Ring Fencing Matters

[Perry]

Yeah - too true, that.

[Perry]

2degrees posts maiden annual profit
17 May 2017

2degrees has posted its first profit, marking the end of a gruelling seven-year start-up period for the telecommunications underdog. The company posted a profit of $13 million on revenues of $703m for the year to December 31, confirming indications in a March filing to the Toronto stock exchange by its owner that it was in the black.

[sidinz]

2degrees posts maiden annual profit
17 May 2017

Also heard recently that AirBnB made their first profit. Took them several years, too. I believe that Uber is still making a loss.

[Don't believe the Hype]

So the short term pain will be a little greater as the losses are locked up.
The long term gain then will be a little longer as they use up those losses when they come into profit.

As for it driving rents up - bullshit!
Do the people who have no mortgage on a rental property charge less rent because they have less costs? No!

If your business model is so reliant on the tax break then it might not be such a sustainable business model.

I run a significantly cash flow positive portfolio... I for one will raise my rents should this change happen, safe in the knowledge that a large number (not all) of landlords will be be trying to recover costs. While i don't need to why would i knot leverage this opportunity to improve my profit margins - like any other business in any other industry would.

[Perry]

An empty rental is an expensive rental.

[cube]

What seems to be lost in these arguments is that, to claim my 33c tax deduction I have to spend $1 of my income on mortgage interest, rates etc. first - providing a social benefit to a poor, hard-working Kiwi. I'm still 67c down on the deal! Damn right there better be some capital gain to look forward to.

And what happens in 10 years, when the stories are of "Landlord receives $2,000 per week rent AND PAYS NO TAX" (because of the previous 9 fallow years of building up the losses).

[Don't believe the Hype]

An empty rental is an expensive rental.

Very true and you need to judge your market and market conditions.

For me across a very large portfolio we run at above 99% occupancy while targeting 96%.

We recently had a property vacate, it took 2 weeks to tidy up (internal paint, clean up) and had I not done that work could have had a gap in tenancy of only a few days. The property was tenanted for a 20% increase vs. the previous tenancy and based on the interest it could have been 30%.

[artemis]

Nick Kearney points out to Labour the difference between a speculator and an investor, including taxation requirements. He also comments that this particular issue is going to overshadow Labour's overall housing policy, some of which is good. So far he is correct.

http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=11857784

[Wayne]

Very true and you need to judge your market and market conditions.

For me across a very large portfolio we run at above 99% occupancy while targeting 96%.

We recently had a property vacate, it took 2 weeks to tidy up (internal paint, clean up) and had I not done that work could have had a gap in tenancy of only a few days. The property was tenanted for a 20% increase vs. the previous tenancy and based on the interest it could have been 30%.

So you are raising rents when costs haven't gone up - so rents don't bear any relationship to costs?
Rents are based on supply and demand not cost plus.

[bmt]

Nick Kearney points out to Labour the difference between a speculator and an investor, including taxation requirements. He also comments that this particular issue is going to overshadow Labour's overall housing policy, some of which is good. So far he is correct.

Nick Kearney is an Auckland lawyer specialising in property. He holds a Master's degree in law from Auckland University and has been a candidate for the Act Party at previous elections.

A nice balanced piece of writing there hahaha. So far he is correct? Since this policy was announced this thread has only run to 7 pages. 7 pages of mostly yes men nodding and agreeing with each other. So I got to disagree with you there.

[Anthonyacat]

Rents bear some relationship to costs, but it's certainly not linear.

I completely agree, rental levels are supply and demand. But supply is affected by costs.

If costs radically increased, over time you'd see rents go up more than they would have otherwise. Some landlords who were charging below market will bring theirs up to market (thereby bringing up the average) and some would sell their properties thereby decreasing rental supply.

There was a thing at APIA this month that shows rents diverging from inflation soon after the depreciation on buildings was removed. That's unlikely to be a coincidence.

[Wayne]

some would sell their properties thereby decreasing rental supply.

There was a thing at APIA this month that shows rents diverging from inflation soon after the depreciation on buildings was removed. That's unlikely to be a coincidence.

And when they sell their property one less family would need to rent - they now own - so reducing the demand.

It just annoys me when people run the 'well I'll just put my rents up' line when, as you say, the relationship is far from linear.
Be very careful with averages and statistics.

[Perry]

There was a thing at APIA this month that shows rents diverging from inflation soon after the depreciation on buildings was removed. That's unlikely to be a coincidence.

And the details of that divergence are . . .

[Anthonyacat]

They went up faster than inflation. Sorry, thought that was clear from the comment. If you're asking for the graph, I didn't get it - ask APIA?

[sidinz]

And when they sell their property one less family would need to rent - they now own - so reducing the demand.

No, because if they could afford to buy, they'd already own their own home.