Life as a Landlord

[ivanp]

$300 to have it installed by certified installer.

Sounds like you've got mates rates and haven't include the materials.
A box of 20m of copper coil pair is $105 incl. GST. Two feet and capping add another $40 or $50... And these are close to trade prices.
I couldn't find any electrician in Auckland who would install cheaper then $500+GST, so decided to DIY.

[Wayne]

Heat pump $100 off trademe (two years old. seller said it was too big for their lounge) and $300 to have it installed by certified installer. ;-)

Rental insulated and heated for under $1600.

The insulation was 4 years ago - of more relevance is can you do the same now?

[Learning]

That was to total. Installer was able to reuse a lot of the pipe work and as it had been properly capped it still had a full charge of gas. The old owner had no idea what he was getting rid of.

[Learning]

The insulation was 4 years ago - of more relevance is can you do the same now?

probably not but 4 years ago the government was throwing money at LL's to heat and insulate their rentals. Most said "why should I what do I get out of it.". Now they have their answer.

[flyernzl]

By now, we should all realize that we have a major crisis on our hands. Every day the media report harrowing stories of families who are suffering. Mothers and their ragged children look out at us from our television screens and newspaper pages with hollow eyes and pale, drawn faces. Social workers tell us heartbreaking stories and beg for more resources. Each evening news features John Campbell and Andrew Little with tears in their eyes as they recount the latest tales of poverty and want.

It is not enough, we are told, to leave this tragedy to be resolved by market forces. The politicians must take immediate action. John Key and Bill English can no longer shelter behind their uncaring lack of empathy for the needy and duck away by foisting the blame on local council regulations. We pride ourselves in being a first world country, and it is a disgrace that many of our people are living in such deprivation.

I am, of course, referring to the supply and distribution of food in this country.

Do you realize that there are many people making substantial profits out of the food industry? Even worse, some of them not even New Zealand citizens! Surely, in a country like ours, this should not be permitted. Something, indeed, should be done. Why just the other day I bought an apple at a local shop and I’m absolutely sure that the shopkeeper was a Chan or a Singh.

We also hear that there are a large number of people who set themselves up in business running supermarkets, coffee shops, butchers, delicatessens and fruiterers with the absolute intention of making a profit out of this activity. How dare they take advantage of the public like this. The right to food is implicit within our society, Shocking! Graeme Wheeler, have you ordered a case study on the advantages of restricting the finance that a bank can be allowed to offer to an asian national who sets out to buy a fruit and vege shop in Remuera? That sort of restriction can’t be bad, and may well reduce the rate of price inflation on such places for, um, a few days.

Having borrowed the money to establish their food business these people then compete with ordinary hard-working kiwis when they get their supplies. It is scandalous that they are allowed to deduct the cost of buying their potatoes, their cabbages and their bananas off their tax bill whereas you and I cannot do that when we buy our own families groceries. Unfair competition in the market. Not only that, but when they pay their rent, their power bill and their insurance they can also claim those costs as a tax deduction. You and I, sitting at home, cannot do that. How can we compete? We are disadvantaged. Mr Little, Mr Twyford, please come to our rescue. It is so unfair. This loophole in the law must be closed.

Even worse, when these people have built up their business on the basis of all these tax-free perks and they come to sell out at a substantial capital gain, that capital gain is completely tax free! They walk away with many thousands of dollars, all unearned, and do not pay a single cent in tax. How dare they. Tax the bastards till their eyes water and their toenails ache I say.

The Government must step in right now and do something to relieve this tragedy. We can’t just leave it to the market. At the very least they should set up Government stores where affordable food would be available to those in need. A catchy name for these places would be great – Great Union Markets sounds about right, and GUM would be an interesting acronym, reminiscent of those Soviet Russia food stores of the 1950s who had the worthy aim of "democratizing consumption for workers and peasants nationwide". Equal lack of choice for all.

Some people argue, and say that the Government has no business to be in the food business. I disagree. We have many reports from university academics and top public servants saying that this is the way to go. Sure, these people have all spent their entire working lives sheltered on a secure and protected government funded salary, but they have read plenty of books and have lots of letters after their names so they must know what is the right thing to do.

We then need to set up an affordability benchmark, your weekly food bill should be no more than ten per cent of your weekly income. Any subsidy that might be needed to achieve this could easily be raised by imposing a fair tax on private food suppliers. Sure, what you and I might consider to be a fair tax may well be regarded by them as a punishing imposition, but the Green Party says that our view of what is fair is what counts and anyway we all know that when we levy a tax on anything it always brings the price down, don’t we?

