The Property Academy Podcast

In this episode, we are joined once again by Shelley Funnell from Henderson Reeves, a mid-tier law firm based in Auckland and Whangarei. And in the show we discuss trusts. Shelley shares the stat that there are an estimates 500,000 trusts in New Zealand ... but many of them may not be necessary.  During the show, Shelley shares the 3 reasons why people typically have used trusts in the past, but also the 3 reasons why these may no longer apply. To learn more about property investment in nz, then check out the Epic Guide to Property Investment our 16,000-word guide to investing in property within New Zealand. 

In this episode, we discuss buying property off the plans – which is where you purchase a property and commit to buying it before it has actually been built.  If you haven't heard about buying property off the plans then this might sound really scary. However, there are some really good reasons why you might purchase an investment property off the plans:  First of all, when you purchase a brand new property, it is not subject to the 30% deposit requirement that banks need in order to give you the finance. This means that banks will happily lend you the money to purchase a property with a 20% or even a 10% deposit.  Because the property hasn't been built yet there is less competition to buy the property. There are no auctions to go to and the buyer has more control in the sale You're able to buy in today's market, however by the time the property has been built and you settle with the developer (i.e. pay them the money) your property may have gone up in value during the phase of the build. Shelley and Ed then discuss how to protect yourself from a legal perspective by using Sunset Clauses and how to resolve disputes with a developer.

In this episode, we discuss a few of the things that can go wrong in a property investment deal, which a solicitor would usually pick up on.  Shelley Funnell is the guest on the show, and she shares one story regarding properties bought by a permanent resident, who had recently moved back to New Zealand. Because this purchaser hadn't been resident in New Zealand for 12 months, he wasn't legally able to purchase the property, yet his contract was already unconditional ... that is he has to settle the property and go through with the transaction.  So, his best course is to delay settlement until the transaction can legally be registered with the government.  These are exactly the sort of situations a good solicitor should pick up on before a contract goes unconditional.  Shelley Funnell is a solicitor at Henderson Reeves, a mid-sized law firm based in Auckland and Whangarei. 

In this episode, we discuss the key clauses you can use in a sale and purchase agreement when buying property in New Zealand.  This is important for NZ property investors because DD clauses can be used to put a property on hold to investigate the property before making it go unconditional. This means that you can agree the properties price in principle (and have the right to purchase the property) while you ensure that it is fit for purpose. We mentioned in the show that we would include a Due Diligence clause you can use: This agreement is entirely conditional upon the Purchaser in its sole discretion being satisfied that the property is suitable for the Purchaser’s intended uses following the Purchaser carrying out due diligence investigations on the overall viability of the property and including but not limited to searching any and all easements, and of any requirements of the local authority or financier, this clause is for the sole benefit of the Purchaser and the Purchaser shall have until 4pm on 10th working day from the date of this contract to give to the Vendor’s solicitor notice that this clause is satisfied failing which the contract shall be at an end. This clause may be waived by the purchaser prior to the prescribed time at the sole discretion of the purchaser.

In this episode, we are joined by Shelley Funnell who is a solicitor and HendersonReeves in Auckland. During the show we discussed the new sale and purchase agreement that was introduced on the 6th December 2019. The Real Estate Institute of New Zealand (REINZ), Auckland District Law Society (ADLS) sale and purchase agreement is the standard S+P that is used to buy and sell property in NZ.  The new version of the contract (the 10th version of the document) is important for property investment because several clauses have changed. For instance, the interpretation of the finance clause is such that you are no longer able to use the finance clause in the same way as a due diligence clause (a get out of jail free card). If property investors want to cancel a contract using the finance condition, then the vendor can require that evidence is provided that the buyer was unable to obtain funds for the purchase. Other changes have also been made in respect to the use of fax machines, and toxicology reports. HendersonReeves is a medium-sized law practice based in Auckland and Whangarei.

In this episode, we discuss refinancing, which is the mechanism property investors can use to leverage off their existing properties in order to grow their portfolio.  There are to ways to refinance your investment property: Refinance in order to increase your lending on a property Refinance in order to change banks (from one bank to another)

In this episode, we discuss three things that stop people from investing in property.  Personal reasons Fear and worry. For example, the worry that as the size of your portfolio increases, there is a greater risk of vacancy. Lack of Time. If you're not out there looking for new properties then you are less likely to take action on one.  Lack of Ambition. If you don't have a property coach working with you to achieve your goals then you might not hit them. Lending Restrictions Banks treat you more stringently when you have a large level of debt with them. LVR Restrictions, i.e. you don't have enough useable equity to buy the next investment property. Property Choice Investing in existing properties will use up more useable equity than if you were to invest in brand new properties. Because new properties are exempt from the LVR Restrictions you can buy around 50% more property using the same level of deposit when you invest in new, rather than existing properties

In this episode, we discuss 6 events that have occurred over the last 20 years that have impacted the NZ property market, with a particular focus on the Auckland property market.  Those 6 events are: 1. Leaky Homes Crisis 2. 67 Finance Companies Fell Over 3. Christchurch Earthquakes 4. LVR Restrictions Were Introduced 5. Brightline Tests Were Introduced 6. Introduction of the Internet and the Digital Economy The key takeaway from this episode is that although these factors all happened, the NZ property market was still strong and continued to appreciate even as shocking events were introduced.

In this episode, we discuss whether there really is a housing shortage within New Zealand, and particularly within the Auckland property market. In pure economic terms, there can never be a shortage of any good in a free market, so long as demand and supply don't significantly change. Under these conditions, if there are more buyers than sellers in a market then those buyers will bid the price up. As they do, some buyers will drop out of the market and more suppliers will be drawn into the market by the higher prices that are now available. This will continue until there is an equilibrium. However, we also discuss that the assumption that demand and supply are constant while these market dynamics play out, may not be accurate. For instance, even as prices are bid up and some buyers drop out of the market, there are even more buyers entering the market wanting property. This occurs through organic population growth (more people being born than those that are dying) and through historically high net migration in NZ. The effect of this is that the additional demand coming into the market creates a perpetual shortage. And even though suppliers (both developers and owner occupiers) will be drawn into the market, the lag in the time it takes for that supply to come onto the market means that suppliers can never fully respond to close the shortage.

In this episode, we discuss why your house isn't an asset, particularly when you begin to plan your retirement. The conclusion we come to is that the reason your house isn't an asset is that it doesn't produce any income. Sure, you can build wealth within your property, but you can never use it or unlock it unless you borrow against that wealth to pull the cash out to get started in property investment. We also discuss the option of putting a minor dwelling on the back of your existing property, which you may be able to rent out in retirement, in order to turn your house into an asset.