Smoke and Mirrors

Olly Newland’s Column, September 2008

The Reserve Bank of NZ lowered the official cash rate by 0.5% and that’s good.
The trouble is that’s all it is — good.

It will not solve the credit crunch.
It will not stop the recession.
It will not stop unemployment rising.
… and it won’t stop the property market from sliding further.

We are caught in the slipstream of world events and, short of discovering huge oil deposits in the middle of Wellington Harbour, we will continue to be buffeted by the collapses and bail-outs that we have seen and read about — locally and offshore.

As I write this, several big US financial institutions have collapsed or are on the point of collapse (Lehman Brothers, Merrill Lynch, AIG just the latest) in a string of events that, collectively, are unprecedented since the depression of 1929. There will be more to come, you can be sure of that.

All this was doubtless caused by the smoke and mirrors created by whiz kids with their new forms of financial instruments (derivatives of mortgage pools, Consolidated Debt Obligations etc) that nobody really understood… least of all them. Even more astonishing, the pillars of the banking world (Barclays, Chase, UBS, et al) bought them hook line and sinker.

As I have alluded to previously, the financial world has become a vast gambling den, dominated by those who delight in creating complex deals, rather than simply investing and getting fair profits in return.
For this folly we will all have to pay — sadly some more than others.

If there is one thing to learn out of this credit crunch carnage it is this: ‘Keep it simple’

Write that on your office wall and remind yourself of it every day.

On the local front, the coming General Election will tend to fudge matters as many eyes will be on the polls and the results. The Ancient Romans used the same trick to appease the masses with ‘bread and circuses’.

It is my view that we are entering a quieter phase right now — but it may only be temporary.

Early next year, well after the election hype has died down, the new government will have to face the realties of the marketplace — and it won’t be easy.

Political considerations
From my experience, Labour governments are good for property investors. National governments are not. This is nothing to do with my political preferences. It’s just statement of fact.

Labour governments generally spend like crazy to keep the workers happy and hang the consequences.

This then flows into the pockets of investors until we finally get a ‘Big Bang’ (such as now) and things all get terribly messy. Then the party is over and we all go home with hangovers.

Next, National has to come in and clean up the mess and in doing so often has to dish out unpalatable medicine — we all don’t like it, but we have to take it because we know it’s good for us.

This has been the pattern in the past, and will in my view likely be the pattern again.

The Finance Company Fiasco
The impact of the collapse of what seems like scores of finance companies (plus the freezing of many other funds) cannot be overstated in seriousness.

I predicted this scenario in my book The Day the Bubble Bursts but even I am staggered at the ferocity and the speed of events as they continue to unfold.

Flowing directly from these financial fiascos is the evaporation of billions of dollars of purchasing power, either lost for good or locked away for the duration.

The lifeblood of the property and development industry has been choked off with the unfortunate flow-on effects of job losses, soaring mortgagee sales, and record bankruptcies and receiverships.

As the facts are revealed and the lax practices of some of the financial cowboys exposed, one can’t help but wonder how it was possible that with all the expertise available to them, they could have got it so wrong.

I have seen all this before. This nightmare takes years to work through the system. It will be many more years before we can enjoy the sort of boom we’ve all benefitted from in the recent past.

We will be lucky if the market just hovers above flat-line for the foreseeable future.

Skulduggery
One of the scandals still emerging from the finance company mess is the dodgy way some financiers created false ‘profits’ and creamed off huge dollops for the promoters.

In some cases it worked like this: (in very simple terms) Dodgy Finance Co would issue a prospectus and raise $100M from Mum and Dad investors.

‘First Ranking Fully Secured Debenture Stock’ these investments were pompously labelled. (More like ‘First Ranking Rubbish Secured Against Thin Air’, I would say.)

Dodgy Finance Co would make a deal with the Bent Developers Co to launder the $100Million in such a way as to make it appear as being a good deal all round.

Bent Developers wanted (say) $70Million to buy some bare tussock land by a weed-choked lake and to erect 1,000 shonky houses to on-sell to dummies for a huge profit in three, four or five years time.

Dodgy Finance would say ‘Here is the $70Million you want, but you must sign up to pay us back $100Million — being capitalised interest, our fees, and a share of your profits.’

Bent Developers would duly agree and, Hey Presto!, Dodgy Finance could claim it had made a instant $30Million profit!

Then Dodgy Finance Co could take $20million out in cash and pay it to the promoters of the debentures (the directors often enough) while the remaining $10Million would put aside to pay the investors ‘interest’ so as to keep them quiet until the next dollop of investment money came in.

So no real profit was made at all.
It all came out of the original $100Million that the naive and trusting Mums and Dads had advanced in the first place.

The whole scheme came unstuck, of course, when the market for shonky homes located by weed-choked lakes dried up and stopped selling to the gullible public.

An implosion can happen just as quickly as an explosion.

Hence we have the current finance company debacle and the flow-on or knock-on effects. These will reverberate for years to come.

But wait! It could get worse.

Moratoria
Those finance companies that are in receivership are dog-tucker for all intents and purposes, but some are seeking a ‘moratorium’ — in other words they are trying to get themselves up and running again using their boot straps (and the forbearance of their creditors and investors) as leverage.

If they manage it, then I will be the first to cheer. Really. We property investors need imaginative finance companies, rather than po-faced trading bank managers, to assist us with the more risky, unconventional deals (but not crazy, off the planet ideas). We need their help to fund the deals which can make investing so much more challenging and rewarding.

I have to say that to date the few finance companies that have struggled to their feet again, have come up with some pretty bizarre schemes. Some of the proposed arrangements, simply put, swap an investor’s deposit for shares or some other security which will take a lifetime to collect in full — if ever.

