Merlot - issues

[Jabroni01]

Well, guess this could be called one of those stupid mistakes, but we invested in Merlot a couple years back. With the recent Bluechip scenario we have been watching closely and recently received that email from Merlot how they were having financial trouble but give it some time, it will be back under control.

Weeks of no rent payments and trying to get a response from them but nothing, and we got a call from Harcourts today saying Merlot were going under, and to review our options.

We want to get out ASAP and get control of these properties before we mis out of any more payments.

Before this turns into one of those "lets all have a crack at these silly people" we are feeling pretty bad as it is and doing it tough already, any advice on going forward?

What do you think of Harcourts taking over the management of the rental properties, are they any good?

Pretty disappointed in the way Merlot have handled this, but guess can't expect much else seeing how things progressed with Bluechip.

Any advice during these trying times, would be appreciated.

Thanks

[outspoken]

well, you probably got involved due to the slick sales pitch about it being "hands off" "passive" and "hassle free" right?
o.k so you paid the fees to make that happen but it aint and probably never will.
Time to get your hands dirty friends, get in there, go see your lawyer about terminating the lease with Merlot, set up a new one directly with the tennant if there is one and manage it yourself.
If you can't handle that, appoint a property manager.
Go and see your accountant, get the good oil on whether it is fesible to hold this property either cashflow neutral or negative most likely, but know exactly what your holding costs will be and make a call.
If it's a lemon, donkey, whatever you want to call it, and you can't afford it....cut your losses, sell it now get out move on and learn from the mistake.

Good luck

[Jabroni01]

Thanks Outspoken, yes we got the sales pitch and took the easy route into our first property investment.

Likely scenario for us is that we will appoint someone to manage the property for us ASAP and get away from Merlot and likely just have to wear the loss on rent.

Will get some independent valuations on the property then get with the accountant to look at it realistically if we can hold on to them and hope to see some capitals gains down the track.

if not i agree may just have to quit what we can and take the loss on the chin and move on with life.

[outspoken]

Don't bother throwing good money after bad with valuations, they are not worth the paper they're written on at the moment unless you HAVE to refinance. The market, i.e a willing buyer will dictate what they are worth.

The maths is pretty simple really. multiply your weekly rent by 48 or 50 depending on what vacancy you expect. that's the big part of your income.

now's the scary bit...add up all of your expenses. Interest, rates, insurance, make sure you factor in a decent maintenance figure and there you have your actual expenses.

Now you will probably want to claim depreciation so see your accountant, beware that depending how much you claim you will / may have to pay alot / some of it back.

Depending on your structure
You may be able to file an IR23BS to have your tax losses offset against your income in the cycle that you get paid, i.e weekly, monthly whatever. this might help keep your cashflow going.

[spurner]

I'd go straight to your property this day and advise the tenants to make all future rent payments to yourself, effective immediately.

Then you can notify Merlot that you're canceling any lease you have with them immediately, I wouldn't bother about any fixed term, notice period, or contract terms you have with them. Give them an invoice for any amounts outstanding (not that they'll pay it).

Then you can decide whether to continue managing the property yourself, or appoint a property manager.

Good luck!

[Kerry Christian]

Do not dally

I know this company personally, they have tried to purchase from me in the past. I decided not to proceed with the sale

Take the advise given

Time to get out as fast and as safe as you can. Do it quietly and quickly

[exnzpat]

I'd go straight to your property this day and advise the tenants to make all future rent payments to yourself, effective immediately.

Then you can notify Merlot that you're canceling any lease you have with them immediately, I wouldn't bother about any fixed term, notice period, or contract terms you have with them. Give them an invoice for any amounts outstanding (not that they'll pay it).

Then you can decide whether to continue managing the property yourself, or appoint a property manager.

Good luck!

Yes. Do this first. If the tenants have a problem with it tell them to "pack their crap and get out." There is always another tenant. Also, you need to demand from the tenants past rent due. If they can show you receipts where they have been paying rent to Merlot then ask if you can photo copy them – you will need this info if you plan to pursue Merlot later in court for damages. If the tenants can’t show that they have been making rent payments then tell them to "pack their crap and get out."

