Upcoming events - WnPIA meetings:

 

27th June 2011 - Who should you listen to?  

Alan Borthwick, Financial adviser and WNPIA Exec member. 

Hear from an expert in the new regulation covering all aspects of financial advice, whether for property or other investment classes. 

7pm, Venue Harcourts Building, Cnr Vivian & Cambridge Streets.

WnPIA will also be having its AGM this evening, and this will be followed by a light supper and refreshments. 

Admission for each meeting is free for WnPIA members and $30 for non members. Door sales by cheque/cash or pre-register by emailing contact@wnpia.co.nz. Join WnPIA now to get free entry to these meetings.

See our website for more information about these events.

Sponsors and Discounts

Members of Wellington Property Investor's Association are eligible for a whole host of discounts from the sponsors of the NZ Property Investors Federation.

Check out the sponsors and their offerings here http://www.nzpif.org.nz/sponsors

The latest sponsorship deal is with Bunnings Wharehouse, simply show your WnPIA/NZPIF membership card and ask for your purchase to be on the NZPIF cash account to receive almost property developer style discounts!

NZPIF 2011 Conference: Adventures in Property

Register online or download a registration form.

New foundation rule recognises seismic hazard

The Department of Building and Housing is making immediate changes to Building Code documents to increase the seismic hazard factor for Canterbury and to require stronger foundations for buildings in that area.
 
The seismic hazard factor for the design of all buildings will increase by 35 per cent from 0.22 to 0.3 based on the best scientific and structural engineering advice available. In addition, concrete floor foundations for housing will need to be tied and reinforced.
 
The changes took effect on 19 May 2011, so that Christchurch building owners can rebuild or repair with certainty as quickly as possible.
 
A full copy of the media release is here: www.beehive.govt.nz/release/new-foundation-rule-recognises-seismic-hazard#main 

Misleading Property Deals

A man has been found guilty of misleading consumers into thinking they were buying properties, when in fact they were never registered on the titles as owners.

In Auckland District Court the Home Finance Company Ltd, Meguro Ltd, and Christopher Mark Ashenden, a director of Both companies, were found guilty of breaching the Fair Trading Act, and ordered to pay $237,048 in fines and court costs and $42,764 in reparation.

The Commerce Commission, which laid the charges, said the companies bought residential properties, primarily in South Auckland, and then marketed them using phrases such as "Why rent when you can buy?" and "Why rent when you can own: rent is dead money".

People who signed up to the scheme thought they would own the properties outright, when in fact the agreement did not give them legal ownership till 30 years had passed.

Judge Lindsay Moore said Ashenden's offending had contained strong elements of cynicism and the calculated exploitation of people.

"By encouraging vulnerable people in the mistaken belief that they were acquiring home ownership rather than a package of rights and obligations which; on any view, fell far short of that concept, folk were lured into commitments which were a recipe for disasters in which they lost everything they had put into the property they were seeking to acquire - indeed were given to understand they had acquired."

Ashenden had recently been declared bankrupt, but Judge Moore considered this no more than a ploy and certainly not an indication of his true worth, so imposed significant fines.

"The court has no hesitation in concluding that Mr Ashenden is one of those people whose affairs are deliberately kept complicated to the point where it is exceedingly time-consuming and expensive to unravel them.:

Commerce Commission enforcement manager Stuart Wallace said the case emphasised the importance of seeking independent advice before signing up to a property deal.  "Buying property is a complex transaction and the right advice will ensure that you are fully aware of all the risks and benefits before any financial commitments are made.

Mr Wallace said that Ashenden, who owed money both in New Zealand and Australia, now lived in the US where he promoted aproduct known as Brain-quicken, a health supplement.

Insurance

By Vesna Wells, Oxygen Property

Insurance is essential for all investors. With the September and February earthquakes in Christchurch and on 3 May 201 a tornado in Albany, it is important to check policies for adequate cover. There are a number of considerations for investors.

Insurance begins when a property is purchased. Banks generally will not lend without proof of adequate insurance cover for a total loss prior to settlement date. There is good reason for this - they do not wish to be exposed nor is it a risk that any investor should ever take.

Here's a guide of what cover is generally available for residential property investors....

Building insurance The major consideration is to make sure that there is adequate cover in place in the event of a total loss and therefore a complete rebuild. Generally policies work on square meterage of a property but it is important to check this with your insurer. Make sure you discuss with your insurer additional structures such as decking, carports, garages, sheds, pools etc - anything that would be affected in a total loss situation.

