NZ 1st homebuyers are ScReWeD...

[JoeKing]

Halebop
your comment..
"a wrap sale agreement is very similar except for one key detail. An unconditional agreement does not mean the purchaser can settle, it just means they are obligated to settle."
In this respect there is no difference between a deferred settlement or immediate settlement. Of course "unconditional" contracts fall over, but the occurance is very rare, and yes invariably involve an emotional, costly legal battle.. The advantage with a wrap sale is it is completely flexible. You have control and it and can be altered at any time by mutual agreement to cover unforseen events as you describe. The bottom line is the 3rd party has to live somewhere. Knowing that the probability of my wrap deals settling within 5 years is great, if the 3rd party runs into diffulties it is a simple matter to extend settlement term to reduce payments, or offer a payment holiday for a period once your buyer has built up equity, and allow them to use part of that equity in the form of penalty (a horrible word) % increase. All repayment schedules in the wrap deals I did were about the same as, or less than current rent at the time, so if they could not afford their repayments, they could not afford to rent. In the case of the default mentioned earlier the woman and her children made no repayments for 12 weeks, no problem, it just meant an adjustment to final settlement figure. This relieved her of some stress during a difficult time, we made a bit more in extra interest, she still came out better than she started with some cash to get restarted... again everyone happy. Remember by applying gst, deposits, extra cashflow to mortgages repayments my debt/equity ratio is only about 40%, so I had more than enough cashflow from other properties to cover the outgoings.
Banks are like computers, unemotional non caring and dictatorial. There is no advantage to me in causing extra hardship on a purchaser experiencing hard times. We all have them occasionally.
You say "In a wrap deal the purchaser makes an assumption based on their standing several years rather than several weeks or months from the point where they must settle."
Again there is no difference. Unless the purchaser is paying the total purchase price in cash of course. Repayments are repayments irrespective of to whom they are paid.
Halebop, I do agree, property investment has its risks like any other life scenario.
My Mum used to say.. "don't go near dogs they will bite" Well I have trained hundreds of dogs, during my 14yr stint as sheep station manager, and have never (yet) been bitten by one.
I'm sure someone will get some benefit from these discussions, keep em coming
Cheers all, hope its a better day at your place
JK

[Crypto Crude]

Tracker.... I have an alter ego know as slim trady.... seeing that we are talking about rapping and all... haha... if you dont get my joke, its all good... just a little light humor...
[8D]
.^sc

[Steve]

quote:Originally posted by JoeKing

Steve it is late and Ive had a big day, not wanting to debate numbers which can go on forever, just quickly, your numbers...
"BASED ON A WRAP:
Your CASH Income $30,000
Your CASH Expense $21,000
Your CASH Profit $ 9,000"
You have not accounted for rates and insurance, say $3,500, maintenence say $2000, now paid for by purchaser. So are you saying even $14,500, per year profit after puting up not one cent of your own money PLUS a one off $37,500 interest free loan from IRD (gst refund) which is non taxable, BAD?? And of course we have not yet counted in the day to day tax benefits, phone, petrol, office space, power allowance, advertising, new lawn mower, garden tools, paint, garden improvements.. shall I continue till breakfast?.
Cheers
JK

1. Of course I have not accounted for these under the WRAP scenario as they are the responsibility of the purchaser - they have no bearing on 'your CASH profit' under the WRAP agreement!

2. The day to day tax benefits such as home office, travel etc will be applicable to both scenarios so it makes no difference as they have been left out of both.

3. You have not made any comment on the $30,000 price appreciation that you would have 'forgone' under the WRAP agreement.

I am not disputing that WRAPs are good on a pure cashflow basis, just that they are not the way to go in a rising market such as what we have just been experiencing

[JoeKing]

Hi Steve, we have to be careful not to get bamboozled with numbers here. Yes WRAPs are designed to produce cash flow, as opposed to ending up in a an asset rich, cash poor scenario that most new investors find them selves in. It is important to note here wealth is cash FLOW not cash.
So: 1. OK. 2. OK. 3.I bought HARD. In most cases at 15%-20% discount, then had a registered valuation done by QV which in most cases was about the original asking price of the property, then expecting my purchaser to qualify for a conventional bank loan in 3 years (and settle then) I added 3 X 8% (a reasonable capital gain)to Reg val. and that became my sale price. You do the sums. Remember I put no money in at all.
Cheers
JK

[Steve]

JK, thanks for the explanation. I must have missed where you mentioned the origional purchase was at a discount...

