Thumbs up for Empower today!
Filed under: Cost of living, General Budgeting, Property & General Investing
One of the things our waste-of-space tenants did before they ran off owing money to a lot of people was not pay their power bill for ages – and got disconnected. I think this may be the real reason the did a runner rather than any sterling effort our ex-property manager claims he made to get rid of them.
You cant power a 46″ flat screen TV, Sky system, X-Box and Laptop if you refuse to pay your power bill now can you?
So not only do we have to tidy up after the dirty tykes, remove their crap and repair the extensive damage, and field several debt collectors (to who we are giving all the aliases this guy goes under)- we also have to reconnect the electricity before we can do much of the work. We talked to Meridian the day we got in the property, but they pissed around so much that it was gone 5pm on a Friday before they pulled their fingers out and would arrange the connection – and then said they had to charge us $60 for a “weekend connection”.
We told them where they could stick it, as they refused to see that their bone-idleness had in fact caused the necessity.
So we contacted Empower – who we used to deal with before shifting to Meridian.
Because the power had been disconnected, we actually couldn’t get it back on till the Wednesday, but we weren’t being charged, so waited patientl;y and did what we could without electricity. Which is actually not as much as you might think.
This weekend we got the bill from Empower – including a $65 next-day reconnection fee!
Well, I phoned (and managed not to get angry – which I feel was no mean feat). Spoke to a lovely chap named Paul, explained the situation and he said he would see what he could do. A minute later and he comes back saying the fee has been waived.
What a lovely start to the day!
So Empower get a thumbs up from me today for being helpful and understanding, and I will now look at the possibility of changing back our home accounts to them.
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Would you apply for a mortgage for someone else…
Filed under: Banks, Economics, General Budgeting, Interest Rates, Credit Cards & Mortgages in NZ, Property & General Investing
and then complain when you realise that you were scammed and the mortgage broker lied to you when they told you it was to help a British couple out whose money was locked up in the UK???
Much as I would like to help people make the move to New Zealand – the answer for me is
NO WAY IN HELL! 
Because call me nuts – but isn’t it fraud to apply for a mortgage or loan under you own name, when you know its actually for someone else, especially when you are doing so on the promise of being paid money by these people when the loan draws down, and then a monthly fee from them?
This is what has happened to a couple on the Kapiti Coast. They got scammed by Kerry Brundle, a mortgage broker. And they have finally woken up and gone to the police – along with many other victims who for some utterly inexplicable reason took out loans to give this woman money. The mortgage payments were supposed to be met by Brundle, or some other fictitious character and then the people scammed were also supposed to receive a payment when the loan was drawn down, and then ongoing payments each month. To say “Thank you”.
Mark Mason can testify to how persuasive Ms Buddle could be. He took out a $42,000 mortgage on his house in Paraparaumu in 2008 so he could lend her money to renovate her home. He has since had to sell his house to avoid a mortgagee sale.
“She said it would be good for both of us. I trusted her, she was a friend. I thought this has got to be easy – get $1000 upfront then $100 a month – for signing a piece of paper.”
Were they all barking nuts???
Why oh why oh why would you mortgage your house, risk yours and your families financial future to give money to someone else? Charity is one thing – stupidity is quite another. If you have the money and want to help people – that’s great: laudable and entirely your choice. But when you are prepared to sign loan documents under your own name knowing full well that you are lying about the loan being for you in exchange for money, I’m afraid any sympathy I have goes out the window. To me – this is what greed is – you do something which highly unethical, because someone is going to pay you money to do it.
That doesn’t diminish how much of a snake Kerry Brundle is – living like a millionaire on the money she scammed out of people. There are an awful lot of people out there pretending they have a lot of money when they don’t, so she will not be the last person to get caught for trying to live off other people’s money I’m sure.
Why do people do this?
