How much do you calculate for maintenance ?

[cube]

P.S. Let's have a sideline bet on how long it takes for this thread to be locked.

No need for the thread to be locked, SD, so long as everyone plays by the rules.

In case anyone is too busy to read the ASA ruling on your complaint about RM advertising, I thought I'd replicate the decision here. I know that this means people have more to read than in your previous 'edited highlights', but I am a fan of balance

The Chairman accepted the information provided by the Advertiser, acknowledging that the advertisement may have misled consumers and that it had been withdrawn. The Chairman was also pleased to note the Richmastery had appointed a person to ensure all their website advertising of property deals met the high standard required by the Code for Financial Advertising. The Chairman emphasised the need for advertisers to take great care to ensure code compliance in this area, as could involve a significant financial commitment for consumers.

The Chairman agreed that in light of the self-regulatory action taken by the Advertiser in removing the advertisement and putting in place a system to reduce the likelihood of a breach in the future, the principles of self-regulation had been met and the matter could be regarded as settled.

Now, I'm not saying that I think that RM, or any other finding service, don't have their own interests at heart in presenting a deal (and yes, I think anything under $1,000 is way too light for R&M), but I think that the selective quoting of a balanced decision to spin it against RM was unfair.

cube

[cube]

Hi guys

jus wondering when doing the sums , how much maintenance to take for average 3b house in a reasonable condition ?

thanks
H

Hi Orkiki,

Sorry that your thread has been somewhat hi-jacked.

The points given are valid, though - you can probably never allow too much for r&m, because with any house, there always SOMETHING that needs doing.

Maybe 'The Moneypit' should be compulsory viewing for all property investors!

cube

[SuperDad]

Cube,
What is wrong with selective quoting? After all, it was you who wrote:

I'm...saying that...I...don't...think that the selective quoting of a balanced decision to spin it against RM was unfair.

Sorry, I couldn't resist that lame attempt at late night humour.

Note that (as stated by the Chairman of the ASA) the complaint against RM's advertising was originally upheld, at the August 8 meeting of the ASA. Only after the complaint was upheld did RM decide to take is seriously, and submit a reply to the original complaint. It was in that reply that RM argued that they had taken self-regulatory action. (The secretary of the ASA tells me that they were in the course of preparing an "indictment" against RM, based on their contemptuous first reply to the complaint, when they received RM's second reply. I never saw that original reply, unfortuantely.) The Chairman then decided to amend the orginal "upheld" decision to a "settled" decision.

RM acknowledge that they received notification that a complaint had been laid on July 12th, nearly one month before the meeting of the ASA board. I can't understand why they didn't take the complaint seriously in the first instance. The cynic in me has an opinion on this.

All I can say is that if you think advertising is misleading (be it advertising for chocolate, poodles or property), take action.

Paul.

[Monid]

The points given are valid, though - you can probably never allow too much for r&m, because with any house, there always SOMETHING that needs doing.

cube

And another extremely important thing, have at least $5000 spare and available when you settle and for the first year you own a property... It is amazing how many properties seem to spit the dummy in the first year and give you a nasty big repair bill...

dang defered maintance probably due to someone spending only $500 a year upkeeping their property...

Davud

[The_Dog]

While I agree that the buyer should get on site and check things out themselves, that is a little difficult from the other side of the world. It's not only noobies that are victims.

I have purchased a number of properties unseen, and been burnt on some of them. For this reason I'm not looking to buy again unless I'm on the ground, or I can have someone I trust to check it out. I doubt you could find anyone, even a registered and highly paid professional, to give you a cast iron guarantee that a property will not fall apart. Alternatively you could ask the advice of a friend, however they might not remain a friend should things so wrong.

This brings up an interesting approach that some property 'finders' have taken. They will find a property to your specification for a fee, and it's therefore it's not in their interest to fudge the figures or misrepresent the condition of the property. That may be a better way, however the fee may be greater and still gives no guarantee there are no hidden R&M costs.

As mentioned in another thread, I seem to be haemorrhaging money at the moment on all manner of maintenance. To be honest, when I do visit my properties I’m alarmed at the condition and I certainly believe the Agents have a different view on maintenance from me. They spend $250 on a new stove element (which sounds like a rip-off to me), whereas I believe that would be better spent clearing out the guttering and washing the external walls.

Which brings me to another point, the R&M bill for a handyman is going to differ greatly from someone that has to pay someone else to do all works. Personally, I think I pay well over the odds.