Taking control means getting tough. Remember, it's your money and your property. Don't be afraid to do what it takes.

The reason crappy organizations like Blue Chip and their ilk get away with the crap they do is because most people tend to be nice, polite and accommodating.

Don’t be, you have too much at stake!

[OllyN]

Application to liquidate Merlot Homes Ltd

NZ Herald Public Notices today:
Application to put Merlot Homes Ltd into liquidation brought by Roberts Heritage Ltd (t/a Heritage Tiles)
CV-2007404 1440. Application to be heard 18th July. Any person who wishes to be heard in regard to this application must do so at the High court no later than the second day before the date of hearing.

Merlot Homes Ltd :
Directors
Stuart Goldstone
Grant Petrie.

[Hound]

Spurner has the right approach. Do not delay, roll up your sleeves & toughen up. You have every right to protect your capital. The middlemen ain't up to the job, so circumvent them ASAP. Preferably well before the liquidators do on the 18th July. Take charge.

[Dean]

If you keep the house and don't want to manage the tenants and want security of rental income, try contacting HNZC. They are looking for leases, 10 years usually and they always pay the rent.

[tim360]

Also try contacting other investors in the same situation. Grouping together and working as a collective can improve the results, particularly if you want to share legal costs, or setup your own property management company.

[OllyN]

Is Merlot another Blue Chip?

Investors alarmed over missing rents
5:00AM Saturday July 12, 2008
By Anne Gibson

Investors in residential real estate business Merlot are complaining about missing rent payments.

Vicki Walsh of Palmerston North said she was owed more than $700 rent on a property she bought through the Auckland-headquartered Merlot three years ago.

Other Merlot investors have also complained to the Herald about missing rent after Merlot said last month it was having problems.

Merlot investors are saying their rent has not been paid, leaving them to cover mortgages out of other earnings.

Vicki Walsh said rent stopped flowing last month and since then she has not received any money nor any explanation from Merlot.

The house she owns in South Auckland's Tuakau is rented for $350 a week and Walsh bought it new, borrowing $300,000 from a bank.

She is paying $75 a week to have the property managed and said she believed Merlot when it promised her trouble-free investment.

Fortunately, she said she was financially secure but she is worried about where the rent has gone and concerned for others who invested with Merlot.

She complained that a sales representative from Merlot had tried to sell her another Auckland property just before Christmas.

In late June, Merlot told clients it was having problems with rent payments because of the difficult econ-omic environment.

"Life is pretty difficult at present for all of us and some investors have had rental payment instability and this has meant that rent has been paid on different days of the week over recent times," Merlot said.

"We appreciate your support through this period and assure you that it is our commitment to you, that we will be making up these payments as soon as is practicable and intend to return to weekly in advance payments shortly."

Merlot has about 300 investors owning about $100 million of houses.

In 2005, it paid more than $6 million for 62 sections in Counties Manukau.

Merlot management could not be reached for comment yesterday.

[Dean]

It seems simple, Merlots business. Rent comes in from the tenant, management fees are deducted and the remainder is deposited in owners accounts. That should not fail unless the tenant stops paying rent.
Of course Merlot have other problems. They like many other investment property experts decided that it was easier and cheaper to become developers to secure the stock needed for their clients. And of course you need a pretty flash office on Princes Wharf. Alot of Merlots stock was in the Franklin area like Tuakau. Unfortunantly these areas have large quantities of greenfield development available and that is where Merlot and the likes have gone to source cheap land. And that it what it still is, cheap land , sections because there is an oversupply . My advise to anyone witha Merlot house in these locations is take control of it yourself and importantly secure your tenant as they are going to like hens teeth.

[artemis]

$75 per week for property management on a rental of $350 per week is more than 20%. That is out of line with what other PMs charge. Wonder what the owners got for their money.

[OllyN]

Bye Bye Merlot

"Merlot Homes Ltd the development arm of Merlot property Investments was declared insolvent and placed into liquidation by the High Court last Friday"

http://www.stuff.co.nz/4624646a13.html


This will be a big story when the facts roll out.