Wellington PM who can do property inspection

[Bobsyouruncle]

Hey everybody I need a property in Tawa to be inspected for insurance. Anybody know a PM company or individual who would do this either as a 1 off or quarterly please?

[Nick G]

Mine wouldn't. Ray Simpson is a name I see pop up as a letting agent so he might also do inspection services.

[Bobsyouruncle]

Thanks Nick!

[PonsonbyPM]

Be wary of one-off rental inspections - by the time you pay for a suitably qualified person, you may as well have hired a professional property manager (who knows the property & the tenants) to do this for you.
Many of the independent companies include inspecitons as pat of their core service - rather than the additional charge that the big guys slap on you.

Just make sure whoever you get in is 'approved' by your insurer if called on - otherwise you will have wasted your money & voided your cover!

[Bobsyouruncle]

Problem is this is a lease option so no PM required ongoing.

[Nice]

You might find a PM willing to do just this part of the service for you that needs the income; but is that what you want ?

What about those that charge a flat fee instead of a % of rent; they might cover it ?

[Lighthouse]

Hi Bob, how well do these lease options work in practice?
Am I right to assume the inspection report is quite important in the scheme of things?

[Bobsyouruncle]

Mine are all years old now. IRD have made them problematic in New Zealand so you can't do them now. I did a lot a few years ago. Sadly the high interest rates meant some worked and some failed. In the current interest rate environment they would be a perfect, perfect solution to get people into their own home but IRD stuffed that up.
We do a lot in the USA, they are awesome over there!

[Lighthouse]

Thanks for the frank explanation Bob.

Normally property investment is a simple game since you collect rent(yield) as you go along and make capital gains when the market price rises and capital losses should it ever fall. If you are fortunate you might accumulate a few free options along the way that you can use to your own advantage.

Your story is a cautionary tale about the dangers of DIY financial engineering and form vs substance.

If you do the math using a concept called Put Call Parity you will find you have created a high interest loan and are short a put option and of course you are probably short another lower interest loan to the bank. Unfortunately, you have capped your upside by selling the Call option to your tenants so theoretically you haven't benefited from the recent market rises. No doubt the effective rate off interest of your artificial loan is quite high and I can see why this would appear to be attractive in today's a low interest rate environment but as you explained interest rates can move against you.

As an aside, in the early 20th century American financier Russel Sage used Put Call Parity to get around usury restrictions of the time by combining different stock market contracts to create a synthetic loan. Tax authorities have woken up to the more obvious applications of these types of strategies so now tax is often paid on these complicated transactions.

I guess that if your tenants default on payments or that the repairs to the property are not to standard you can take back the lot? I am not quite sure what this part of your contract would be called but it is probably the cleverest part of the whole scheme. Perhaps someone can suggest a name.

Some in finance are a more fortunate. By the time your sort of problems eventuate they and their bonuses are long gone. This method of operation, "I'll be gone you''ll be gone", is articulated by John Kay in his excellent book Other Peoples Money.

All this extra complexity just adds hidden risks. Even in the USA, unless you can do a "I'll be gone" with the other peoples money then this strategy can't be recommend?

[Bobsyouruncle]

America is very different. If the tenant buyer misses payments or defaults in any way you can repossess the property and they lose all their equitable interest. Varies from state to state but in the main it is a way to get higher rent and the exercise rate of the options is very, very low.
In NZ we only did them for people we knew and were trying to help into home ownership so we deliberately capped the upside to zero. But a normal lease option would make the sale price valuation at the time of the option. All history now.

[Nick G]

You can still do in NZ, I know two people who do and are both very much up to speed with IRD rules.

[Bobsyouruncle]

They must pay the GST or have found a work around.