Contents insurance Some investors are not aware that things like carpets, blinds, drapes, fixtures and fittings may not be included in the building policy. Ensure that there is adequate cover for these additional items as they soon add up. Carpet, for instance, can cost thousands of dollars to replace. Some building insurance policies cover carpets that are affixed to the floor (i.e. like commercial carpets that are glued to the floor) but do not cover carpet that is stapled to the floor as in general house carpet. Make enquiries to ensure you are adequately covered.

Tenants should also have contents insurance themselves. If a tenant does not have contents insurance and a loss situation occurs either through negligence or accident, then the tenant becomes personally liable for the loss. The investor's insurance company will look to recover the loss from the tenant and this is usually achieved through the contents insurer but if there is no contents cover in place, tenants can find themselves massively exposed and the subject of legal action to recover the loss. There have been a few incidents like this where students have not bothered to insure their belongings, caused a fire and then ended up being personally liable for the loss that they caused to the owner.

Malicious Damage This is very rare in properties of a good standard that attract good tenants.  With robust reference checking procedures, the possibility of this happening is fairly small but it does happen. People can fall off the rails, lose their jobs, develop mental illness or a drug habit which can result in damage to the investment property. This insurance cover tends to cover damage caused by a tenant like kicking in doors or walls etc.

Under standard market residential dwelling policies (and particularly in chattels cover policies), there may be restrictions to limit cover to intentional damages caused by fire only.Additional cover may be able to be purchased.

Legal liability or public liability insurance Check with your insurer whether this is built in to the building insurance or needs to be taken out separately. It covers remote events such as injury to a third party that can arise from an insured's negligence causing loss or damage to a third party's property, business, reputation or a liability for an unintentional breach of a statute.

Rent default  As an addition insurance cover, rent default situations are fairly rare in well maintained properties attractive to good tenants. Rent default insurance covers investors if the tenant leaves a property without paying their rent i.e "does a runner". With the collection of a bond at the outset, some of the rent default will be covered and the insurance policy depending on its wording should cover the rest.

Loss of rental income  An addition to the insurance policy can cover situations of loss when the property is not able to be occupied or a rent reduction might be needed if the property is partially inhabitable.  In the case of a total loss, this insurance policy would cover investors for the loss of rent while the property is being rebuilt. Check the amount that would be covered. Generally, we have seen insurance policies that have up to $20,000 or $40,000 worth of rent loss cover. This may be particularly important if the investor is highly leveraged and could not support mortgage repayments for a period of many months while awaiting a rebuild of a property.

Some investors take the risk themselves regarding additional cover such as malicious damage or rent default. Investors should never take any risks with building insurance and contents cover (fixtures and fittings). 

Investors should consider carefully their insurer's financial security and ratings.Often investors are tuned to "getting the best deal".Just like anything, you do get what you pay for and the best deal is not necessarily the soundest deal for your investment property.There are specialised landlord insurance packages available or additional insurance cover.

Vesna Wells is the General manager of Oxygen. Oxygen specializes in property management, lettings and bodies corporate.  They are based in Wellington and also have an office in the Hawkes Bay.

Prepare against roofing troubles

Homeowners should nail down any roofing problems before the rains of winter kick in.

Whether it is rusting iron; blocked gutters or loose tiles, it's essential to make sure that roofs are tip-top to cope with the onset of wetter, colder, windier weather.

In a stormy region like Wellington, homeowners would be wise to inspect their roofs before winter so they can identify and fix any faults before it's too late to iron them out.

Regularly cleaning the surface and keeping it free of debris will not only stop leaks from developing but also safeguard against blocked gutters and downpipes. The best roofing maintenance tool is a broom with strong bristles and a long handle. Use it to sweep downwards toward the guttering.

But roofs need more attention than just a good sweep.

Remove creepers and any other vines to stop them from snaking under tiles and metal sheets, where they can tear apart a roof. Also watch for silt and debris in roof flashings that, if left to build up, can trap water in heavy rain and lead to seepage into the roof space.

Terracotta or concrete roof tiles can be recoated if they have weathered and faded, although there is nothing structurally wrong with a weathered tile.

Terracotta, concrete and slate tiles are prone to invasion by lichen, moss and dirt if their surfaces are pitted and not regularly cleaned. Lichen isn't damaging, but moss can cause leaks by collecting and retaining moisture that then filters between tiles. Unless rainwater is collected from the roof, use a pressure water spray and copper sulphate wash to remove lichen or moss. Don't use a wire brush to clean roof tiles as this can cause damage to them.  

Refixing roofing tiles or sheets can be done with just a hammer and screwdriver.

If roof coverings, capping and flashings are disturbed (such as in high winds), the fasteners or fixings may come loose and the covering will lift.

Maintaining gutters and pipes is another must. Gutters usually overflow because they are blocked or the drainage system they feed into just can't cope with the volume of water. If the latter is the case, employ a plumber to install more or larger downpipes.