far-off — UNLESS, of course, we get hyper inflation. If that happened it would not occur overnight and there would be plenty of time to change course (and, indeed, profit mightily as hyper inflation carries all assets up in value as money devalues).

Home buyers and property investors see low interest rates as a great opportunity to trade up to a bigger and better house or investment and — despite what some say — that is how it should be.

Worrying about future interest rate rises is a hiding to nowhere. Should interest rates RISE it means that the economy is improving or inflation is on its way which means higher wages and greater profits which should easily make up any difference.

The opportunity to get cheap money now carries little threat to buying on tick and loading up some debt — if done carefully — and it can bring great rewards.

My advice

My advice is to borrow more and use the money to carefully upgrade your home or investment property. A dollar well spent in upgrading can return up to ten dollars in profits — and it’s a darn easier way to make money than trying to pay down a hopeless debt.

Put another way, increasing the value of your property is the same as decreasing the mortgage. e.g. if you have a $500,000 house with a $250,000 mortgage then your gearing is 50%. Not bad, but it could be better.

If you spend a prudent $50,000 on upgrading the kitchen, bathroom, or whatever and the property ends up being worth (say) $750,000 (this is pretty easy to do. Ask any property investor) then the mortgage — still at $250,000 against a $750,000 house is now only 33% geared.

Extra borrowings, even at the current historically low interest rates are being covered by rising rents (something I predicted over 12 months ago). Look at the latest figures for the Auckland region. Some rents have risen by as much as 40% … and this is just the beginning as the housing shortage deepens:

Crockers September research (click to enlarge)

Crockers latest research

Also: remember paying off a mortgage has to be done with tax paid dollars. Increasing the value of a property is tax free in most cases. Which one, then, is the obvious choice?

Before embarking on any such plan get your friendly Registered Valuer to give you an estimate on what your property is worth as it stands today and what it would be worth when you do the upgrade you are planning.

Be prepared to compromise to get the biggest bang for the bucks as possible. (This is a big subject.  Contact me if you want to learn how.)

Now is the time to increase your mortgage, NOT to buy ‘toys’, but to reinvest into the home or investment through improvements and ultimate tax free capital gain.

This is not the time to fall asleep and forget the opportunities out there. In fact it’s time to wake up and increase the value of your investment as much as possible … and reduce your debt the far easier way.

I have had countless number of clients who have followed my advice and seen their homes or investments climb quickly in value — outpacing the market easily — even in these quieter times.

A few years ago everyone was throwing money at real estate and just wanting values to go up without any effort  on their part. (No wonder so many came to a sticky end.)

Now a relatively few well spent dollars (borrowed or not) can bring the same rewards with minimal effort. The aim for most renovations is to complete them quickly —ideally inside 4 to 6 weeks. With that it is quite possible to get that gain more quickly and more certainly then by blind speculation or naïve hope.

Time is of the essence. Avoid major rebuilds and stick to once-over-lightly makeovers — then you will see your equity increase in leaps and bounds … as your debt ratio reduces.

And one more bit of advice before you rush out to you see your bank manger: Increasing equity (viz. decreasing debt) requires a fair amount of hard work and dedication on your part. There is much to learn if you are not experienced. With the right coaching and right advice virtually anyone can achieve great results. It takes lateral thinking and the will to succeed

From the files – A real life story

Let me give you a real example from my recent files on just how increasing value creates equity and cash profits.
Sue and Brian, with a small loan from their elderly patents  found a very nice looking 3 bedroom plus wash house brick and tile 1970’s home in the suburb of Glenfield on a reasonably level full site of 620M2 more or less.
Brick and tile are always popular as there is no concern over leaks or shoddy workmanship and so is a full site.  These types of houses are in great demand as they tend to be easier to renovate being made of relatively modern materials.

It was for sale in a very shabby run down state  after being rented out for years.  The suggested asking price was $395,000 and with my advice Sue and Brian put in an offer of $340,000 which was rejected but came back with a counter offer of $370,000.

With my advice a registered valuer was employed who valued the property at $380,000 as is, but with the note that similar fully renovated houses in the area were selling in the high $400’s-to mid $500’s. Brian and Sue put in a counter-counter offer of $359,000 and a deal was finally sealed  at $361,500.  A mortgage of $300,000 was arranged and then Brian and Sue moved into the house and got stuck in. Within 6 weeks ( a little longer than anticipated) a new kitchen ( pre made variety) and bathroom were installed, the place repainted inside and out, floors polished or carpeted a double carport erected (always a good move and cheap), plus new lighting, gardening and minor repairs and major scrub up.
They also turned the wash-house into a study — good move.

Total costs $35,000 plus their own labour.  A new valuation was obtained suggesting $525,000 so it looked like around $100,000 equity or profit was created. Brian and Sue listed it for rent on Trademe and were staggered to get 40 replies within 3 days. This sort of response told them that they had created something a little special so they decided to sell it, which they did within 2 weeks achieving  a sale price of $500,000 clear. Not bad for their first effort and I am sure they will do even better next time  – and the time after.
Indeed as I write Brian and Sue are now onto their second property also on the North shore and if they keep this up they will earn enough to effectively double their annual income.

While it is true that doing up a house while you a still living in it  is not easy, the rewards more than make up for it.

Olly Newland
October 2011
www.ollynewland.co.nz
© 2011 Olly Newland. All rights reserved. See Olly’s books and audio products.

The property market is changing and changing fast. As never before, obtaining sound independent advice is needed to prosper in this changing environment. Get the benefit of Olly’s experience: Click here for details of his Property Mentoring Programme and consulting services.