We were prepared to take a certain amount of risk when taking out mortgages to buy our investment properties. But always – we ran the numbers, listened to advice, and remembered that if we screwed up or things got difficult – we were risking not just our home and future – but that of my Parents and brother as well. I sure as hell would never risk that to borrow money for someone else! If I give money – for any reason – it is money I can afford to give – and I give it because I want to – not because someone will pay me to do so.
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Where on earth have I been?
Just in case anyone was wondering – I have been away from blogging for a few weeks because I have been having to sort out one of our rental properties, and unfortunately – everything else had to get dropped because well – I need the rent.
So what happened.
Well, I can’t say too much because I will be taking legal action or going to the Disputes Tribunal against my Property Manager for not actually managing the property. But essentially, the tenant in one of our properties was allowed to move in without paying a bond for 6 months, or paying rent in advance, owes us about $3500 in rent, and wrecked our house as well. (Turns out they owe an awful lot of people a lot of money!)
We have had to repair holes in the walls, replace a door that was kicked in, replace a bath that had a hole kicked in it, replace the carpets that dogs had peed all over (we still have to get decorators in to repaint the outside because the dogs have clawed the weatherboard), and generally fix and tidy up.
It has cost us over $10,000 to repair the damage – that’s on top of the lost rent and the 9% + GST I was paying for the property manager. We have also had to do some repairs for our other property as a previous tenant also did a fair amount of damage, and we were not told about it before the current tenant moved in. They were left with the impression that we were little more than slumlords. So at least now we have repaired some of the damage to our reputation and they now understand that we will indeed maintain the property if we are told that work needs to be done.
So for the last 3 weeks we have cleaned, painted, weeded, and paid large sums of money for contractors to re-carpet, put a new bath in, clean some more, change the locks (the PM hasn’t even bothered to give us the keys back – let alone get them off the tenant.) fix holes in the walls, replace doors, and generally turn our rental from a shit-hole back into a home.
The results
The property is now available on TradeMe, via our new Property Managers, Lambton Property Management, who have gone above and beyond the call of duty and friendship to help me deal with this nightmare.
So if you are looking at starting your new life in New Zealand in the Wairarapa – take a look:
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You don’t save when you have debts to pay.
Filed under: Avalon's Money Thread, Economics, General Budgeting, Interest Rates, Credit Cards & Mortgages in NZ, Property & General Investing, Retirement, Pensions and Kiwisaver
It is a fundemental rule of personal finance and budgeting:
Do not save while you have debt to pay off.
So why is it that the supposedly “clever” people in the savings working group want to force people to save because we have too high a level of debt? It makes no sense, in fact its the most stupid and finacially dangerous idea you could come up with. The scary thing is – they have to know this – they really can’t be that thick – so why are they suggesting it?
First of all- why is it a bad idea?
Well, its all to do with interest rates. You get less interest for saving than you pay for borrowing. For example, ASB pay you 3.65% for any savings you have, and charge you a minimum of 6.25% for any borrowings you have. (Up to 19.25% if you have credit card debt with them). So WHY would you put any money in the savings account when it can work at least twice as hard for you paying off the debt?
And because you pay tax on any of the interest that you earn – you are even worse off. The simple fact, to earn enough interest to make it worth “saving” (or “investing” ) instead of paying off debt you need to be able to earn that 6.25% AFTER THE INCOME TAX HAS BEEN PAID. That means you need to earn about 8% interest in savings or investments.
Anyone know where you can get that?
(Actually – First Direct in the UK are currently offering 8% on thier regular savings account – but that aint gonna help most Kiwis, or expats unless you already have an account with them).
So – Forced Kiwisaver then?
Yep – thats the bee-all and end-all of everything. Open a Kiwisaver account and the economy will fix itself. You won’t be able to eat – but hey – who cares about that? We will stop using debt to buy things we can’t afford, and no one will have any money to plow into investment properties because it will all be in the stockmarket. NZ Business needs the investment – and as too many of us are not doing as we are told – we need to be forced to behave.