The Dog

[xris]

This brings up an interesting approach that some property 'finders' have taken. They will find a property to your specification for a fee, and it's therefore it's not in their interest to fudge the figures or misrepresent the condition of the property. That may be a better way, however the fee may be greater and still gives no guarantee there are no hidden R&M costs.

I have just said in another thread about GST that I have a simplistic (perhaps 'to the point' would be a better phrase to use) way of looking at these issues.

Here we have another example where I am sometimes puzzled at the endless debating.

If somebody holds themselves out as a professional in a given field and the receives money for providing goods, a service, or advice in that field, then they are accountable for the quality of the service they provide.

That means that if you have been ripped off (or even just mislead) then you can have a crack at them. Simple enough?

These finders are a good example. (I won't mention RM because they are just one of many, so who shall I pick on this time? Any offers?)

I agree that it is impossible to say what r and m on any given property will be over the following ten years. Impossible even to be even reasonably close. (New property over the next five years may be an exception). So, to give any figure is misleading. The best thing to do is either to say nothing or to refer buyers to sites like this.

It does frustrate me that so many people seem to think that 'finding' is an easy way to make a fast buck with no thought given to the consequences of what they are doing. You wouldn't put up with this sort of laissez-faire sloppiness from Bob your local plumber fixing a tap, so why put up with it from someone providing you with help and advise on buying a $300,000 house?

xris

PS/

Ivi,

I do not believe RM can use the excuse of the disclaimer on each 'deal' they offer as a way of avoiding liablity. Those disclaimers are meant for relatively minor variations from what is true, or for typos and so on. To say, repeatedly, that r and m is so much lower than what it really will be would be, and then to say 'Oh well, don't take anything by that, you should do your own research first' is simply not tenable. I believe that argument would not stand up in any court.

[SuperDad]

While I'm quite clear in my mind about what the moral issues are with regards to the representations made by property finders, I'm less clear about the legal issues.

In particular, under what legislation would one have a comeback against a property finder if they misrepresented their product? Consumer Guarantees Act? Fair Trading Act?

It will be interesting to see whether property finding services come under the scope of the proposed regulations on financial intermediaries. I know that the Task Force set up by the Minister of Commerce thinks that they should. Here's a passage from the final report prepared by that task force:

The Task Force believes that advice on, and the promotion and marketing of investment property should be within the scope of its proposals.

Paul.

[xris]

In particular, under what legislation would one have a comeback against a property finder if they misrepresented their product? Consumer Guarantees Act? Fair Trading Act?



Paul.

Paul,

A quick answer being sent to you as a pm.

xris

[SuperDad]

Thanks xris.

Paul.

[Josko]

Ivi,

I do not believe RM can use the excuse of the disclaimer on each 'deal' they offer as a way of avoiding liablity. Those disclaimers are meant for relatively minor variations from what is true, or for typos and so on. To say, repeatedly, that r and m is so much lower than what it really will be would be, and then to say 'Oh well, don't take anything by that, you should do your own research first' is simply not tenable. I believe that argument would not stand up in any court.

Of course I don't believe that Richmastery are doing the right thing by allocating such low amounts towards R&M, but I do think it falls within their 'personal paradigm' attribute where by suggesting such a low figure they are promoting the landlord of such a property to become a landlord who ends up with a very poorly kept property, (you don’t have to spend 10k on exterior painting, or 5k on interior painting) you have a choice, it is just that the facts are that if you do not spend an average of 3k-4k R&M on a 3 Beddie property it is in all likelihood to end up being a bargain to be picked up by some renovator.

I have just realised that Paul did follow through on his convictions about the behaviours of Richmastery with their advertising of deals, I would like to know if it is that their R&M figures are implicated as misleading. I will read the ruling.

[Josko]

My second complaint is that the advertiser's claims about the full and true costs of running the advertised property do not strictly observe the basic tenets of truth.

My third complaint is that should the property be run in one of the manners implied in the advertisement, the purchaser of the property will be exposed to a substantial tax liability that The Advertisement fails to disclose. This omission is likely to mislead readers of the advertisement, in breach of Principle 3 of the Code for Financial Advertising. …

Not quite sure if this covers it as it refers to a possible tax liability rather then the failure to disclose the possibility of the property ending up to be a slum.

[The_Dog]

If somebody holds themselves out as a professional in a given field and the receives money for providing goods, a service, or advice in that field, then they are accountable for the quality of the service they provide.

That means that if you have been ripped off (or even just mislead) then you can have a crack at them. Simple enough?

In principal I agree, but these Professionals have clauses in their contracts that say "although all care has been taken, we will not be held responsible if any part of our report or services turns out to be crap" or words to that effect.

