LOCAL BOY HITS BIG TIME
Nelson Property Investors Association invites non-members to join us at our next meeting on Thursday 5 July 7.30 pm at the Nelson Suburban Club 168 Tahunanui Drive.
Nelsonian Frank Stace from www.globalpropertydeals.com together with business partner Westan Johnson from Australia will be speaking on their successes as residential property investors.
They will:
Entry is free. Phone secretary Glenn @ 5477718 or [email protected] to reserve a seat.
Our next meeting is being held at the Nelson Suburban Club 168 Tahunanui Drive on THURSDAY 5th of July. The meeting proper commences at 7.30 pm with the ever popular meal at 6pm when you will have the opportunity to chat to other investors. We have Frank Stace speaking on investing in the USA.
Frank Stace is a successful 43 year old property investor who has spent the last 18 years living in Australia before relocating back to Nelson last year. Seven years ago, he and his wife Maree, also from Nelson, embarked on a journey into residential property investing which enabled them to leave well paid corporate careers in the IT industry to spend time together with their young family. In 2006 Frank teamed up with another successful investor Westan Johnson, who was already finding positive cashflow opportunities in the USA. In November last year he designed a successful website www.globalpropertydeals.com which was developed here in Nelson by a local company and launched in Jan 2007. Frank is a member of the Nelson PIA, and is willing to share his story, investing insights, and the opportunities that offshore property investing can provide for local Kiwis looking for better than average returns.
Well its been an interesting few weeks with the Reserve Bank increasing the OCR by another 0.25% to eight percent. With fixed housing loans ranging from 9.30% fixed for 6 months to 8.95% fixed for 5 years. Notice the difference between the long and short term rates is getting closer. Which means at some point in the future the short term rates could be less than the long term rates. Who knows when that will be, maybe sometime in the next 12 months. We’ll have to wait and see. Floating rates are now above 10%.
What impact will these higher interest rates have on property values? Probaly not very much in the short term with the rate of capital growth increasing in Nelson and surrounds. Annually capital growth is running at over 12% at the moment. This trend is accelarating. In my opinon it will take time to reverse that trend and its not going to happen over night. When and if we return to falling property the back sliding is likely to be short lived because investors who are waiting in the wings will move in to the market and stablise values. Tradionally Nelson prices retreat when primary producers have a bad year.
As investors how are we going to deal with cashflow sqeezes as our fixed rates mature and higher interest rates are paid on rollover of mortgages? My advise is not to just hope for the best but to prepare in advance in case this accurrs. These are some of the things we can do in advance to prepare
The main thing to do is to plan ahead so we can ensure that we make our payments on time every time so that we honour our agreements with the banks and conduct our affairs in a manner the inspires confidence in us by our lenders. Don’t get caught unprepared and have to sell a house in a soft market. You can be sure that the vultures will move in and take advantage of your weak situation. There are organisations who train investors to exploit fellow investors who show any signs of selling in a vunerable position.
Lets not put our heads in the sand, lets plan in advance and save any pain on ourselves and our families if the worst case senario eventuates. Which it probaly won’t.
Here is an interesting article from the Dominion Post
MPs grill Bollard over interest rate hikes
08 Jun 2007
Dr Bollard briefed the finance select committee today just hours after he surprised many economists by lifting the Official Cash Rate to a record 8 per cent from 7.75 per cent. He told MPs the inflationary outlook remained strong for the next two years –, an election must be held by November 2008.