A classic quote in a second article today shows the attitude of these people really eloquently I think:
“KiwiSaver has considerable potential to further help people select appropriate investment assets,” the working group report said. “At the moment this potential is not being fully realised.”
Ie – “stop thinking you know better than us – we tell you Kiwisaver is the best investment – and if you won’t believe us – we will force you to. You are too stupid to select your own shares and we really are terribly hacked off that you want to buy property – because none of us get a cut of that!”
Of course, buying shares, unless you buy in an Initial Public Offering never actually puts money into a business – it just values the business. Which means that on paper the business is worth more and can borrow more. Um – isn’t that bad and greedy when Property Investors do it? It will of course put money into the pocket of the person you bought the shares from. Much like buying a property off someone who bought it as an investment puts money into the greedy gits pocket!
The first rule of smart finances:
Pay off your debt first.
It’s the best form of “saving” there is, purely because of the cost of borrowing and the effect of compound interest. If you want to try and beat the interest rate you are paying on debts, then you tend to have to save the money in risky investments, or property (and that as we all know is BAD!) And even then – it isn’t easy – and is dependent on a lot of outside forces. Investments can and do lose money – because money always goes in cycles. Theres are booms and busts – in a boom your investment goes up, in a bust it goes down.
But one easy way to get the best return on money is paying down debt. It’s risk free, makes the absolute most of every pound or dollar, and also reduces your personal risk. Can you get a better investment for your money than that?
Does this include mortgages?
Yes and no. In general when people talk about “debt” they mean non-mortgage debt. But clearly when you end up in the middle of a financial crisis like we are right now, mortgage debt is also a huge issue for people, so I personally think you can’t forget about it that easily. And when the boffins in these working grups are whining about our debt levels – they are also talking about mortgage debt. Most of our mortgages are business related, so they are tax deductable – effectively this brings the interest rate down by about 1/3. (which would be exactly the same if we have taken out the loan to buy shares with by the way). But it should never be forgotten that they are still debts, and they cost a lot of money to service. It is in the end money we owe. To be honest – if we didnt have the investment properties then financially we would be laughing all the way to the bank because our spending is way lower than earnings right now. All our spare money is going into paying down debt and keeping our properties.
If we are forced to pay Kiwisaver contributions as well – how the bloody hell am I supposed to pay the mortgages and reduce debt levels???
I may be good with money – but I am not that good!
I will be writing another blog about this, and what the Savings Working Group actually said in full, because from the skim read I have had – there are some really good ideas in there. Just some truly barmy ones as well, and an arrogant insistance that I MUST have a Kiwisaver account.
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Migrants buying up houses in New Zealand!!!
Filed under: NZIS & Immigration issues, Property & General Investing
I came across this article on google news with the headline Chinese buyers chase easier housing market. It seems that China has brought in rules to stop people buying multiple houses, so they are buying here instead. Basically this is because, news and political expediance aside – investing in property is a bloody smart idea. Now the article is a bit confusing in places (not entirely unusual in New Zealand to be honest) because it keeps talking about a/ different types of migrants and b/ different properties.
Upshot 1
Chinese parents want to buy property for thier children who are studying here (presumably for them to live in as students) with a view to upgrading as and when they get residencey.
Upshot 2
Chinese migrants coming in on the Investor Category two are bringing in $1.5m each and want to invest most of that in property.
Upshot 3
One of those chinese investors has expressed an interest in spending $2m on a commercial property.
Now, theres a few problems with articles like this – not least because at the moment there is a concerted effort to drum up a bit of “Asians are buying up our country” hysteria. Not helped by the fact that Chinese dairy companies are currently trying to buy a load of dairy farms which are in recievership.
To be honest in general I don’t have an issue with most of this being shown in the article. If we are taking in foreign students – we are generally charging them an arm and a leg to be here, so I dont see why thier parents can’t invest in a propery rather than having to pay rent all the time. Clearly it will highten the housing market – but really – any more than I have by buying three investment properties on top of our home?
