Why are MP’s such hypocrites?
Filed under: General Budgeting, Property & General Investing, The Book and Website
I know not everyone agrees with the fact that Property Investors can use the tax laws here to their advantage, but a few weeks ago, our MP’s discovered that some investors were using a loophole in the system to get access to government benefits they would not normally have been able to get – the Working For Families Tax Credit.
In a nutshell – the situation is this: you can use specific company set ups such as the LAQC, to offset your losses in your rentals (because believe me the rent is no where near high enough to make a profit right now) against your income.
So basically if you earn $60k in your job, and “lose” $40k on your business – you technically earn and pay tax on just the $20k left.
Which drops your salary down to the level at which you can claim benefits.
Now – obviously I’m a bit thick – because we use an LAQC for our property business, and take full advantage of the tax benefits. It was after all one of our many reasons for leaving the UK – to escape the governments ever increasing greed and need to tax the living crap out of us. So to come to a country that says you can actually reduce your tax was a bonus. We were happy with just a lower level of tax, but once we got here and realised that we could get it even lower – well – I was a happy bunny.
But I would actually never have dreamed of using that to then claim benefits – we do still after all earn quite a high salary by New Zealand standards.
And that is what has got the MP’s in a bit of a stew. It seems that there are a number of people claiming benefits, particularly working for families, who not only earn high salaries, but have rather a large asset base and are worth a lot of money. As I object to people getting welfare benefits when they don’t really need it, I also happen to object to this scenario as well. This is actually the reason I don’t like paying tax – because it gets wasted on things and people who don’t need it, which means there isn’t enough for the people who really do need it.
But I have to say I’m rather revolted at MP’s in any party that have the bloodly gall to complain about people doing this (Rorting the system) when they do exactly the same thing, and have their snouts in exactly the same trough and justify it because “its within the rules”. Well, so is what these wealthy people are doing – some of them on considerably smaller salaries than MPs, and with much less generous retirement benefits to look forwards to.
It seems that the MPs are looking to close this loophole. Hopefully if they have an ounce of decency – it will be shortly after they stop filching from the public purse themselves.
Note: If you decide you want to use LAQC’s yourself – make sure you get advice on how to set it up and how to do it. Tax evasion is illegal in New Zealand, and you need to make sure you get it right. You cannot set up an LAQC for the purpose of paying less tax. The basics are explained in Avalon’s Guide. You should also be aware that, despite what many people want to believe, the LAQC system is not just for property investors: many people turn a “hobby” into a business and claim tax benefits.
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Are Kiwis really obsessed with Property?
Err – no.
But it makes a good headline doesn’t it?
There have been two articles that talk about this recently – both contradict each other – no surprise there – articles usually do that.
In today’s article, it seems that a group of concerned people have addressed a group of concerned politicians (uh oh) and told them that we are about to “lose our sovereignty to Australia” if we don’t stop buying houses. Seriously. And some of these people get paid a lot of money to write such tripe. I mean – how can buying houses possible mean we are about to get taken over by the Aussies – and why the hell would they want to take us over anyway?
Now basically – all this is to do with looking at why the Banks won’t pass on the drops in the official interest rate. I thought it was just because they wanted to screw us for more money – but the boffins think its all the fault of the Property Buyers. So watch out – you might not want to buy your own home and a Bach when you move here – you will be blamed for us becoming an Australian Territory.
Of course – the people they are really blaming is people like me – dastardly, evil, greedy Property Investors – who apparently according to said boffins are “using the credit card to pay the mortgage”. Like hell I am mate! Our mortgages are paid for out of our hard earned salary and a bit of rent. Speak for yourself – don’t speak for me!
So – exactly how many Kiwis own investment properties? Why is there such a rush to insist that the recession is all our fault? That the New Zealand economy is collapsing because every Kiwi owns a gazillion houses and we need to invest in shares (New Zealand shares of course) instead?
7%
That’s right – a whopping 7% of kiwis own rental property, and most of those (about 90%) own just one or two rentals. Leaving about 0.7% (ish) of the Kiwi Population that are “professional investors”.
Scarily – that includes us with our huge portfolio of 3 (yes three) rentals. When we settle on the two off-plan rentals we have purchased – you will have to hang us from the gallows. I had a rather “wow” moment while chatting about insurances with my broker when he said that we had “Lots of rentals”. I don’t think I’ve even got started yet. We are piffling compared to a lot of people I know.
