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  1. #1
    Join Date
    Jun 2005
    Nelson NZ

    Default Nelson PIA February meeting and Newsletter



    PO Box 198 Nelson

    Our next (and first for the year) meeting is being held at the Nelson Suburban Club Tahunanui Drive on THURSDAY 19 Feb. 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. By popular request we are having a Landlording 101 night. Local experts Seddon Marshal and Terry Bolitho will be joined on a forum with Usha Ganda-Wilson from Christchurch . Usha is the owner operator of The Property Boss an Independent Property Management business in Christchurch. Usha is the President of the IPMA. She is one switched on lady who really impresses me. This will be your chance to learn how the experts deal with all the day to day problems that tenants throw at us. Come along with your curly questions and see how the experts deal with it.


    Some of the last few weeks have been fantastic. However the traditional New Year surge is slowing. Some properties are now not letting as fast as I would like. At the moment cheap or big is what people are asking for. An increasing number are becoming a little bit pickier about heating and insulation.

    What have you done to my son’s flat wails the lady? You have completely cleaned it out and there is nothing left there. Well um he died as you know. The police told me to do it I say. Well I have a right to see the flat where my son lived. I am off to see my lawyer she claims.

    What happened to my car engine another ex tenant asks? You know the one I left beside the stinking pile of rubbish three weeks ago. It was worth $2000.
    I have been too busy over the summer holidays to come and pick it up. Sorry boy I say it looked like another dead motor to me.

    At an Order for Examination Hearing. I only have $800 a week that the government gives me to live on. I can not afford to pay my debt to you.

    Scene at a group flatting house when I come, by appointment, to collect overdue rent. Hey, the looser calls out to the others. Can anyone lend me some money? He comes out and says the girlfriend has not been to the cash machine yet to pick up my rent I owe you. This is all I can afford at the moment he says handing me over the due amount minus $50.Give me your home address and I will bring the rest up to you later.


    This story comes out of the States. I have transliterated a few words to assist Kiwi understanding. Be afraid, be very afraid. The latest mantra of those who would abrogate our property rights and interfere with our rental property businesses is "affordable housing." It always sounds so appropriate and worthwhile, no matter what the latest mantra. They plan it that way. Who can be against "affordable housing"? Well, nobody, and that's the problem. Affordable housing means "decent, safe and sanitary" housing that is purchasable or rentable by people whose incomes are no more than 80 percent of the area's median.
    The problem is that when drives for affordable housing hit roadblocks, those who are in the business of protecting the welfare of people who would rent or buy below-market housing take further action to make sure their goals are accomplished. People in communities with little or no "affordable housing" live there because they expect a lifestyle that reflects their capability of living in upscale communities. "Affordable housing" advocates say, "Not fair. What gives you the right to live in upscale neighbourhoods when all those other people can't afford to live there?" So they conjure up reasons why more successful people should have to share their enclaves of prosperity with those who can't afford to.
    The State of New Jersey is a vanguard example. Encouraging building affordable housing didn't work; those pesky wealthy people just didn't want slums imported into their cities and towns, so the legislature established "affordable housing" quotas that cities and towns had to meet. For a while local governments got to barter off their quotas to other cities and towns; but once again those pesky wealthy people still got to live in communities without having to live near
    people they didn't want to tolerate. Last summer all that went away and now every city and town (at least those with too many wealthy people in it) has to have an affordable housing plan that fulfils the quota.
    Why we should be afraid, very afraid, is that ideas such as New Jersey's are tested in one place to work the kinks out (or not), then foisted off on the rest of the country, often by our elected representatives in Congress. The result of this particular event is lower property values. Here's why.
    Investment property is usually valued using cap rates. Cap rates are a function of Net Operating Income, which is rental and other income, less a vacancy rate and operating expenses. The lower the Net Operating Income, the lower the value of property. That means if your Net Operating Income drops because you had to provide housing for people whose incomes are no more than 80 percent of median, or a low-rent complex gets built next door lowering rents in the area, you have lost some of the value of your investment.