Better than nothing I suppose (in some cases, barely) but they’re really akin to burning the furniture to keep the house warm.

However, we must remain vigilant.

Back in the aftermath of the Crash of ‘87 (and the late 70s as well) when similar collapses occurred, one of the schemes tried was simply an attempt to rort the investors with smoke and mirrors.

For example I was caught up in a scheme in the late 80s where ABC Finance (not their real name) which was about to go into receivership, tried to get out of the strife by claiming to inject a large amount of money out of the pockets of the directors and so recapitalise the company anew.

Now you would say, ‘That’s great!’
Good on them!
But there was a catch you see.

What the directors came up with was a deal where they, the directors, would give to ABC Finance a huge lump of bare land which they had had valued by a (friendly) valuer at $300Million but which ‘only’ had a $200Million mortgage over it.

‘Look’ they cried. ‘Here is our capital injection. There is an equity of $100Million which we are giving away to help the company onto its feet again.’

Needless to say, raspberries all round was the response. I just escaped from that mess by the skin of my teeth and soon after ABC Finance went under, as it richly deserved. (They still owe me $13 million plus interest but aren’t answering calls.)

Keep an eye out. It wouldn’t surprise me if this idea was tried again.

The Knock-on effect
There is a mood among many that the current turbulence in the market is a temporary thing and it will all be over by Xmas. Next year all will be better and the property boom will carry on from where it left off.

I sincerely hope they are right — but my logic tells me that it will take longer than that.

Based on my experiences of the past, I believe it will take several years for the property market to come right. My advice to investors is to take any profits they may have now and cash them in — or be prepared to hang on for five years, maybe even ten years.
If the market hasn’t come right by then, we are all custard.

History teaches us that the market always does come right and in five or ten years from now, we will look back and laugh at the prices of property now as compared with the prices then.

I recall back in the late 70s making headlines and being paraded on TV because I predicted that houses would one day sell for a million dollars or more. This was when you could buy a nice 3 bedroom house for under $100,000.
Well I predict that ten years from now the median price will be over $1Million and that will be regarded as cheap.

The trouble is, we have to survive in the meantime in the market we live in — and that fact has been lost on many, especially the developers who were bedazzled by the big numbers and not the facts.
As well as the financiers who backed them, there has been a rash of developers going under of late (some hanging on by their fingernails) who treated the New Zealand market as if it was Hong Kong, or New York.

What was the developer Dave Henderson of the Big Hole in Queenstown thinking with his stalled 500 house development?
What was Patrick Fontein thinking with his stalled 700 house development at Orewa with another similar development at Huka falls?
What was Mark Bryers thinking with his Blue Chip attempt to corner the apartment market — especially now that his schemes have thrown thousands of Kiwis on the financial scrap heap?

At this moment there are scores of other developers who have bet against the market, or gotten their timing very wrong — subdividing and building around lakes near country towns or on thinly populated sea shores in the pious but deluded hope that the market will absorb everything — no matter how big.

I predict many more developers will go under in the months ahead as the market crumbles. Existing or potential buyers simply can’t get the cash anymore. You cannot get blood out of a stone and no matter what, people who may have signed up to buy that romantic lakeside section (or that nice new townhouse) a few years ago, will be forced to walk away from their contracts because they simply have no choice!

Up and down the country, tens of thousands of people are facing severe financial stress (ruin in some cases) because of finance company failures, developers’ failures, business failures or just simply the credit crunch.

This could take years to flow through the system so it could be years before the market recovers.

The only quick way out, as I see it, is to endure another round of hyper-inflation (also known as ‘the speculator’s friend’) as this make people spend rather than save. After all, it is well known that rampant consumerism greatly helps the economy.
Welcome to Capitalism.

Nevertheless, if you have cash or can borrow, and you have faith in your abilities, then there is a killing to be made in selected parts of the market today.

Those who read The Day the Bubble Bursts will recall that I wrote a chapter on the coming ‘tidal wave’ of cheap and shoddy apartments. I said that they would end up being sold for fifty cents in the dollar.

This has come to pass just as I predicted, and if I had the time and inclination there is one area of the market that I would be investing in right now. I would be buying up cheap, oversold apartments in the city centres — those that aren’t rubbish, of course.

This market has had its correction early, and the prudent buyer could do very well indeed by trawling through the ruins with an eye to the future. In time we will all look back at today’s depressed prices and wish we had bought truck-loads of them.

One further caution: Buy only freehold apartments — NOT those on leasehold land — and with at least one dedicated car park each.

Likewise, nice standard three bedroom family homes on full sites in leafy suburbs will be all the rage as more and more people end up in shoe boxes on the 25th floor.

Leasehold v Freehold
Oh, the irony! Mark Bryers of Blue Chip infamy is having his own home sold up by mortgagee sale.
Click here: http://www.stuff.co.nz/4692208a13.html

Now he can have taste of the medicine he has dished out so cruelly to so many innocents.

But there is another lesson here: Never, ever buy residential property on leasehold land.

It may be cheaper to get your foot in the door, but as I have explained in talk after talk and seminar after seminar, every year that ticks by on that ground lease brings the next rent review closer and closer.

A new generation of investor is learning that while you fight to hold the value up (and even increase it), the ground lease pushes the value down until it becomes virtually unsaleable.

Stick to freehold and never be tempted.

Conclusion
I am not convinced that we are out of the woods just yet, even if the combined effects of the falling dollar, lower oil prices and warmer weather, not to mention the impending general election, makes everyone FEEL better.