The other article that I thought was actually really good puts this in perspective was looking at words of wisdom from Andrew King and Lisa Dudson, both well respected people in the property world over here.
They talk about the basics of property investing – that funnily enough you do have to do some work, and you do need to look after your tenants and not house them in a flea pit. (While looking at properties to buy – I have seen things that would have the owners in jail if animals had to live in them – but humans get charged rent for the privilege).
Lisa Dudson says “Patience aside, making a profit in property takes sound planning, strategy, wise counsel and firm financial foundations.”
I know I’m only just really starting out with property investing – but that’s pretty much how we do it. We get people to help us, we have a plan, we know what we are looking for and what we want to achieve, and we still keep control of our spending. I can honestly say that it ain’t me that’s overspending on credit! (Well apart from the recent splurge on the 46″ Sony TV and Sound System – but I had saved up for that so even though it went on the card – the bill got paid immediately). My coffee habit is also affordable – so that is not going to cause the immediate take over of New Zealand by the Australians either I’ll have you know!
Whether or not you join the Kiwi Non- Obsession when you get here and invest in property – make it your choice and don’t be bullied by what other people think is right for you, and don’t be bullied into not doing it becuase there are so many people at it and you will be responsible for the end of civilisation as we know it. Get lots of advice and get help – an remember that buying houses in New Zealand is not at straightforward as many people would like you to think, and you need to understand the tax laws.
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How not to be a property developer.
I just can’t help it – but I’m watching old episodes of How to be a Property Developer on Living TV. How sad is that?
This UK based program follows 2 teams of budding property dealers who get given a rather lovely £300k to get started and have one year to make as much profit as they can out of doing up and reselling property. All under the watchful Gary McCausland – who has been doing this for years and runs his own successful property empire.
While one of the teams (The women 
) are doing really well, and have so far made over £60k profit, and churn out one good deal after another – it is just sheer agony to watch the blokes lose money on deal after deal.
I have made my family promise to shoot me if I start behaving in such a tosser-ish way as these two. I’m all for investing in property – I have three already and plan on buying many more, but for crying out loud – there is a hell of a lot of work to do. These guys seem to think it’s all about saying you want to make money and that’s it. And while I am the first to admit that I think one of the joys of the property business is sitting around drinking vast amounts of coffee – I also understand that this does not let you off the hours upon hours of trawling websites, dealing with agents, viewing anything from sheds to palaces, and getting to grips with making offers. And maybe getting your hands dirty with some hard labour now and then. One of the guys seems to stop at the coffee bit! The other one seems to dream a lot and talk about how it’s all a matter of getting this bit or that bit right – he just doesn’t seem to do much of it.
Something that does annoy me with the program, is that although the presenter does swoop in to offer his opinion – he doesn’t seem to be actually mentoring the teams, rather just telling them what they should do once they have bought the place. With the girls that works out OK, as they tend to do their homework before they buy. The guys team however just keep buying lemons, and they need to be taught how to spot one! What is worse –is that when the presenter does tell them what they should do with the property they just bought – the blokes completely ignore him, and the girls tend to at least listen and do as he suggests most of the time.
I’m pretty sure either of the two property mentors I have had, Trev and Steve, would have taken me aside and told me to stop being such a plonker before I actually paid money over for a property that was no good. (Steve has a more colourful turn of phrase – but gets the message across!). I thought it was especially important to get help from a mentor as I was a migrant and I needed help to really understand how the property market works over here. It is very different from the UK way of doing things, and when you are buying to invest rather than buying a house to live in it is even more vitally important to understand exactly what you will be dealing with. While there is certainly money to be made in property – if nothing else the guys team show that it is all to easy to lose a lot of money if you don’t understand what you are doing.
I dread to think what kind of mess we would be in if we had tried to go it alone and buy investment properties. As it is, one of ours isn’t doing too well, though the other two turned out to be really good buys. I read today on Property Talk that everyone buys a lemon from time to time, so it’s nice to know I got mine out the way early. Funnily enough, while there are people out there who will abuse the position of being a mentor, and persuade investors to art with cash for any deal, both Trev and Steve have actually advised me against buying many properties because they either knew something I didn’t, or just through sheer experience could tell me what was a bum deal. I actually listen when they tell me this!
Hopefully it won’t be too long before I can buy my next Investment Property.
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Westpac says I’m not a person.