    For example, if your rents had averaged $1500 a unit per month and the cap rate was 6 percent, the value of each unit would be $300,000 ($1500 x 12 divided by 6 percent). Suppose then, that you had make one quarter of your units "affordable" and that lowered your average rent per unit to $1400? That would lower your value by $20,000 a unit. Even worse, suppose the average went down to $1250 a unit? You just lost $50,000 a unit.
    That doesn't even include the increased wear and tear and increased likelihood of rent default you can count on with lower-income tenants.
    Be afraid, be very afraid. Our property rights and our profits are an inconvenience that can be taken away by those with people with agendas. Join and/or participate in your local Property Investors Association to protect your profits and property rights.

    “It’s cleaner now than when we moved in .....”

    STOP right there! How often have you heard these words? If I had a dollar for the number of times I’ve heard it said, then I would be a rich person.
    Rather than enter into a debate as to the relative cleanliness of the property, get smart and start employing some techniques that nip this problem right in the bud.
    1.Have a standard for cleanliness and stick to it. Clean is clean, ie if the mark can come off then it shouldn’t be there. Do not compromise on cleanliness!
    2.Agree responsibility for cleanliness in all areas with your clients from the outset.
    a.Carpets will be professionally cleaned at the end of each tenancy at tenant’s expense.
    b.In the case of tenancies which run over 18 months, carpets must be professionally cleaned every 18-24 months
    c.Curtains – will they be dry-cleaned or washed, and if so by whom?
    d.Vertical drapes and blinds – will they be professionally cleaned, at what frequency and by whom?
    e.House washing – at what frequency? Remember that keeping the property clean will prolong the life of the paintwork as well.
    3.Provide supporting evidence of your Entry Condition Report – detailed descriptions is still open to interpretation whereas photos and/or videos are irrefutable.
    4.Use the photos to persuade landlord clients or yourself to freshen up properties every 5-10 years. Even the best properties start to look tired after continuous tenancies.
    5.Be ruthless with the standard of ovens and bathrooms. Cumulative baked-on grime or mould becomes very difficult to shift. Report on these areas during routine inspections to ensure that they do not get out-of-hand by exit time.
    6.Cupboard interiors must be clean, empty and free of odour. Scuff marks should be removed. A quick coat of paint will ensure a clear start if they have fallen behind in the general standard.
    7.All light fittings and fans should be clean, dust-free and working – bulbs should all be working from the outset (including ovens, rangehoods and outdoor ones).
    8.Flyscreens and security screens can become dust traps. Insist that these are washed and dirt free on exit.
    9.Do not allow garages and under-house areas to become repositories for unclaimed ‘bits’. Start with a clean slate regardless of how attached your clients are to their old timber and goods.
    10.Insist on garage floors and driveways being acid-washed to remove oil stains. Unless you are measuring the size of stains it is very hard to monitor their growth.
    11.Patios front and back are part of the living areas and must be kept clean as well. This may mean some wall washing, railing scrubbing and outdoor light cleaning.
    12.Use the carrot rather than the stick to encourage compliance. A high standard of cleanliness on exit will ensure a quick turn-around, fast bond release, and glowing tenancy reference.

    Don’t get caught “NAP”ping.

    We all know that rust never sleeps. While we are sleeping at night rust is slowly eating away at our cars, our houses or anything else of value. Unless our prized possessions are protected 1000s of dollars can and will be stealthily stolen from us. Early action needs to be taken to protect our assets from this incidious disease of lost wealth.

    But now there is another reason not to be caught napping. I refer to the “NAP” process.

    The No Asset Procedure (NAP) was a process that came into being about a year ago. This process was designed to minimise applications for bankruptcy. It was quietly brought into existence with very little fuss or discussion. Unfortunately like most government policies designed to help people who are a bit down on their luck, the NAP process is often open to abuse.

    The January 2009 edition of the NZ Property Investor magazine quotes David Young, National President of the NZ Credit and Finance Institute, saying “The numbers of those applying for NAPs has climbed 500%, from 58 when the service started, to 331 in October this year” (200. It will continue to climb in 2009.

    And yes it can and does affect Landlords. Debtors (you can put the word tenants in here) can lump together their debts including rents when applying for a “NAP”. It seems that landlords are appearing more and more on the receiving end of these proceedings. You need to protect yourself against this process now.

    So what is the No Asset Procedure (NAP)?