National's finance spokesman, Bill English, said about one third of existing fixed rate mortgages would be refinanced in the next 12 months, with people moving from rates of 7.8 per cent to rates closer to 9 per cent. Floating interest rates have already crept above 10 per cent for first time since July 1998. Dr Bollard said the bank had been taken by surprise by the size of the increase in the pay out to dairy farmers, which would inject around $2 billion into the economy over the next two years. If farmers spent this money rather than use it to repay debt then this would create more inflationary pressure. National MPs grilled Dr Bollard over the impact of government spending increasing at a faster rate than household consumption and the effect that was having on the interest rate. Bank officials said government spending made up only 20 per cent of GDP, compared to private spending 60 per cent shares. They said while government spending had some inflationary pressure the bank did not differentiate between the qualities of that expenditure. Officials said they would be watching with interest on who joined the KiwiSaver scheme and how it affected savings patterns. The Reserve Bank has assumed it would have a zero impact on net savings at this stage. The assumption is based on the belief that new savers who join the scheme and add to national savings levels, will be offset by those all ready saving using the government subsidy to reduce their saving levels and increase spending. Dr Bollard also gave MPs some details on his talks with banks and his concerns about their lending activities. The banks had provided him with details of the risks they were taking out on mortgages of sometimes up to more than 100 per cent of a house's value. Dr Bollard said there had been some level of risk, but he had been reassured it was not as bad as he feared. The risks being taken by banks in New Zealand was not near the risks being taken by their counterparts in the United States, he told MPs.
There has been controversy in the US with bank's subsidiaries handing out mortgages to low or fixed income people, who can not afford the repayments when interests rates rise.
Dr Bollard said he had received a "useful response" from the banks, but refused to elaborate on the private meetings. Mr English spent some time quizzing Dr Bollard over his and Finance Minister Michael Cullen's concerns about the lack of alternative monetary policy tools besides lifting interest rates. Dr Bollard said lifting interest did work, but not as quickly as he would like. The finance select committee was beginning an inquiry into monetary policy and Dr Bollard said he was hoping MPs could come up with some new ideas. Mr English said the two people who had the most influence over monetary policy – Dr Bollard and Dr Cullen – had just renewed their policy target agreements and had made no changes. Dr Bollard said some of the options being looked at –- which included a tax on mortgages – would require political consensus. Dr Cullen said in a statement that in his haste to criticise government spending, Mr English had ignored the main factors for the rise – the dairy payout and high household debt.
He challenged Mr English to say how National would cut rising government spending and fund tax cuts.
Great news from Veda Advantage.
Veda (previously call Baycorp) has renewed the special deal for financial members of our association. There were some rumours circulating indicating that we were about to loose this privilege and be asked to pay the annual $195 fee that all of their other clients pay. If you manage your own property you are playing with fire and driving blind if you choose your tenants without first doing a Veda credit check. When things go wrong with your tenant having the saved credit report on your file is the first step towards recovering your tribunal awarded costs. Veda is also promising to carry an audit of those claiming the discount to make sure they are still current financial members of NPIA. Glenn has the application forms. Contact him for a copy. For those of you who are still getting this newsletter but have not paid your annual subscription it is surely a no brainer which is the smart thing to do.
Remember there is a great conference coming up in October. I have really benifited from these conferences in the past and will be going this year. It’s a good idea to get you rego’s in early. At our association we have family membership so if one partner has paid you are both members.
2007 Conference speaker Noel Whittaker is presenting on Principles of Money. Here is an extract from NoelNews 20 June 2007.
The smart money managers know that financial success comes to those who pay themselves first and who realize that large portfolios come from the accumulation of small sums over time. They will take steps to capture that tax cut (in Australia) before it becomes part of the pay packet and is frittered away with all the other money. If you have a home loan, the easiest strategy is to simply call the bank and increase your home loan by $63 a month. Even a sum like this will save you a huge amount of interest over time and also give you a safety buffer if rates rise. If your home is paid off, talk to an adviser about starting a regular gearing plan, a margin loan or some borrowing for investment. I cannot stress enough that the secret of becoming wealthy is to make sure your investment is the first item that comes out of your pay packet.
You can veiw the conference details on the following site.
http://www.nzpif.org.nz/
Look forward to seeing you all at the meeting
Terry
Nelson Property Investors Association invites non-members to join us at our next meeting on Thursday 5 July 7.30 pm at the Nelson Suburban Club 168 Tahunanui Drive.
Nelsonian Frank Stace from www.globalpropertydeals.com together with business partner Westan Johnson from Australia will be speaking on their successes as residential property investors.
They will:
- Share their investing story and strategies.
- Share their insights on residential investments in USA, and how smaller investors can participate and also profit.
- Provide details on upcoming Investor Tours to the USA.
Entry is free. Phone secretary Glenn @ 5477718 or [email protected] to reserve a seat.