Having seen these false dawns before, and having been bitten hard by them, I tend to remain skeptical — but hoping that this time I will be mistaken, and we really are turning the corner.

My advice: Remain cautious for the time being. Get out and look for bargains, by all means as I said last month.
Do your market research, and even polish up your finances. See what you can find without necessarily committing yourself — unless you know it’s a steal.

If the market really is improving, it is better to be a day too late than a day too early.

Amazing  What you get To Know when you have been around for 40 odd years doing these things and actually take the time to check out what you are being offered before you thrust your hard earned money into the grubby fat paws of a bearly twenty + Shyster. So Here’s my advice:

1. Check out the Property

2. Check out the seller

3. Check out the promotor

4. Check out the Area history

5. Research the market [actual market]

6. Check out the suitablity for your intend purpose

And there is the slightest doubt ran like wind, run like the worst monster you can ever imagine are after you …….

because they Most probably ARE !

I came across this from my Good Friend and know that others out there are FULL OF IT I decided to Share this with you ..Be warned…

“When Fools Rush In”

Olly Newland’s Column, August 2008

We are now about six months into the real property downturn. Until last December there was still a positive note — despite the collapse of several finance companies and with other hints of worse to come.

Now there are those who say ‘the worst is over’ and that we can look forward to a more stable market and the resuming of the property bubble.

I do not believe that at all. Some optimists and their advisors are merely seeing a false dawn, in my view, and there is much more pain to come.

Since the beginning of the year, many more local finance companies have collapsed or shut their doors, and overseas the financial markets are still deep in trouble.

Sooner or later there will be a real crisis, with emergency measures to be taken — and that will be the end of the beginning.
It often takes a crisis to solve a crisis.

Judging from previous experience, I’d say we are probably about one-third of the way through the problem, with much more unpleasantness to come, but (and this is an important distinction) only for a relatively FEW.

Learning from the past
During the 1987-1991 meltdown down both locally and internationally I was continually amazed to see that the restaurants were full, properties were still sold for good prices, people continued to go on expensive overseas trips and buy the finest wines.

This taught me that a recession (for that is officially what we are in) really only affects a small number of people. For many, it is business as usual.

While 10% of the population may be suffering in the recession, 90% ARE NOT.

Now all this is good news indeed for many property owners and I, for one, am more optimistic than ever. Here’s why.

If we are one-third of the way through with two-thirds to go:
It means that the real upturn (or least a stable market) will likely arrive towards the end of next year, 2009. Hence, most of us can while away the the rest of recession in relative comfort until then.

It means that investors can now drive bargains that were unthinkable to many 12 months ago. Take advantage of this while you can.

It means that fuel prices should steadily fall (not all the way back, but enough to take the hurt away), interest rates should drop (cheers!) and the banks will relax their po-faced attitude of today and be more realistic tomorrow.

All we have to do is survive for the next 18 months or so, gather up real bargains in the meantime, and get ready for the better times ahead.

Can we get this over with?
You may well may ask if the difficulties we are seeing now could be put right more quickly?
In my view, no, that will not be possible for the following reasons:

(1) Something like $4 billion or $5 billion of people’s spending power has been locked up in failed or frozen finance companies. For an economy the size of New Zealand this is way too much. It matters very little if the frozen money is lost or is eventually returned in part — the effect is the same.

(2) Remember that the statistics quoted — that ‘only’ around 16,000 investors are affected — are patently untrue. Each investor will have have dependants and family, all of whom will be affected to one degree or another. More likely 300,000 people have been affected with stalled deals, properties not settled, projects frustrated, purchasing power crimped. This takes a long while to work through the system, and hence the time delay.

(3) In addition to the finance company debacle, we have more and more lay-offs, and companies reducing profits. All this tends to make people think twice about spending on any major items. (Just ask the car dealers.)

(4) For every mortgagee sale you may see advertised, I estimate there are at least another 50 others who are under real pressure and are selling before the bank does it for them. This backlog has to be cleared away as well.

(5) Even if interest rates were slashed by the Reserve Bank, I doubt it would help. This approach has been tried in the USA and Japan with negligible results. Ask yourself: If interest rates were suddenly reduced to 6% would you rush out and buy everything in sight? I doubt it.

(6) Then we have the problem of inflation. Having lived through hyper-inflation in the 70s and 80s I know it can be both a curse and a blessing. Inflation erodes savings and makes money dearer to buy. On the other hand, it drives up prices — and property is the first to benefit. Inflation is the potential curve ball in the whole equation. All predictions can be thrown out should inflation become a serious issue once again.

The way forward
It is with these points in mind that I caution property owners and investors NOT to rush in right now just because prices may have a slipped a little.

But this is important: don’t stay in hibernation either.

What I DO encourage is that buyers start to learn and get a feel for the market. Go out and look at everything for sale — don’t necessarily buy anything. The current painful volatility is a relatively rare opportunity for you to observe a market in turmoil and to study the ugly side of capitalism.

Of course should a real bargain turn up (at say 20-25% below current market) then maybe a buyer should chance their arm… but how will someone ‘uneducated’ in property investment or unfamiliar with the market tell a bargain from a lemon? It’s time to get educated.

Advice for those under pressure to sell
(1) Deal with the problem early. Delay is your enemy.

(2) Go to your bank or mortgagee and explain the circumstances. As unpleasant as that may be, the alternative is worse.

(3) Usually the bank will give you up to three months ‘relief’ with no further payments required (capitalising the interest). Of course if you have left it late and already missed a a payment or two, you may not get this relief. Hence the need for early action.

(4) The bank does NOT want to take your house back and will do anything to prevent that. They would much prefer that you put the property on the market yourself, selling it in the ordinary manner for the best price achievable.