Olly Newland Mentoring Programme

Olly Newland provides a consulting and mentoring service for people committed to make serious progress with property investments … whether it be buying, selling, holding or troubleshooting.

With more than 45 years in the property game, there are few investors who wouldn’t benefit from his insight and experience.
Olly’s services are impartial and independent of any real estate agent or sales organisation, bank or other lender. Unlike some who purport to offer similar services, he does NOT broker real estate ‘bargains’ (houses, apartments, sections or developments off the plans) nor other related services such as financial planning.
Olly’s style is up front and he offers sound, road-tested advice, robust counsel to help people move ahead with property investment. He is not adverse to using somewhat unorthodox methods to achieve his clients’ goals. (Experience PAYS!) Olly offers a limited number of people one-on-one, totally private consulting and mentoring by phone, email, Skype video and face-to-face meetings seven days a week.

If you’re interested in knowing more, visit Olly’s webpage on Mentoring www.ollynewland.co.nz or email him.

FEEDBACK: Do you agree or disagree with Olly?
Send your comments, criticisms, counter-arguments or any feedback to him by clicking here.

AUGUST 2011: World financial markets react with turmoil due to the US credit rating downgrade and sovereign debt crisis — shedding value and displaying a nerve-wracking volatility that makes many question their investment strategies. What is the way forward? How will these world events affect our local property market? How should investors react — and how should YOU react?

Olly Newland has lived through many such troubled times. While Olly would never say he ‘knows it all’, in this 13 minute audio interview he outlines his view of the current financial crisis, he discusses the ‘change in the times’ brought on by this increased market volatility, what it heralds, and suggests what steps you could take to protect yourself.

Listen here:

or download an MP3 file here (13 minutes 6.7MB):
Olly Newland – How to respond to the global crisis

© 2011 Empower Leaders Publishing Ltd. All rights reserved.

Related: Olly’s book Lost Property relates his experience in previous financial market convulsions and important lessons he drew from those times.

Regards, Peter Aranyi   Empower Education

If you’re lucky in life you can learn from people more experienced that you. This book draws together strategies for success in negotiating real estate and other deals as an investor, seller, buyer, landlord or tenant. Negotiating Real Estate Deals – How to unlock a GREAT deal is an approachable, digestible guide to what works (and doesn’t) in this vital area.  Available as an eBook or hard copy.

Get the inside story on how you can greatly increase your ability to achieve the results you want in a negotiation. Learn about the costly mistakes some investors make when faced with a negotiation – and how you can avoid them. Discover the three crucial variables of ANY real estate negotiation – and how you can use them ethically, responsibly, to your advantage. Find out how to make the best of almost any negotiation by using proven, time-tested, specific and relevant techniques that apply directly to local conditions.

Negotiating Real Estate Deals – How to unlock a GREAT deal will give you practical and useful tools, tactics and procedures, and – more importantly – it will help you develop your own successful approaches to different real estate negotiation situations. You won’t win every time, but you’ll do much, much better if you apply what you learn from this book. You’ll discover how to build your negotiation skills and awareness. You’ll gain knowledge that you will be able to use over and over again, in deal after deal, year after year.

Topics include:

• How to prepare for a negotiation – vital rules to follow every time
• Does it have to be win/lose? How to avoid sour compromise, and play the game ethically
• Why almost any negotiation should be about much more than just price
• Working with real estate agents – how to get them to help the process
• Common tricks some negotiators – and some agents – employ. How to recognise them and deal with them
• Some ‘never break’ rules for negotiation – when buying or selling
• Using the three crucial variables of any negotiation
• Some common mis-perceptions about what works
• Developing your own negotiation style (or styles)
• ‘Haggling’ and ‘bargaining’ versus ‘educating’
• How to avoid being worn down or ground down
• How to keep it from becoming personal (unless that’s exactly what you want)
• Should you lay your cards on the table or keep them close to your chest? Sometimes it pays to be candid.
• When to negotiate yourself – and when you would be better to use an intermediary
• Ploys and ruses, strategies and tactics – using them, recognising them and countering them
• How your tactics and approach will probably vary with the property cycle
• How to identify vendors who are more likely to be flexible or ‘motivated’ – looking for clues without looking like a shark
• How to generate options and alternatives, what to do when it looks ‘stuck’ (sometimes, the most flexible wins)
• Calculating your ‘walk away’ – your real bottom line – and finding theirs
• Understanding how power (or perceptions of power) can shift during negotiation and how to preserve yours
• Negotiating with your existing tenants maintaining the relationship while getting what you want
• New leases – seeing the long term implications of incentives, inducements and exclusivities. Traps for young players
• Negotiating with larger tenants – how to work with them without giving in
• How do you deal with an uncompromising opponent and remain reasonable
• Whose paperwork or lease form? What are the implications of using theirs?
• How you can sometimes make your terms palatable by understanding their need for something you can easily offer them
• The dangers of ‘looking good’, the importance of building rapport
• How you can identify – early – the relative bargaining strengths of each party
• When to reach for a mediator or arbitrator … and how
• Making the most of the offer/counter-offer process
• When ‘flying a kite’ in a negotiation can blow up in your face
• How to say what you mean without backing yourself into a corner
• When to break off talks – really
• Dealing with contractors, professionals or tradespeople under pressure

Order your eBook here (includes printable PDF & ePub versions) Order hard copy here.

LAST WORDS
The best advice I can give you is this:
Find a way to benefit from the experience of others you can trust.
Get them (or their information) into your circle of influence.
If we can help, great. That’s what we aim to do.
Best wishes,

Peter Aranyi
editor, Negotiating Real Estate Deals – How to unlock a GREAT deal