Filed under: Banks, Interest Rates, Credit Cards & Mortgages in NZ, Life in New Zealand, Property & General Investing
One of my Rental property mortgages is with Westpac bank, and I’ve had the mortgage for about 18 months now. I have had nothing but problems and agro with it – despite the fact that the only thing it needs to do is take a single payment each month from my ASB business account to pay the mortgage with. You would not think that was too tricky would you – especially for the “most advanced banking system in the world” (allegedly).
You would be so woefully wrong.
For a start – Westpac (and ANZ it turns out – so it’s a NZ wide problem) cannot – simply cannot – take a direct debit from another bank to pay the mortgage. Instead – I have to have a second account with them from which they can take the payment. Personally I think this is simply a scam so that they can claim they have 2 new accounts instead of one! The first problem with this – is that I have to make sure I deposit enough money into the fake “second account” so that Westpac will always have the funds to pay the mortgage with. (Because it would also be too easy to work out the interest payable for a year – and divide by 12, so each month they charge a different amount of interest on an interest-only mortgage).
The second problem this causes – is that over a few months – money builds up in the fake Westpac account – and is neither usable (because it is not my working business account), nor do they even have the courtesy to pay interest on it. So every few months – I have to log into the Internet banking system and manually transfer the extra back to my real business account at ASB.
Only Westpac won’t hold my user ID and password for more than a few weeks. Which means every time I need to do this I have to go through a farce to get MY money out of THEIR account. The reason? I’m not a person!
If I want to be able to speak to customer services – I have to open a THIRD account in my personal name( for which of course I have to pay!) Then they will talk to me! Because my accounts are in a Business name – they cannot and will not deal with me. I was told for the first time last week that the way round this if for my manager to provide me with a pin number which allows customer service to determine that I am in fact real.(Seriously – I am NOT making this up). My new manager was going to provide me with said Pin – but funnily enough it hasn’t materialised yet. A letter introducing the new manager to me has however come through – inviting me to a financial review to that they can “better understand my financial goals”.
With westpac – I have one goal – to get access to my bloody account and not have to go though all this stupidity.
Until then – I have to
a/ find out who my manager is (it keeps changing without notice,)
b/ try and get hold of them (bearing in mind that Customer Service cannot tell me who they are because Im not a person)
c/ get them to renew my user Id and Password
d/ go into the internet banking and then re-change the password because the one the manager gave me will only let me in to do that – it doesn’t actually give me access to the damn account.
E/ Pay the money back to my real account.
Guess what the excuse for this? Security. What a load of old tosh. It is pure incompetence and laziness and idiocy.
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Apparently property investing is still considered safe.
Filed under: Interest Rates, Credit Cards & Mortgages in NZ, Property & General Investing, Retirement, Pensions and Kiwisaver
There was news in the Dom Post this weekend about how “wealthy investors” still keep their money in property. Cool. There is so much fear and uncertainty right now – it can be hard for many people not to run for the hills and panic that they may have made a ginormous mistake in investing in anything other than a sturdy mattress with a hidden compartment.
Kiwis are known for their love of property as an investment, fuelled partly by the fact that you can take advantage of some nice tax breaks here by investing through what is called an LAQC (Loss Attributing Qualifying Company). There are frequent calls for this to be removed, but I for one am making the most of it while it is still there. Also, I think, it is a lot easier to understand houses and renting than to understand buying shares sensibly.
Property is still seen as a “conservative” investment, and not as volatile or risky as the stockmarket. Personally I think any investing is risky if you don’t understand what you are doing – and it is well worth learning about it before parting with your hard earned cash.
The article is a nightmare to read – so I’m not even going to link to it. I really wish New Zealand journalists would learn to write coherent articles. What I did pull out of the article was that “wealthy investor” means US$100,000 – about $170,000 – $200,000 NZD. Wehey! Nice to know.
And also 63% of Kiwi investors in that bracket own property as investments.
I’m not sure that is really new news.
We have recently decided to sell most of our share investments. We still had an Endowment policy in the UK, and some IBM shares. We have decided that now is the time to sell them and use the funds to pay a chunk off the mortgage and cut our interest payments. I’m all for paying as little money to the banks right now, and the investments aren’t growing as much as the interest we are being charged.
It will also make life a bit easier in that we don’t have to keep sending money back to the UK to pay for the endowment policy – which I have to say is getting a bit irritating.
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