(5) Remember, if you are unfortunate enough to find yourself in a mortgagee sale situation you can actually pay the arrears right up to the fall of the hammer, if you find the funds, and keep your property.

(6) Suggest to the bank that they take an equity stake in your property. i.e. They become part owners in exchange for some of the debt. When times are better the property can be sold and the bank will get their share of any upside as well. This was done to good effect in the UK during the severe downturn in the market in the early 1990s.

Are the media to blame?
Some people are saying that a lot of the present troubles have been caused by the media and their sensational stories of gloom and doom. This is bunkum for at least two reasons.

The media only reports events as they happen — they do not invent them. The market is bigger and stronger than the media by far. There is no way the media can influence the market to such an extent that it creates a recession.

Besides, no-one was complaining about the influence of the media when property prices were rising at the rate of a “$1000 a week”. People seemed happy enough then.

In conclusion
The present market is a nightmare for some and can be a bonanza for others. With a good education on how to survive and prosper in a falling market and the ability to act in conjunction with proper advice from impartial sources, it is quite possible to take advantage of this falling market to steadily build up a portfolio of residential and/or commercial property — which can be a springboard to secure your future.

In the months and years ahead I am sure there will be many who will look back and say that they should have acted but have missed out again through inaction.
Make sure you are not one of them.

If you want good things to happen you must take action and the sooner the better.
The more action you take the more chance you have of getting ahead.
Become active.
Become educated.
And above all — never give up!

Olly Newland
25 August 2008
© 2008 Olly Newland. All rights reserved.

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Quotes

“Live your life each day as you would climb a mountain. An occasional glance towards the summit keeps the goal in mind but many beautiful scenes are to be observed from each new vantage point.” *Harold B. Melchart

“The need to be right all the time is the biggest bar to new ideas. It is better to have enough ideas for some of them to be wrong than to be always right by having no ideas at all.” *Edward de Bono

“It is in giving that we receive.” *St. Francis of Assisi

“If you limit your choices only to what seems possible or reasonable, you disconnect yourself from what you truly want and all that is left is a compromise.” *Robert Fritz

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Market shift bring opportunities and threats for investors

Property investors can’t expect to generate easy equity from rising house prices in the current market.
By Andrea Milner

The latest ASB housing confidence survey reveals price expectations have dropped back to similar levels as the lows early last year.

ASB economist Nick Tuffley says property investors need to be aware that prices will trend up over the long term, particularly in areas with high population growth, however over the course of the property cycle, “you get times where property prices do nothing spectacular”.

“We are heading into that part of the cycle at the moment.”

“You can’t really expect capital gains year in, year out,” Tuffley says.

Realistically, he says, house prices can probably average 5-6% growth in the dollar value over the long term.

“There haven’t been any fundamental shifts in the economy that mean house prices could keep rising at the same rates as they have over the last five years.”

This is the time of the market where those doing “quick flicks” run a greater risk than normal of coming unstuck, Tuffley warns.

The flipside of a slower market, he says, is that a lot more opportunities arise. “The people likely to sell are those who need to, so for property investors in a good cash position there is the potential over the next year or two for there to be some decent bargains.”

The market has shifted in a relatively short space of time, Tuffley says, and property investors trying to lighten their portfolio might have more of a struggle than they would have at the start of the year to achieve the same price. On the other hand, those buyers pushing for harder bargains will have more of a chance of succeeding with that strategy.

There needs to be some sort of correction in the housing market of the ratios between incomes and house prices and rents and house prices, says Tuffley. “If you’re investing in a rental property, you need to cover the expenses and get sufficient rent to service the mortgage off the people who can’t afford to buy, in order to make the sums work as a property investor.”

Overall he predicts a mild correction. “Areas where you tend to find booms and busts are the more manic-depressive parts of the country where you’ve had very sharp gains coming in a very short period of time. The Auckland CBD market looks as though it has a little further to correct. Queenstown potentially “is a bit of a risk” and rural areas where price growth has been the strongest relative to the cities could go through more of a slowdown than other areas.

“However any areas remotely connected to dairy farming stand to do pretty well.”

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- Community Profile - Key statistics from Statistics New Zealand on Income, Occupations, # of Children, Education etc…

- Local Schools - What school zones the property is in.
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The Secrets of Millionaires Exposed
By: Axel Henriksen

The Law of Saving
Financial freedom comes to the person who saves ten percent or more of their income throughout their lifetime.
One of the smartest things that you can ever do for yourself is to develop the habit of saving part of your salary, every single paycheck. Individuals, families and even societies are stable and prosperous to the degree to which they have high savings rates. Savings today are what guarantee the security and the possibilities of tomorrow. The best way to do this is to set up an automatic deduction from your pay into a high interest savings account.

Start With Yourself
The first corollary of the Law of Saving comes from the book The Richest Man in Babylon by George Classon. It is to “Pay yourself first.”

Begin today to save ten percent of your earnings, off the top, and never touch it. This is your fund for long-term financial accumulation and you never use it for any other reason except to assure your financial future.

Develop New Habits Regarding Money
The remarkable thing is that when you pay yourself first, and force yourself to live on the other ninety percent, you will soon become accustomed to it. You are a creature of habit. When you regularly put away ten percent of your earnings, you soon become comfortable living on the other ninety percent. Many people start by saving ten percent of their income and then graduate to saving fifteen percent, twenty percent, and even more. And their financial lives change dramatically as a result. And So will yours.

Build Your Wealth Now
Did you know there’s over 5-million millionaires in America? Australia the country that is developing more millionaires per capita than any other country in the WORLD! Did you know that there are more billionaires in India than anywhere else?It’s shocking to find out that America, Australia, Hong Kong, Singapore and India are breeding so many successful people. Do you want to know how they do it?