NELSON PROPERTY INVESTORS ASSOCIATION
July 2007 NEWSLETTER
PO Box 198 Nelson [email protected]
Important Notice Change of Venue
Our next meeting is being held at the Nelson Suburban Club 168 Tahunanui Drive on THURSDAY 5th of July. The meeting proper commences at 7.30 pm with the ever popular meal at 6pm when you will have the opportunity to chat to other investors. We have Frank Stace speaking on investing in the USA.
Frank Stace is a successful 43 year old property investor who has spent the last 18 years living in Australia before relocating back to Nelson last year. Seven years ago, he and his wife Maree, also from Nelson, embarked on a journey into residential property investing which enabled them to leave well paid corporate careers in the IT industry to spend time together with their young family. In 2006 Frank teamed up with another successful investor Westan Johnson, who was already finding positive cashflow opportunities in the USA. In November last year he designed a successful website www.globalpropertydeals.com which was developed here in Nelson by a local company and launched in Jan 2007. Frank is a member of the Nelson PIA, and is willing to share his story, investing insights, and the opportunities that offshore property investing can provide for local Kiwis looking for better than average returns.
RSVP Glenn for the meal please (Ph 03 547771 or better still email me.
Well its been an interesting few weeks with the Reserve Bank increasing the OCR by another 0.25% to eight percent. With fixed housing loans ranging from 9.30% fixed for 6 months to 8.95% fixed for 5 years. Notice the difference between the long and short term rates is getting closer. Which means at some point in the future the short term rates could be less than the long term rates. Who knows when that will be, maybe sometime in the next 12 months. We’ll have to wait and see. Floating rates are now above 10%.
What impact will these higher interest rates have on property values? Probaly not very much in the short term with the rate of capital growth increasing in Nelson and surrounds. Annually capital growth is running at over 12% at the moment. This trend is accelarating. In my opinon it will take time to reverse that trend and its not going to happen over night. When and if we return to falling property the back sliding is likely to be short lived because investors who are waiting in the wings will move in to the market and stablise values. Tradionally Nelson prices retreat when primary producers have a bad year.
As investors how are we going to deal with cashflow sqeezes as our fixed rates mature and higher interest rates are paid on rollover of mortgages? My advise is not to just hope for the best but to prepare in advance in case this accurrs. These are some of the things we can do in advance to prepare
- Draft a schedule of all mortgages and maturity dates
- Check when mortgages mature and what the estimated interest rate difference will be them. Is this change in interest going to cause hardship or not?
- If so how am I going to fund the increased interest payments? Can I fund it out of surplus wages or rental surplus? Another alterative is to arrange for a revolving credit facility to cover the period of higher interest rates until they fall. I don’t like this method very much because the bank can remove it at their descestion and this could make it hard to make your payments on time if you are dependant on it. The method I like is to borrow cash reserves in advance from the bank and have them available for when you need them. When things are going well banks are happy to lend money but when cashflow is tight it is not as easy for them to advance funds.
- The other thing you can do if you are paying interest and principle payments ask the bank for an interest only period of say a couple of years or extend the term until interest rates come down again.
The main thing to do is to plan ahead so we can ensure that we make our payments on time every time so that we honour our agreements with the banks and conduct our affairs in a manner the inspires confidence in us by our lenders. Don’t get caught unprepared and have to sell a house in a soft market. You can be sure that the vultures will move in and take advantage of your weak situation. There are organisations who train investors to exploit fellow investors who show any signs of selling in a vunerable position.
Lets not put our heads in the sand, lets plan in advance and save any pain on ourselves and our families if the worst case senario eventuates. Which it probaly won’t.
Here is an interesting article from the Dominion Post
MPs grill Bollard over interest rate hikes
08 Jun 2007
Dr Bollard briefed the finance select committee today just hours after he surprised many economists by lifting the Official Cash Rate to a record 8 per cent from 7.75 per cent. He told MPs the inflationary outlook remained strong for the next two years –, an election must be held by November 2008.