The other thing is that people coming in via the investor category cannot invest the $1.5m in residential housing. There are actually fairly strict rules about where that money can go as it happens:
BJ5.50 Definition of ‘acceptable investment’
An acceptable investment means an investment that:
- is capable of a commercial return under normal circumstances; and
- is not for the personal use of the applicant(s) (see BJ5.50.1 below); and
- is invested in New Zealand in New Zealand currency; and
- is invested in lawful enterprises or managed funds (see BJ5.50.5) that comply with all relevant laws in force in New Zealand; and
- has the potential to contribute to New Zealand’s economy; and
- is invested in either one or more of the following:
- bonds issued by the New Zealand government or local authorities; or
- bonds issued by New Zealand firms traded on the New Zealand Debt Securities Market (NZDX); or
- bonds issued by New Zealand firms with at least a BBB- or equivalent rating from internationally recognised credit rating agencies (for example, Standard and Poor’s); or
- equity in New Zealand firms (public or private including managed funds); and
- is not (directly or indirectly) invested in residential property development (see BJ5.50.10 below) or deposit taking financial institutions (e.g. banks or finance companies) (see BJ5.50.15 below).
- Notwithstanding (a) above, where an investment fails to meet one of the acceptable investment requirements, a business immigration specialist may consider, on a case by case basis, whether the failure was beyond the control of the principal applicant and if satisfied that this was the case, may consider the investment acceptable.
So – this begs the question to me: are the investors planning on buying up houses, or commercial property? Because the legislation doesn’t actually preclude commercial property – but it also doesn’t list it as a suitable investment either.
It is of no surprise to me whatsoever that a licenced agent is quoted in the article and does not seem to be too clear on this issue:
Ming Tiang, director of Chiwi Immigration Services, says he has 10 potential investor migrant clients from China, willing to invest upwards of $1.5 million each to qualify for the investor migrant category, and most of them are keen to pump a large portion of the sum into real estate.
“They are businessmen, and are quite realistic about how much to invest in business here and what the returns would be,” said Mr Tiang. “As with most Asians, the Chinese feel investing in real estate is usually a safer option.”
Does Immigration know that this is where the funds are going? Becuase one of the things you have to do under this scheme is actually show where you invested the money. INZ say they will want to see proof. It offends me that this is going on – with an agent seemingly fully aware of the fact that his clients are not going to be following the rules.
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Christmas pressie from the Reserve Bank
Filed under: Cost of living, Economics, Interest Rates, Credit Cards & Mortgages in NZ, Property & General Investing
Alan Bollard (bless his little cotton socks) has decided that the base interest rate in New Zealand is not going up this month.
“Interest rates are now projected to rise to a more limited extent over the next two years than signalled in September.
Oh Yay! Just in time for my investment mortgages to come off their fixed rates – and there was me thinking that I might have a snowballs chance in hell of reducing my mortgage payments.
Of course the reason for the hold is becuase no one has any money to spend, so the economy isn’t taking off as well as it should. I’m not sure where anyone expects us to get money to spend from right now – prices are still going up and wages aren’t. And to be honest, even if I had any money – what he’s saying is that If I spend it and “help the economy” hes going to put my interest rates up as a result.
Does this make any sense to anyone?
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And why are the IRD being so selective in who they audit and prosecute?
Filed under: Economics, General Budgeting, Jobs & Work, Property & General Investing
As I’m on a rile complaining about laws being applied unevenly and inconsistently – I thought I would mention an article this weekend about the Inland Revenue not collected overdue taxes.
Now Ive made no secret of my dislike of over-taxing people. I’m the first one in the queue to get a legal reduction in tax if at all possible. I maintain that its my money and I should be able to hold to it. Not that I think all taxation is bad – I feel its right to pay a central agency some share of income to cover infrastructure: roads, schools, healthcare, a proper welfare system for people in need – that sort of thing. My issue is with taking more and more tax becuase the government just feels like spending more and more money on things that are vote winners rather than things the country needs.