Learn To Attract Money
You make your own choices and decisions about money. If you’re unhappy with the amount of money you’re making - the only question you should be asking is “How can I make more money?” Yes Go Ahead and ask Yourself That Question RIGHT Now!

Take Every Advantage
The second corollary of the Law of Saving says, “Take advantage of tax deferred savings and investment plans.” Because of high and even multiple tax rates, money that is saved or invested without being taxed accumulates at a rate of 30% to 40% faster than money that is subject to taxation. Self-made millionaires, according to Dr Thomas Stanley’s book The Millionaire Next Door, are almost obsessive about accumulating their funds in assets such as real estate, self owned businesses and equities that increase in value without triggering tax liabilities. Peter Sibold in his Book “Pay Zero Taxes clear states “if You Don’t have a Home Based business you must be brain Dead”

Americans and Australia Invest in company pension and retirement plans, 401(k) plans, IRA’s, Keough Plans, Roth IRA’s, Education Investment Accounts, stock option programs and whatever else has been approved by the IRS for long term financial accumulation. Or any Similar products that are available in your country. Make every dollar count!

Action Exercises
Here are two things you can do to apply this law immediately:

First, begin today to put away ten percent of your earnings. Set up a special account for this purpose and treat your contributions to this account with the same respect that you do your rent or mortgage payments each month. When you are self employed you simply take 10% of every payment you receive after allowing for your basic business costs. And be aware that that a big cheque is often followed by a big bill so don’t spend on depreciating assets such as cars and boats etc.until you have a huge amount of surplus cash. I would recommend that have at least 3 years of expenses in cash on hand before you waste any on the toys.

Second, become a lifelong student of money. Read the best books, take courses and subscribe to the most helpful magazines. Check out your Risk Profile by doing a MyProfile Report so that you will Know what you are doing and that way you can always make intelligent decisions when you invest your funds.

“Become a Millionaire Simply By Changing Your Habits”
You can develop habits that will make you a millionaire. When you become a millionaire you’ll finally be able to buy that house, take that vacation, make that big purchase, and take care of your family and friends. *Not Just a Paper Millionaire But When You Can get Your Hands on a MILLION Dollars in Cash!”

It sounds crazy - but it’s true.

Almost every self-made millionaire has strong financial habits. Habits that help them ear n money, habits that help them save money, and habits that help them to achieve their financial goals.

If you haven’t achieved your financial goals yet - You may not have the right financial habits.

Do you want to learn the habits that will make you a millionaire?
In my program MyMillionaire Coaching Programme, I will teach you successful financial habits that will turn you into a millionaire guaranteed! www.mymillionairecoach.com

You can get so much more done when you have the RIGHT help. The task of building a TEAM is complex Unless your have the Right Tools. Building a team is ongoing. And, it is the difference between Success and Failure because:

T = Together

E = Everyone

A = Achieves or Attracts

M = More

And with the ideal team you can become a champion overnight.

Start with two thoughts:

1. The less you do the more important you are: Years ago I began calling on top people who ran some of the biggest companies in the world. As a general, rule when I walked into their office, there was no big pile of paperwork on their desk. Someone else took care of that. Someone else took care of almost everything. That is when I began to realize that the less you do the more important you are provided you get things done well by someone else. “ The Art Of Delegation”

2. A few good people on your team could make all the difference: There is theory in business called the 80-20 theory. Many speak of this theory. For example, twenty percent of the Real Estate Agents do eighty percent of the transactions. Eighty percent of the contractors do poor quality work. Only 20% of the Attorneys/solicitors are skilled in More complex Real Estate transactions.

What a Fractal Is
While this concept is amazing enough, what is more amazing is that this “80-20 Theory” is a fractal. Encarta describes a fractal as “an irregular or fragmented geometric shape that can be repeatedly subdivided into parts, each of which is a smaller copy of the whole. Fractals are used in computer modeling of natural structures that do not have simple geometric shapes such as clouds, mountainous landscapes, and coastlines.”

What this means is that 20 percent of the 20 percent bring you 80% of the 80 %. And so on infinitely! Do the math for the fractal. You have less than 1% of the realtors for example bringing in over ½ of the business.

The Effects of Fractals on Team Building
Even in sports teams we see the “fractal effect” where just a few superstars can carry not just the team but the entire league. What effect do you think Babe Ruth had on baseball? What effect did Michael Jordan have on Basketball?

How Fractals Can Help You Build Your Real Estate Investment Team
It’s not how many people you have on your team but, who? Start with you. Not too difficult to hold yourself responsible if you can remember that the less you do the more important you are. However, you will have to find others that “get it done.”

The bottom line is you need to develop a strong team of the best possible players. Let’s look at this “best people fractal concept” in action:

When Bill Gates left Harvard to start the Microsoft Corporation he had a big dream and precious little money. He met with Paul Allen, his partner, and they both agreed to make the dream come true they would need to hire the brightest minds in the country. They also discussed their money position and the thought scared Bill so much he just looked at Paul and said. “You do it.” Right from the get-go Bill Gates had the right guy on his team. Need we say any more about how critical it is for you to have a top notch team right now?

Specific Members for Your Team
Below we will look at some of the specific kinds of people who may be able to help you. The detail here is daunting. But, we will begin with some of the specific things you may want from those people. How do you find them? How do you impress them to work with you when you do find them? Just what did you want them to do for you?

