Another Dreamer

[flyernzl]

"Tenants will become customers and landlords "housing providers" under a new model of renting proposed by an investment fund.
Haven Funds has been founded to invest in residential property, with a view to letting it long-term. It is open to wholesale investors, whose money will be pooled to buy the properties."

https://i.stuff.co.nz/business/107471098/new-renting-model-replaces-tenants-with-customers

Given the current demands on residential landlords imposed by the Residential Tenancies Act (which this company cannot contract out of) and the reality that any tenant can depart from a tenancy with just 21 days notice, I give this concept little chance of succeeding.
There have been a number of similar proposals in NZ over the last thirty years. All have eventually failed for just these reasons.
The Hobsonville Development Company announced they were going to do a similar thing from last year.
Nothing has been heard of that proposal since - I suspect that reality has scuppered their plans.

[Perry]

Are We Dream Stealers?

Section 5 (1) (r) could be used to prelude the RTA.

5 Act excluded in certain cases
(1) This Act shall not apply in the following cases:
(r) where the tenancy arises wholly from or depends wholly upon the ownership by the tenant of any shares in a company that owns the premises:

Nonetheless, it does seem to be rather pie-in-the-sky.

Lots of egregious self-promotion from their web site.

Haven Funds is a New Zealand company, founded by a diverse team of property, finance and marketing professionals, to reinvent property funds management. We exist to enable livability. A disruptor in the home rental market, Haven Funds is creating a customer-centric approach to providing a better rental home experience, and creating far reaching economic and social outcomes.

Haven Living is providing high-quality housing at a scale that offers tenure security, encourages community and has a positive effect on neighborhoods. Getting this right requires skill, long term thinking and a level of commitment from investor funders. In addition, the supportive local and national government policy environment is also fundamental to the evolution of Haven Living.

No bonds, no letting fees, free broadband Internet connectivity . . .

Have fun, guys and girls.

[Bob Kane]

Section 5 (1) (r) could be used to prelude the RTA.

5 Act excluded in certain cases
(1) This Act shall not apply in the following cases:
(r) where the tenancy arises wholly from or depends wholly upon the ownership by the tenant of any shares in a company that owns the premises:

Say you sign up a new tenant and instead of asking for 2 weeks bond, you ask for $500 to purchase shares in the company owning the rental property. When the tenant moves out, you will purchase the shares back for $500 so the tenant doesn't lose out - or even more to reward a good tenant.
Would this make this tenancy fall outside the RTA?

[Don't believe the Hype]

I talked about this type of ownership structure about 6 months ago on PT. This one might not work based on the above comments it seems to have a mix of business and socialist philosophies which don't tend to play well together but I believe this will be the way of the future.

Kiwisaver funds are needing to find solid long term investment each month they collect around 3% of peoples income and are expected to find a return for that money. This is no different to you and I saving $200/wk and when we have a deposit investing in a single property.

Taking a quick look at the NZ stats database there are around 2.2m people earning on average $1000/wk - if all contributing to Kiwisaver that means there is $3.5b annually looking for an investment return - we know the no. contributing to Kiwi saver is far lower say 30% - this would mean there is over $1b annually looking to invest. Allocating only 10% of those funds to NZ residential property would mean a pool of $100 million annually to purchase houses.

The kiwi saver funds could purchase 110 average Auckland houses per year or 200 in Wellington for cash. The argument is this is an expensive asset to run but done well it works - many of us are living proof that a reasonable number of properties can provide nicely. The next argument is that the yields are low, too low to be worthy of investment. This is true in many cases at purchase price but using my own experience over a decade the yield off purchase price on my early purchases was around 7.5% that same initial investment is getting a return of 16% today

Putting aside the increase in values over the past decade in the return calculation, this fund would be delivering a very solid return - assuming a straight line growth of both values and rents because I don't want to invest hours looking at the historical data - had this fund stared buying 10 years ago and invested the same each year the average yield would be 11.5%.

Assuming property prices have doubles to calculate the no. of properties owned this fund would now have somewhere near 20k properties to manage. In a decade this fund would have 20k houses to manage, $10b invested and a return of 7.9% gross - with no mortgage the nett would be somewhere near 3.5%. This is not a bad return which will only increase as rent increase and when you overlay the asset value the fund performance isn't a bad one.

why wouldn't this work?

[hawkeye]

This concept might work if the buildings were just concrete shells with services laid on and the tenant had to install fittings like kitchens, bathrooms etc and decorate it. More like a commercial office block. Then the tenant would have to afford quite a sizeable fitoutout cost so that could self select and there would be not much need for a bond if they own all the fittings. If it was long term they may be happy to do that as they could redecorate whenever they wanted, put pictures on the wall etc. That is how it works overseas.

Alternatively if the investor owns only the land and the lease is just on a plot, the tenant could build a tiny relocatable home, then sell the building when they want to move on. Again not much need for a bond.

Perhaps a clause to seize the building/chattels if rent is unpaid.

Banks would need to be more flexible loaning on fit outs and tiny homes for this to work though.

[hawkeye]

Also they may just be positioning themselves so that if stricter tax on capital gains rules are introduced they can call it a passive fund and try for an exemption like the one for shares.

[Beano]

This concept might work if the buildings were just concrete shells with services laid on and the tenant had to install fittings like kitchens, bathrooms etc and decorate it. More like a commercial office block. Then the tenant would have to afford quite a sizeable fitoutout cost so that could self select and there would be not much need for a bond if they own all the fittings. If it was long term they may be happy to do that as they could redecorate whenever they wanted, put pictures on the wall etc. That is how it works overseas.

Alternatively if the investor owns only the land and the lease is just on a plot, the tenant could build a tiny relocatable home, then sell the building when they want to move on. Again not much need for a bond.

Perhaps a clause to seize the building/chattels if rent is unpaid.

Banks would need to be more flexible loaning on fit outs and tiny homes for this to work though.

Nothing wrong with the landlord owning the land and tenant owning the building ...no I do not charge a bond but the rent is mainly charged 12mths in advance.