National's finance spokesman, Bill English, said about one third of existing fixed rate mortgages would be refinanced in the next 12 months, with people moving from rates of 7.8 per cent to rates closer to 9 per cent. Floating interest rates have already crept above 10 per cent for first time since July 1998. Dr Bollard said the bank had been taken by surprise by the size of the increase in the pay out to dairy farmers, which would inject around $2 billion into the economy over the next two years. If farmers spent this money rather than use it to repay debt then this would create more inflationary pressure. National MPs grilled Dr Bollard over the impact of government spending increasing at a faster rate than household consumption and the effect that was having on the interest rate. Bank officials said government spending made up only 20 per cent of GDP, compared to private spending 60 per cent shares. They said while government spending had some inflationary pressure the bank did not differentiate between the qualities of that expenditure. Officials said they would be watching with interest on who joined the KiwiSaver scheme and how it affected savings patterns. The Reserve Bank has assumed it would have a zero impact on net savings at this stage. The assumption is based on the belief that new savers who join the scheme and add to national savings levels, will be offset by those all ready saving using the government subsidy to reduce their saving levels and increase spending. Dr Bollard also gave MPs some details on his talks with banks and his concerns about their lending activities. The banks had provided him with details of the risks they were taking out on mortgages of sometimes up to more than 100 per cent of a house's value. Dr Bollard said there had been some level of risk, but he had been reassured it was not as bad as he feared. The risks being taken by banks in New Zealand was not near the risks being taken by their counterparts in the United States, he told MPs.
There has been controversy in the US with bank's subsidiaries handing out mortgages to low or fixed income people, who can not afford the repayments when interests rates rise.
Dr Bollard said he had received a "useful response" from the banks, but refused to elaborate on the private meetings. Mr English spent some time quizzing Dr Bollard over his and Finance Minister Michael Cullen's concerns about the lack of alternative monetary policy tools besides lifting interest rates. Dr Bollard said lifting interest did work, but not as quickly as he would like. The finance select committee was beginning an inquiry into monetary policy and Dr Bollard said he was hoping MPs could come up with some new ideas. Mr English said the two people who had the most influence over monetary policy – Dr Bollard and Dr Cullen – had just renewed their policy target agreements and had made no changes. Dr Bollard said some of the options being looked at –- which included a tax on mortgages – would require political consensus. Dr Cullen said in a statement that in his haste to criticise government spending, Mr English had ignored the main factors for the rise – the dairy payout and high household debt.
He challenged Mr English to say how National would cut rising government spending and fund tax cuts.
Great news from Veda Advantage.
Veda (previously call Baycorp) has renewed the special deal for financial members of our association. There were some rumours circulating indicating that we were about to loose this privilege and be asked to pay the annual $195 fee that all of their other clients pay. If you manage your own property you are playing with fire and driving blind if you choose your tenants without first doing a Veda credit check. When things go wrong with your tenant having the saved credit report on your file is the first step towards recovering your tribunal awarded costs. Veda is also promising to carry an audit of those claiming the discount to make sure they are still current financial members of NPIA. Glenn has the application forms. Contact him for a copy. For those of you who are still getting this newsletter but have not paid your annual subscription it is surely a no brainer which is the smart thing to do.
Remember there is a great conference coming up in October. I have really benifited from these conferences in the past and will be going this year. It’s a good idea to get you rego’s in early. At our association we have family membership so if one partner has paid you are both members.
2007 Conference speaker Noel Whittaker is presenting on Principles of Money. Here is an extract from NoelNews 20 June 2007.
The smart money managers know that financial success comes to those who pay themselves first and who realize that large portfolios come from the accumulation of small sums over time. They will take steps to capture that tax cut (in Australia) before it becomes part of the pay packet and is frittered away with all the other money. If you have a home loan, the easiest strategy is to simply call the bank and increase your home loan by $63 a month. Even a sum like this will save you a huge amount of interest over time and also give you a safety buffer if rates rise. If your home is paid off, talk to an adviser about starting a regular gearing plan, a margin loan or some borrowing for investment. I cannot stress enough that the secret of becoming wealthy is to make sure your investment is the first item that comes out of your pay packet.
You can veiw the conference details on the following site.
http://www.nzpif.org.nz/
Look forward to seeing you all at the meeting
Terry
Disclaimer. Anyone stupid enough to act on advice or comments in this newsletter without thinking for themselves deserves to suffer the consequence
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