Attorneys / Solicitors
I have an investor friend who is a millionaire many times over. You would never know it to look at him. He is so tight he only buys a new pair of shoes about every five years and never spends money on shoe polish. But, he is not afraid to spend money where he thinks it will help him. I have never forgotten his advice about attorneys. “Don’t forget to pay your Attorney. You never know when you might need him.”

An attorney / solicitor can help you in many ways. Here we will go over how to communicate your needs to an attorney in a way that makes it clear just what you expect from him or her.

Initial Attorney / Solicitor Pre-screen Script: Your 30 Second Commercial
You are on the phone with Attorney/solicitor Johnny Jones who called you back after you left a message asking him to call you.

“Thank you Johnny, for returning my call. Mary over at ABC speaks highly of you and suggested I give you a call.

Johnny, I realize it is customary for people in your business to offer a free initial consultation, and I’m OK with that because I am a Real Estate Investor and am looking for an Attorney /solicitor I can develop a long term relationship with.

If possible I would like to meet for lunch where we could get to know each other. When would that work for you?”

Perhaps, your attorney / solicitor will ask for more detail about what you wanted from him or her. You would say something like: “Thank you for bringing that up. I would like to spell out just what I’m going to need help with so you can see if I am the kind of client you would want to work with.

Are you OK if I take a minute to list the things we should visit on? — Listen! He may say OK or may speak.

When you get to speak again, go over any of this that he has not covered.

1. It is critical to me that I feel good enough about my Attorney to send him new clients because I insist he do the same for me in situations where I can help someone with property issues. “Mutual Referrals”

2. Joe, I work in Mortgagee Sales {foreclosures}and other distressed property situations using nuclear financial leverage. Your job will be to make certain nothing blows up even with all inclusive trust deeds, lease options, 3rd party lenders. And of course selling to buyers who are so risky no bank will touch them. Obviously, I will need my legal ducks in a row so I can get dead beats out of the property post haste and make, not lose money in the process.

3. We can go over fees, retainers, and time lines at lunch.

When is a good time to get together?”

Things to Go Over at Lunch
1. The law on Mortgagee Sales here appears to be 6 pages (you should have this with you yellow highlighted and present it). As you hand it to the attorney / solicitor, ask a question like: “What are the issues you see as most needing concern and care during the foreclosure process?”

2. Obviously, I would like to know of any loopholes, or opportunities for advantage at pre-foreclosure or post-foreclosure. I realize the rules are always strict at the auction itself. However, if there is any slack in the rope, I would want to know. I sure don’t want to lose my deposits. Are there ways I can by using your expertise or connections to gain an advantage that won’t come back to haunt us later down the road? {This conversation will vary based on the laws in your country}

3. Do you have any insight or connections to get early discounted settlement from financial institutions in the Mortgagee sale{foreclosure} process?

4. First, what is the law as it relates to getting people out of a {Mortgagee sale}foreclosed property and more importantly how long can it take if they are sophisticated in their effort to stay without paying? Could you give me a range here with a maximum amount of time it will take me to get them out if I do it your way? Oh, and what will that cost me?

5. Are you able to hold cheques in {escrow} your Trust Account without depositing them on deals I structure where I clearly state in the contract, “cheque being held in My Attorneys /solicitors trust Account {escrow}.”

6. Do you know of any private investors I should meet?

7. When I look at properties I will be coming across people with issues such as death, disease, divorce, and debt that need legal help. I will have them call you or better yet I will call you and introduce them over the phone. “Referrals”

8. My question is what do I need to do for you to be comfortable in introducing me to people I can help? “Asking For Referrals”

The Title Company
You don’t have Title Companies in Canada or many other parts of the world. And you may be able to get an attorney / solicitor who will do the same thing as in the states. So don’t get hung up on the semantics. Substitute the word attorney / solicitor for Title Company if it serves you.

I have a student who has the inside track because he has the code to his Title Company’s property data base. This way he can see details on each property that is in Default {foreclosure property} he is looking at and figure out what is going on in terms of mortgages and encumbrances.

As a general rule you would be looking for a Title Company that will give you preliminary title searches on properties you are looking for at zero cost. Obviously, if this is not possible you are looking for small costs that can be paid at closing.

Title Companies can introduce you to attorneys who are skilled in real estate and have had much experience with foreclosures. They may even be able to introduce you to helpful private investors, superstar real estate agents, and other insider knowledge.

You are looking for a title company that is familiar with dual closings and will share any information on dual closing friendly banks, pre-foreclosure “NOD” lists, and lots of other goodies, maybe even doughnuts.

Real Estate Agents
Any way you slice it 6% is a lot of money. Worse, most agents will be out of the business in less than a year or just can’t help you. Why pay them 6K per hundred? The bottom line is if you are going to use Real Estate Agents get your money’s worth.

Here are some things you should want and figure out how to get:
1. The code to tap into their MLS. This may be all you need from your realtor.
2. Insider secrets on distress properties.
3. Help in getting FREE Tile Search Comps.
4. Willingness to carry back long term Trust Deeds on the commission or at least wait till the flip.
5. Knowledge of the market and changing conditions. More importantly a willingness to share this information with you.
6. Creative thinking even nuclear leverage.
7. Always remember most of the superstar RE Investors either own a brokerage or have one in their hip pocket. Either way you want a top-notch agent that gets deals done at margin with most of the fee going back to you.
8. Some realtors can get you in touch with top notch contractors who can help you get those flips done quickly with quality workmanship to a tight budge.
9. Realtors who are successful property managers can be especially helpful. — What you are looking for is properties with a positive cash flow. You can keep these properties for yourself or flip them to other investors who are easy to find when the cash flow is positive.
10. If the realtor is a property manager you want one who can pull renters out of a hat like a magician.