    When a debtor (our tenants) finds themselves in a position where they are unable to pay their debts instead of taking the ultimate step of declaring bankruptcy or alternatively “doing a runner” as they are wont to do, tenants now have another option through the No Asset Procedure (NAP). Unlike bankruptcy, the NAP at this stage doesn’t have the same stigma attached to it as bankruptcy does. It only lasts one (1) year. The kicker is that Creditors (read Landlords here) cannot pursue their tenants for these debts once they have been included in the NAP process.
    Imagine how the discussion between the Land lord and the Official assignee would go.
    “The tenant owes you $1500 in rent? Well that’s a shame. They have applied and been granted a NAP? Oh well never mind. How are you going to pay your bills? Not our problem! However if you like to apply for Bankruptcy there is a very good website available that outlines the procedure at WWW. …”.
    Helpful. Very helpful. Perhaps I’m being a little too cynical but I don’t think so.
    When the tenant (oops I mean applicant) applies for the No Asset Procedure there is the usual red tape to get through. It’s all pretty standard stuff and very easy really. The application must be completed to a standard acceptable to the Official Assignee. I can’t see this as an issue.

    Like any thing worth having in life the applicant has to qualify for entry. For our customers in the lower decile areas this would be pretty much business as usual. They would be a shoe in.

    The critieria is:
    1. They must have no realisable assets (realisable assets exclude cash up to $NZ1,000, a motor vehicle up to $NZ5,000, tools of trade, and personal and household effects)
    2. They must not have previously been admitted to the no asset procedure or been previously adjudicated bankrupt
    3. Their total debts (excluding student loan) not less than $NZ1,000 and not more than $NZ40,000.
    4. They must complete a means test showing they have no means of repaying any amount towards their debts.
    The Official Assignee can refuse entry into the NAP if the creditor(s) object to entry into the process. Personally I wouldn’t count on the assignee being helpful here.
    The Assignee can also refuse entry:
    1. If bankruptcy proceedings have been initiated and the likely outcome for the creditor would be materially better if the proceeding continued.
    2. If the applicant has concealed assets or
    3. have committed an act that would be an offence under the Insolvency Act 2006 were they bankrupt or
    4. had incurred debts knowing they had no means to pay them.
    But just because they can it doesn’t mean the Official Assignee will refuse entry. No doubt they will be tied up with all sorts of policies or guidelines on what they can and can’t do. Even if they really think that the applicant should be refused the Official Assignee still needs to comply with preset guidelines.
    Funnily enough there are a handful of debts that are specifically excluded from the NAP process. These debts are Maintenance Orders under the Family Proceedings Act 1980, Child support under the Child Support Act 1991, Student loans and Court fines and reparation.
    Note how these debts are all debts payable to the government. No protectionism here.
    I wouldn’t worry too much about court fines or reparation though. The people who are likely to use the NAP process are also the people who don’t pay their fines. What happens to the fines? They get “commuted”. This is a fancy term which means that the person who owes the debt has to serve time doing community service. The fines are converted to hours of service and worked out that way. In itself this is a good idea.
    One question that I do have though is how come tens of thousands of dollars worth of fines are commuted to 100 or 200 hours of community service? That’s a very high pay rate for some low life. Often up around the $100 or $200 an hour mark. You and I can’t get the same pay rate for doing some legitimate occupation. But I digress.
    David Young also says in the NZ property Magazine that “… the landlord loses out and they can’t do a thing about it.”
    Here David and I disagree. Landlords should not simply lie back and take it but rather they should take practical steps to protect themselves against this process.

    It’s really basic stuff.
    1. Do credit checks on prospective tenants. There can be delays or errors with the systems on credit checking so don’t stop there. At least it’s a start.
    2. Check referees. Ask about the history of rent payment by the tenant. If there is a problem don’t let the property to them. If you as a referee for an old ex tenant are asked about a previous tenants credit rating be up front. If there was a problem say so. If not say that too. We are all in this together.
    3. Talk to property investors in your local Property Investors association. Is the tenant known to them in a good light or a not. If the property concerned is in another associations area talk to a local member in that area. It’s the same deal as before. We are all in this together.
    4. This final one is the biggie for me. If the rent is late for what ever reason deal with it straight away. Don’t delay. Don’t be patient. Don’t be a sucker for a sob story from someone with a cute smile and fluttering eyelashes. You can and will go bankrupt if the rents payable to you are “nap”ped. So get onto it immediately.
    I would be interested in hearing from anyone who has had experienced their tenants using the NAP process. My email address is

    For further information go to


    Last edited by Glenn; 11-02-2009 at 06:15 PM.


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