So have a crack if they have not delivered what they say, and what you signed up for, however what I'm saying is "I doubt you could find anyone, even a registered and highly paid professional, to give you a cast iron guarantee that a property will not fall apart.... and be silly enough to put it in writing".

So ultimately, the risk is on the buyer?? I think it is.

The Dog

[John Hutchinson]

Ok - Just back at the computer and see that there has bn a lot of discussion on this matter. I agree with some of the comments and disagree with others. And thats the way this forum should be, otherwise it would be a bit of a non event.

I guess it comes down to 'how long is a bit of string'. Let's say that we put a figure of $2k in R&M (and I'm not saying we are, but let's use that figure as an example) some would say thats still not enough, some would say thats too much and others would say that it ok. If we put no figure in that would be commented on as well. I dont think this conversation could ever be satisifed because everyone has differing opinions. The property that 'Ed' bought is a good example of that.

Some will use P&I for their loans some will use IO. Some will put those loans over xx years and some wont. Some would use 1 rate and others would use another.

All these variables will be interpertred in different ways by different people. That's exactly what this forum does, shows differing opinions on different issues.

I did want to reply to one comment in particular though (just cant remember how to do the quote thing). Someone implied that they (RM) put the success of their own business before all else. I think that is incorrect and unfair.

First remember, RM isnt this 'big thing' residing in Akl. RM these days is a number of different franchises owned by a number of franchisees living and working in a community near you. I think to impy that we would put the success of our business before all else would be to infer that as business people we are just after a quick buck. I have made posts in other threads about that - if u look after the client then results will follow.

We own other businesses and have done so for about 9 years. I think if anyone had that attitude they would only be in business for 9 mths.

As a business owner I have invested to be part of this franchise. Before taking up the franchise I was aware that at times RM had come in for comment, some positive and some negative. Some probably justified and some probably not. Like any investor in any area I did my DD. I spent time in Akl interviewing who I saw as the key people and at the end of that DD I was more than happy to come on as a franchisee and after almost 12 months am more than happy with that decision.

Now does any of this give an answer to all the queries raised above? Who knows - probably not - but dont assume that as a franchisee we are just out for the easy buck and quick sale. I think that's quite unfair.

[SuperDad]

Hi John,

It's responses and contributions such as your's and Sue Laurie's (RM Canterbury?) that make me (and maybe others like me) realise that RM is not a single unified entity that "are just out for an easy buck and a quick sale".

I also agree, to a certain extent, that there are different ways of calculating r+m figures.

I would suggest that the r+m figures on RM deals are always on the low side. I have questioned this previously, for example when I wrote a few months ago:

What I am questioning is how those figures are arrived at. Again, I draw your attention to your claim that you use formulas commonly used by property investors. Simply claiming that everyone is different won't do. By saying that you employ "common formulas", you represent yourself as employing some common standard, that cuts across the idiosyncracies of individual investors. I submit that the majority of property investors would budget more than $2151 for property expenses (rates, insurance, maintenance) on this particular property. The valuer, in his valuation, allows for $2500 for rates and insurances alone. While I accept your valid point that expenses will vary depending on the age, size, and renovated state of a property, I don’t think that they are as low as you claim.

Here the RM allowance for expenses including r+m was less that the valuer allowed for rates and insurances alone, based on the actual rates and insurances for the property. Maybe this was an error on the part of the person listing the deal, who knows?

My issue has, and continues to be, with the claim that RM use "formulas commonly used by property investors". This claim, when coupled with the claim that RM is NZ's largest property education company, lends a certain weight to the figures included in the deals. If I knew what the forumla RM used in their r+m calculations was, and also knew that that formula was a generally accepted method of calculating R+M, then I would be happy. I might still think that the figures were too low, but at least I would know that the formulas RM are using are what they purport to be - namely, one's commonly used by investors.

I'm not making this point to "have a go" at RM. What I'm trying to do is explain why I am sceptical of the motives of RM in advertising their deals. Obviously, if a greater allowance were made for r+m, this would affect the claims about cashflow, and the deals mightn't look so attractive. Given this fact, it is hard not to think that RM are gently "cooking the books" in order to present their deals in the best possible light.

This is just my perception. But I know that I am not alone in this perception. RM might never know how many potential customers are put off by this perception, and how much they could increase their business by tweaking what seems to be a successful business model.

[John Hutchinson]

Thanks Paul - dont go soft on us and become a RM groupie!

I cant comment on your quote above as I guess that was in respect to a particular deal which wasnt one of mine. We do put rates/insurance in as separate items so not sure what happened there.

I understand that we need to be open to scrutiny and I have no problem with that