As with any person you get on your team, it is critical that you understand how to get bang for your buck so to speak. Naturally, everyone including your realtor wants to harvest first and plant later.

Some realtors get a listing and can’t even afford a sign for the property. How much time and money do you think they want to invest in an investor want-a-be? Nonetheless, you can win the hearts of realtors by bring them leads for listings.

When you call on a FSBO where you can’t get the price you want to make sense, at least ask if it would be OK for you to have this superstar realtor you know give them a call. “I know this realtor who is real good at getting property sold and seems to get more money for the deals than other realtors, would you be offended if I had her give you a call?”

Renovations and Quick Flicks Teams
The point guard of the Flicks Team once the property has been purchased and the refurbished begins is the PM or Project Manager. Get a good one. Work from a contract your lawyer wrote to protect you.

Don’t be afraid to protect your assets. Many subcontractors are people who claim to have skills they do not have because they are desperate. Some are lawbreakers who would show up on any radar screen at a regular job. Far too many will steal from you at the first opportunity.

Look for profiles to test people before they work for you. You can assess the likely hood of someone stealing from you and their dependency on contraband drugs with 90 to 96% accuracy for as little as $36.00 per person. www.myprofile.com.au

Let those who work for you know you are serious about protecting your assets. Don’t be afraid to use guard dogs, credit searches, and other security techniques. With today’s technology you can implement top notch security at bargain prices. What does it cost you if the kitchen cabinets you are about to install disappear?

Putting your team together:
Don’t pay too much for your whistle. Find ways to do things that leave a profit for you. Look hard at the numbers. Learn how to say; “No thank you, I’ll pass.”

Times change, your needs change. You will outgrow your need for most of the people on your team as you grow or you won’t grow. Be able to separate friendship from business or be prepared to lose money - lots of money. Look for people who have strengths where you are weak. www.myprofile.com.au will help you find the right sort of person to be on your TEAM.

Be able to adapt your personality to theirs when you work with them. For example highly technical people such as accountants and engineers come out of a different mold than outgoing sales people. It is easy for them to clash. Bottom line, you are responsible for your business. Don’t blame others but take all the responsibility yourself because that is how you learn to make things better. The only thing you have total control over is yourself. That’s why it is critical that you do your own Profile and find out who your Personality Profile needs to Deal with all of the others “Turns You Into A Mind Reader”

Never forget the proverb, “A soft answer turns away wrath.” Don’t apologize for the fact you are in business. Mention your need to make financial sense of any relationship right off the give go. It will make it easier to cut the ties later.

Obviously you will want money. Therefore, you will want to find adventuresome bankers, other investors, Money Partners, renters, and buyers. To find them you will want to be able to make an eloquent presentation. Hence you may want to find property inspectors, Valuers {appraisers}, and house stagers as well.

——————————————————————-

“Keep looking below surface appearances. Don’t shrink from doing so just because you might not like what you find”

– Colin Powell

With Regards

Axel Henriksen

Millionaire Makers International Limited

Your Wealth Creation Coach

For consulting support or discussion matters

Preferably call me from 9am to 11am or after 6:00pm New Zealand Time Mon to Fri or

anytime through Skype or MSN Messenger when status is Online or Available

Who am I check me out here: www.linkedin.com/in/axel4life

SKYPE[callto://axel4life/]

Email:axel@millionairemakersinternational.com WebPage:www.millionaire-makers-international.com

Mobile: 64-27-2890348 (wk): 64-9-4834029 MessageLine: 64-9-4834050

By Michael Yardney
Well, here we are approaching the end of yet another very interesting year for property markets across the country. This year has been rather tumultuous for both owner occupiers and investors alike, who have been forced to ride an uncertain wave of ups and downs.