[Crypto Crude]

Future grim for world economy[

sunday star times article, I have just picked out some of the interesting points,

A series of intensifying global risks, from climate change to TuMbLiNg HoUsE pRiCeS, pose a mounting threat to the longest period of sustained growth in the world economy since the 1960's according to a report released last week.
Global risks 2007, a study prepared for the World Economic forum, called for urgent action to mitigate the potential devastating impact of global warming, international terrorism and pandemics after warning that the international community was ill equiped to cope..........almost all of the 23 risks on which the Global network has been focusing on rose last year............
The study found that five major economic risks- an oil price shock, a plunge in the US dollar, a HaRd LaNdInG In ChInA, BuDgEt cRiSeS CaUsEd By AgEiNg PoPuLaTiOnS were more acute than this time last year... (it will become more and more acute as BB's become closer and closer to retirement for sure)
outlook for inland flooding had also worsened since last year...
Climate is now seen as the most defining challenges of the 21st century..
The way in which climate change is dealt with at the global level will be a leading indicator of the worlds capacity to manage globalisation in an equitable and sustainable way...
guardian news and media
[8D]
.^sc

[Crypto Crude]

Has anyone though about how rising sea levels are going to impact on the NZ property market???

here are some of the facts
-since the end of the last ice age 18,000 years ago... sea levels have risen by over 120 metres....
-A further 1 metre rise in sea levels would destroy half of Bangladeshs rice fields, millions of people would be forced to migrate... other low lying rice growing countries affected are China, Vietnam, India, Thailand
-we are looking at a 1 metre rise in sea levels by 2100
-10 warmest years ever recorded in History of the Earth were since 1983
-7 of those warmest years ever were since 1990...
-I think last year was the warmest ever, or was it 2005?
-average temperatures are set to rise between 1.4 and 5.8 degrees celcius by 2100...
-glaciers are melting on 5 continents
-Majuro (marshall islands) beachfront has decreased by 20% in the last decade.
-since the industrial revolution atmsopheric concentrations of carbon dioxide have increased 30%
-the list goes on and on and on....
I am not a dooms dayer, these are all facts....

global temperatures are rising on an expodential scale.... it will just become larger and rise at an increasing pace over time....

how can we stop global warming?..... fossil fuels to run cars is the biggest cause to carbon dioxide levels... I doubt that we are going to see any response from large oil producers, (shell, BP,exxon) they will continue to make payments to Bush, and keep him happy... Oilers will continue to buy out competition in the terms of substitutes to their oil products... Large oil producers will not allow change easily at all!!!

how can you as a first homebuyer get ready for global warming? buy land on a high mountain or hill... If you live in Christchurch, then try Cashmere Hill... (start looking at the top)... because in 100 years maybe no one will want to buy the houses on the canterbury basin floor..... I for one will surely buy up high....
[8D]
.^sc

[delgary]

Global And NZ Temperatures Are Cooling, Not Warming
Wednesday, 10 January 2007, 4:31 pm
Press Release: New Zealand Climate Science Coalition
Media release
10 January
Global And NZ Temperatures Are Cooling, Not Warming

Figures just released by the U.S. National Space Science and Technology Center (NSSTC) show that mean global temperature for 2006 was 0.24 deg C cooler than it was in 1998.

The seven years 1999 to 2005 were also cooler than 1998.
...
"We know that emissions of carbon dioxide are still occurring, which prompts a further question: for how much longer can NIWA support claims by the present government that CO2 causes catastrophic warming, and needs to be curbed by the imposition of special taxes or emission charges. Surely it's now time to put a stop to these sensationalist claims, which are not supported by verifiable scientific data" said Professor Auer.
http://www.scoop.co.nz/stories/SC0701/S00011.htm

[duncan macgregor]

SHREWD CRUDE, Global warming is BULLSH*T the way that the uninformed spout about it. Ice below sea level that melts decreases in volume, its only the ice above sea level that adds to it.
I would think that the natural bushfires in AUSTRALIA would account for more global warming than mankind last year. What about my pine trees i get nothing for growing them and penalised if i cut them down. Its all namby pamby crap my friend to get money out of you very similar to the police speed cameras. The sooner this global warming gets going the better. MACDUNK

[cantab]

quote:Originally posted by Shrewd Crude

Has anyone though about how rising sea levels are going to impact on the NZ property market???

No