Anyway – to stop waffling!
Commissioner of Inland Revenue Bob Russell took a swing at the insolvency industry last month, criticising “friendly” liquidators for not delving deeply into the affairs of failed companies. He was reporting to Parliament on the $740 million of taxes lost to firms in liquidation.
Ok – so thats a lot of tax lost by companies going belly-up – but as the article goes on to point out – how the hell has the IRD allowed these companies not to pay the tax? If I am late with my taxes – I get into a lot of trouble – and get fines and penalties.
Of the money owing from liquidation files, 90 per cent is over a year old, confirming what many in the insolvency industry see: the IRD is slow to enforce overdue tax debt.
So this isnt because of the liquidators – its because the IRD isnt chasing late payments. But then there’s this little gem:
Importantly, there is more than $5 billion in arrears from taxpayers not in liquidation or bankruptcy.
So the commissioner is taking pot shots at an industry he claims is costing $740,000,000 in lost taxes while overseeing an IRD that has cost itself $5,000,000,000 by not doing its job properly.
But who are the IRD spending millions investigating and going after? Property Investors and Traders. Who owe a paltry $240,000,000 of that $5 billion. Not that they shouldn’t – but It would be nice if when all us property people get tarred and feathered it was occasionally remembered that we don’t actually the bulk of the owed taxes – we are just the easiest to audit and prosecute – possibly also the most popular to be tarred and feathered.
But also last week, there was a rather interesting post on KiwiBlog, about the Unite union not having paid its PAYE or GST to the Inland Revenue. Now thats a bit embarrassing – but worse was the shitty attitude to the situation displayed my Matt McCarten – the head of the union:
Unite head Matt McCarten confirmed yesterday that the union owed money to the IRD but said he had made choices to pay for union campaigns rather than clear the debt. “I don’t shy away from these decisions, I make the calls.”
So basically – this twit decided off his own back that he had better things to spend the GST and PAYE that his union has collected on behalf of the government, and that he would use that money – that wasn’t his to spend- in order to run political campaigns. Utterly corrupt – and actually illegal. Nit only that – hes been thick enough to admit in the media that hes not paying taxes because hes campaigning with the money instead.
So why would the IRD rather come after me as an individual if I paid my income taxes late (which is money I have earned and have to give them a share of) but doesnt throw the book at Mr McCarten for refusing to hand over taxes he has taken from othe rpeople – ie – its not his own money and never was. Hes stealing it.
Paying employee deductions
Employers must pay deductions to us by each due date. The money deducted does not, at any stage, belong to employers. Under no circumstances should the deductions be used for any other purpose than for payment to Inland Revenue. We will help employers who try to meet their responsibilities but will take action against employers who do not comply with the tax laws.
Failing to pay deductions to Inland Revenue is a serious offence and can result in prosecution. An employer who is convicted may be:
fined up to $50,000 and/or
sent to prison for up to five years.
The name of anyone convicted will also appear in the New Zealand Gazette.
Ha! Still a lesser sentence than giving immigration advise 
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Why the hell should I pay other people’s bank fees???
Filed under: Banks, Cost of living, General Budgeting, Property & General Investing
I’m having a slightly irritating day to be honest. I’m off to Sydney – which is going to stretch my budget to within an inch of it’s poor life, and I’m trying to change the buildings insurance on my rentals. Currently its done via ASB, but I have been looking to take the business from them on account of their refusal to give me any discounts on my bank fees or interest rates.
So I got a quote from a broker – it doesn’t save me a huge amount – only about $50 a year for 2 properties – but it has the advantage of not being via the bank. I reviewed the policy documents, filled out the paperwork, and just needed to confirm the amount of the premiums in order to fill in the Credit Card Payment option with details.
At which point, I am advised that there is a 2% extra charge to pay my Credit Card!
So I double check – no where, but no where does it mention this. Not a scooby.
And even if it did – why the hell do I have to pay someone else’s bank fees?