Should we then allow anybody and everybody to shop at GUM? Of course not. The self employed, the thrifty and the hard-working are all undesirables and should be barred from access. We don’t want to encourage such bad behavior. My suggestion is that there should be a statutory means test, and legislation passed that those who fail the test should have to shop only in the private markets. Naturally, if such legislation is enacted, everybody will obey that law just like they already obey laws like those against using cell phones in cars. We are, after all, a thoroughly law-abiding society.

Of course, if we look at history, every single attempt to control a market, regulate supply, impose price controls and subsidize everything and everybody has always inevitably lead to failure, shortages, corruption, disaster and eventual collapse. But we are different. From Vogel to Muldoon, we have long history of trying to outfox the market. Admittedly that has never worked in the past. Regulations have always begat more regulations. Subsidies have always become more complex and byzantine. The market has always won in the end. But it might just possibly work next time. Surely we should give it a go. After all, King Canute was not a Kiwi.

[sidinz]

Brilliant! Who are you sending it to?

[artemis]

Guest post at Kiwiblog?

[flyernzl]

It is actually really difficult to get anything published that reflects the Landlords point of view.
Frustrating!

[Don't believe the Hype]

Flyernzl - is there a lobby group for people who planned to be lifetime renters by choice in order to live a certain lifestyle and/or invest their funds in alternative choices?

There is a huge pity party from the loud majority who think it is their life's work to protect the first home buyer... Which if successful may help these first home buyers but could do a huge amount of damage to those who choose to be life time renters by putting landlords out of business reducing choice for lifetime renters and forcing rent prices up (supply reduction and cost of compliance)

The reality is when you remove the 'affordability' argument (which is the basis for all this pity) from the discussion and look at the home ownership % even when ownership was at historically low multiples of income there was still a huge amount of renters - possibly lifetime renters (I don't have supporting data) who chose to rent vs. buy.

[eri]

unfortunately

modern media +marketing

have led to the common belief that not only can everyone have it all

but that they deserve it

by simply existing!

[Davo36]

The major difference between the housing business and the food business being that in the food business, there's no 'council' saying "Nope you can't have a shop there" or "Setting up a fruit and vege shop? We'll take your first year's profit in fees to us please!"

i.e. like most businesses, it operates as a fairly unconstrained MARKET.

The housing market is not a freely operating market at all. Strangled from all directions by government, it is dysfunctional.

[Perry]

The major difference between the housing business and the food business being that in the food business, there's no 'council' saying "Nope you can't have a shop there" or "Setting up a fruit and vege shop? We'll take your first year's profit in fees to us please!"

i.e. like most businesses, it operates as a fairly unconstrained MARKET.

Most retail premises are subject to a modest raft of council imposts / licences / inspections, etc. Even more so, if there's anything edible involved - such as your fruit and vege example. The Disease Dept (often called the Health Dept) and Money Always First (MAF / DPI), plus the NZ Filching Serious Amounts (NZFSA - NZ Food Safety Authority) have to be placated, as well. It's worse if it's a cafe or restaurant, too.

Did you know that a poultry farmer has to be registered with NZFSA and have a Risk Management Program and pay lots of fees for those dubious privileges? NAIT (National Animal Identification & Tracing) is another cost for stock farmers.

So it's not all plain sailing for any of them, either.

[Davo36]

Most retail premises are subject to a modest raft of council imposts / licences / inspections, etc. Even more so, if there's anything edible involved - such as your fruit and vege example. The Disease Dept (often called the Health Dept) and Money Always First (MAF / DPI), plus the NZ Filching Serious Amounts (NZFSA - NZ Food Safety Authority) have to be placated, as well. It's worse if it's a cafe or restaurant, too.

Did you know that a poultry farmer has to be registered with NZFSA and have a Risk Management Program and pay lots of fees for those dubious privileges? NAIT (National Animal Identification & Tracing) is another cost for stock farmers.

So it's not all plain sailing for any of them, either.

Well yeah I know this, but didn't want to get bogged down in details.

And the comparison is not the same. So what I mean is, once you have your egg laying operation (or whatever) up and running, you don't need to get permission to produce every single egg from then on. You produce as many as you can, without further interference (albeit with checks every now and then.

But if you're an affordable house builder, you can't just bang out houses, because there's often no affordable place to do it in. Because the council has locked up the land.

[flyernzl]

Last weekend the Property Investors Federation held a communication meeting in Wellington.

Unsurprisingly, given the current level of public loathing of landlords, the mood was fairly sombre. We seem to be under attack by most groups within society, and even the usually quite conservative institutions like the Herald and the National Party seem eager to put the boot in. It is all becoming quite depressing.