I pay my own. It is beyond outrageous to expect me to pay someone else’s as well.
When I think about this – it is in much the same vein as the whole MAF Fees scam that some shipping companies try and pull. Where immigrants get charged spurious “extras” which are basically business costs for the NZ subcontractors. I wonder why they don’t go the whole hog and charge us extra for the staff loo roll.
Anyway – they have decided that I don’t have to pay it – but to be honest I’m considering not going ahead anyway. It’s the principle of the thing.
But always remember – in almost ALL cases – these “charges” can be argued against. At the very least – if anyone tries it one without telling you up front – at the start of the transaction (not whacked on at the end hoping you won’t notice) you have every right to refuse to pay it. There’s about $3500 worth of insurance premiums involved here – possibly lost because of a desire to wring another 2% out of me.
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What is happening to LAQC’s?
Well, what it looks like is happening is that they are going to be crushed into a billion little pieces and those pieces consigned to the depths of hell where us greedy property investors should also be consigned for daring to be slightly wealthy. That’s the headline, and that’s what most people will read and understand about what the government has done. And I’m pretty sure that most people (who don’t have an LAQC) will be rather happy about that.
However….
Actually – that isn’t happening at all, so if you were thinking of going into Property Investing in New Zealand – don’t panic.
Gilligan Rowe & Associates – the people we used to tell us how to set up our companies and trusts – have written an article about the new setup – it’s actually quite clear and easy to read. Maybe I’ve just got used to hearing Matt Gilligan speak about tax issues – and now I understand him!
Basically it consists of us having to contact the IRD and file a document that says our LAQC will now become an LTC – or Look Through Company. (Who the hell comes up with these names???)
And despite what many people assume is going to happen, other than that – it’s business as usual for us. We appear to still be able to claim losses against our personal income, as long as that does not exceed the amount of money we have either personally put into the company by way of capital or loans, or the amount of mortgage we have personally guaranteed. As that happens to be an unlimited amount (the banks don’t miss an opportunity to get your signature guaranteeing the moon if they can help it) essentially it means that we can can still claim a tax refund every month.
So at the end of the day – all we lose is the tax refund on the depreciation of the buildings we own. That amounts to about $3000 a year extra we have to find charge our tenants.
Personally, it bugs the hell out of me that I have had to worry about how to cope with suddenly losing the ability the claim tax losses, and being forced to sell three properties (cos I’m damn sure my tenants won’t feel like paying twice as much rent). Because thats what the media have been feeding to everyone. It just turns out not to have been the case. But if it keeps people happy, and means I’m personally not going to have to bankrupt myself for having had the audacity to try and not be poor – I’m actually OK with that.
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Tax Changes hit today.
Filed under: Banks, General Budgeting, Interest Rates, Credit Cards & Mortgages in NZ, Property & General Investing
GST rises from 12.5% to 15% (coffee has suddenly shot up from $3.50 for a Flat White to $4.00 for a flat white in the past few weeks – which I’m sure most people will realise is not a 2.5% rise in GST).
Income Tax goes down – so many people will see a nice little increase in their next pay packet. This one we personally won’t see till about next July as it all gets worked out in the wash of our tax return.
The tax changes for property investors don’t actually come into force yet – that’s not till next April, and a chat last week with my accountant showed that actually the changes haven’t been confirmed yet, so no one is 100% sure what the effect is going to be. Which is helpful. In a not-very-helpful sort of way.
So, to be on the safe side, I’m budgeting on paying the same amount of tax that we usually do, and as soon as hubby gets paid each month, I shovel the usual proportion of that money into a savings account (I’m using RaboPlus (now called RaboDirect) because the interest rate is higher and it takes the savings out of the hands of ASB). That should give us some leeway with our tax until we know for definate what the property investing taxes are going to change to. But at a rough estimate – its going to cost us a lot more than the cuts are giving us.
Which is nice. In a not-very-nice sort of way.
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