Quite why this should be so is not clear. We are, after all, just a group of people engaged in the quite legitimate business of providing accommodation from winter weather for those who either cannot or choose not to buy a house for themselves. Sure, we aim to make a profit in doing so, but it is a fact of life that if there was no profit to be made in this business then no-one would do it and the homeless would either die of exposure or the taxpayer would be shouldering the burden.

As someone who has been in this business since 1991 I can tell you from the coal-face that it is becoming harder and harder to make a living as a residential landlord in the Auckland area. Sure, rents are increasing, but these increases are severely limited by the lack of growth in tenants incomes, while the rents now achievable have fallen well behind the quite startling growth in the value of the assets employed. In the meantime, of course, the unavoidable costs involved in property ownership have soared.

I used to look at a number of the well-known names who seem to be successful landlords and wonder why so many of them depended on other businesses to put bread on the table. They lecture on property, operate as paid mentors, or run some other unrelated business enterprise in order to make ends meet.
“Why do they do that?” I asked. “If they really really knew how to play this game would they be selling that knowledge to others, or would they use it to enrich themselves. After all, if you actually know which horse would win the next race or what exactly would be the winning number on the next spin of the roulette wheel, what would you do? In the meantime I, of course could bask in the golden glow of purity. I was keeping the faith, making a living out of this business, succeeding where they could not.

It hurts to admit it now, but I was wrong, dead wrong. In the last month over my various houses I have had to get a roof repaired, cockroaches eliminated, a toilet flush valve replaced, an erratic living room light fixed, two new front door locks installed, a damaged window security stay repaired and a whole new hot-water system supplied and installed to replace a leaky rusty one – that alone cost $3500. This work, of course, is additional to the usual monthly expenses of insurance roll-overs, lawnmowing, water charges and all the other ongoing but (to the tenant) unseen expenses that come with property ownership.

It’s all very well to say “But look at the capital gain!” Have you ever tried to pay for your grocery bill with a bit of capital gain? Even that capital gain is causing me problems. It has taken me twenty years to find a roof repair man. Most roofing people stand outside in the street, take one look at your roof, and declaim “You need a new roof. That’ll be 15k”. It’s rubbish of course. A bit of repair work here and there and she’ll be good for another ten years, but it’s so much easier and much more profitable for them to whip the whole thing off and go for new. Anyway, after twenty years of searching I found Luke. He can bend up bits of sheet metal into complicated shapes, wriggle them under the problem area and Bob’s you Uncle. A gem. When I rang Luke to arrange for this month’s work he told me that he is moving away out of Auckland. As a youngish family man he cannot afford to buy a house in Auckland, so some other smaller town is going to get the benefit of his esoteric skills.

That, of course is one of the downsides of our current housing boom. Only those who can afford to stay, stay. The less affluent get pushed out. As I found out years ago, the less essential your work is to society as a whole the higher the income you will get from it. Thus we end up with a city packed with lawyers, consultants, Shortland Street ‘stars’ and other assorted con-merchants. Real people who can actually do useful things can’t afford to live here any more.

So will we ever overcome this housing shortage that has taken thirty years to build? Given the current social attitudes and policy settings, probably not. As Olly Newland has so succinctly said, you cannot walk out into the nearest grassy paddock and simply say “Let there be houses”. Firstly you must decide on the location, and wherever you decide someone else will have an objection – your houses will spoil the view, its an ancient pa site, the lesser spotted flubberworm lives there, and so on ad nauseum. Secondly someone must fund the creation of the roads, the pipes and the wires that make up the infrastructure. And finally, someone must organize the labour and materials to actually build the houses. To do all of this now several political dead rats must be swallowed, the major one being that those involved must be actually allowed to make a profit. No profit means that nothing will happen and no houses will appear. As a society, we have spent so long trying to stop those ‘greedy developers’ from making a profit that to reverse this now deeply held belief is going to be a major and controversial exercise.

So long as we property people labour under this cloud of suspicion and contempt very little will be attempted and even less achieved. Given the horror stories I hear about the difficulties and seemingly deliberate hurdles that obstruct anyone who tries to build anything new, there is no way that I would try to develop anything on any property that I own. Possibly, in time, should I start to hear what an easy and pleasant experience this can be then I might change my mind but I fear that this dream-time is a long way off.

In the meantime I have gone a long way away from the heat and dust and done some thinking. I have decided that I will downsize things, sell off one or two properties, and make life easier for myself. That’s better than an ulcer, better than battling attention-seeking politicians and vindictive burocrats, better than lying awake at night wondering where the next dollar will come from. Time to put myself first and be buggered to the lot of them. Right now, I’ve had enough.

[Nick G]

Great post.

Edit: Also, sell your worst properties as Davo says below!