Should I invest? Should I wait? Where are the markets headed? Which direction are interest rates likely to take? How will affordability affect me? Will the upcoming election have an impact on housing? These are just some of the questions investors and owner occupiers fire at me when I speak at seminars and workshops, and there’s no doubt that everyone’s feeling a little apprehensive about where residential real estate is heading… I can tell you that now is as good a time as any to consider getting into property investment or increasing your portfolio. All industry bodies agree that supply and demand pressure is increasing across the board, with new housing construction decelerating whilst increasing migration continue to put pressure on already tightly held stock. In their Australian Property Outlook, the ANZ bank reports that our economic conditions have never been better with unemployment levels at a 33 year low of 4.3%, and the expectation that our economy will continue to go from strength to strength with global growth, expanding resource investment and production and strong infrastructure spending. They also predict that a chronic shortage of housing will “intensify pressure on rents and established house prices going forward.” Whilst this should encourage builders to get out there and start making up for the obvious shortfall in stock, the ANZ says that, “monetary policy and tight builder margins on greenfield development will continue to delay much needed recovery.” This is not necessarily what tenants and would-be home owners want to hear, but of course for investors, this does spell some good news. We all know that limited supply and increasing demand means a continuation of rent rises driving stronger yields (which have been languishing behind very rapid price growth in recent times). Record low vacancy rates should also assist to increase investment cashflow as rental hikes become more commonplace. From a capital gains perspective, less houses on the market means stronger competition in most instances. This is one of the reasons we have seen some capital city markets go “crazy” this year, with strong competition from buyers who are scared they’ll miss the boat entirely driving up prices substantially in some areas. This activity has resulted in a much more delineated market than we’ve seen in the past. It is becoming increasingly clear that in many states, near city more affluent locations are far outweighing “mortgage belt” outer suburbs in the popularity and demand stakes from owner occupiers, investors and tenants alike. Because of this we are seeing many fringe areas languishing in terms of housing prices, whilst within 10 to 15 kilometres from most CBD’s prices continue to soar to record heights. The ANZ outlook indicates that dwelling investment activity rose by a substantial 9.5% over the year to March 2007 and it’s expected that investors and developers will continue to focus their attention back to property as the housing crisis becomes ever more apparent. Although the supply and demand equation is really stretching the budgets of renters and first home buyers, those investors who have already established themselves in sought after property markets are reaping the rewards. The Real Estate Institute of Australia reports that, “The imbalance between demand and supply in the housing market has begun to drive prices up, with house prices increasing during the June quarter in Sydney, Melbourne, Canberra, Adelaide, Darwin and Hobart.” It’s unlikely that this situation will be rectified in the short term at least. Although both the Federal Government and Opposition are talking policies to redress this imbalance and reconcile the affordability issue, many believe that their ideas will only serve to exacerbate the problem and drive prices upward. The underlying concern is that the suggested policies will miss the mark, as they are all either directly or indirectly related to promoting demand for housing (eg. Land release, tax incentives, increase of FHOG, etc.), which will therefore increase pressure on prices. If ever you were waiting for the right time to jump on board, I would suggest that the wait is over and now is the time to strike – before the iron gets too hot! – It is likely that the coming housing upturn will be both vigorous and sustained. Of course you still have to be careful how and where you invest. In the current markets location is crucial when it comes to buying right. There is compelling evidence that the inner and more affluent suburbs will continue to outperform suburban fringe localities by a mile. The trend of flattening house prices in outer areas shows little sign of abating, with land prices discouraging development in these suburban belts. Add to this rising fuel and infrastructure costs and an ongoing shift in “socially driven preferences” for inner city locations, and all indicators point to an increase in more well located medium to high rise developments and an ongoing upward price push for inner city areas. Across the nation Residex www.residex.com.au summarises the latest house growth figures as follows: Area Median Value Growth 10 Years % pa Last Year August 2007 Quarter August 2007 Month ACT $425,500 11.07% 9.45% 1.40% -0.13% Adelaide $329,500 10.62% 12.98% 4.02% 1.46% SA Country $224,500 10.10% 12.96% 3.99% 0.80% Brisbane $403,500 11.32% 14.60% 5.57% 0.24% QLD Country $354,000 10.09% 11.31% 2.93% -0.83% Darwin $389,000 9.53% 13.87% 3.79% 1.21% Northern Territory $363,000 8.95% 18.14% 6.53% 1.39% Hobart $325,500 12.01% 4.53% 2.77% 3.31% TAS Country $240,500 11.64% 8.11% 2.60% 2.60% Melbourne $425,000 10.16% 11.58% 3.72% 3.25% VIC Country $254,500 9.98% 6.31% 4.44% 2.72% Perth $504,500 14.52% 2.96% 2.02% 2.51% WA Country $350,500 12.06% 12.23% 2.85% 2.70% Sydney $559,000 8.11% 4.11% 0.21% -0.73% NSW Country $314,500 9.56% 3.51% 0.63% 0.20% These figures indicate that house prices increased in all capital cities over the year to August 2007. What they don’t show is how within each state there is a two tier market with some suburbs far outperforming others. Although affordability continues to be a “four letter word”, bandied about as the villain that will bring the national housing market to a grinding halt, both owner occupier and investor finance rose significantly between June 2006 and June 2007 quarters. This would suggest that purchaser demand remains strong across the board and the Great Australian Dream of home ownership is still alive and well. Pamela Yardney, Director of Metropole Property Management in Melbourne and Brisbane www.metropole.com.au explains that “Rents have increased strongly all over Australia in the last year. In particular Perth, Darwin, and to a lesser extent, Canberra, Melbourne and Brisbane, have seen sizeable rental increases, with typical rents for two bedroom apartments in Darwin increasing by over 35%. “Darwin has now overtaken Canberra with the highest median rent for three bedroom houses at $395 per week. Canberra and Sydney share the top spot for two bedroom apartments with a median weekly rent of $330. Adelaide remains the cheapest location to rent, with a three bedroom median house rent of $250 per week, and a median weekly rent of $200 for two apartment” REIA President Graham Joyce observes, “Increases in prices and rents are hitting the pockets of both homebuyers and renters hard. While rent increases offer the prospect of improved yields for investors, thus attracting more investors back into the housing market, the price increases will continue to put pressure on rents.” Joyce says, “Affordability has fallen by 8.3% over the past year, with every State and Territory suffering a deterioration. While the Australian Capital Territory and the Northern Territory are in an overall better position than the States, the ACT experienced the largest decline in the June quarter (-6.2%), while Western Australia experienced the largest decline over the year to June 2007 (-13.5%). “New South Wales is the least affordable location, resuming the bottom spot after a brief reprieve in the March quarter when Queensland was the least affordable location,” says Joyce. The REIA is predicting that investors will continue to turn their back on a less than healthy share market and return to property, “particularly in an environment of record low unemployment, increasing wages and a growing population. “Braking factors will however be the August 2007 rise in interest rates and the impact on credit availability of problems in the US subprime market. To that extent, while prices and rents are likely to continue to grow through the remainder of 2007, the growth in house prices is likely to be moderate, despite the demand supply imbalance. The slowdown in Perth prices will continue, at least in the short term, after the massive increases of the past two years.” State of play New South Wales After enduring a ‘technical recession’ since the end of 2005, the state economy is now starting to show signs of a tentative rebound, although Sydney’s housing market continues to languish. Overall Sydney’s median house price fell by 7.3% between December 2003 and March 2007 and, according to data from the REIA, a decrease in median house prices of 0.3% occurred between June 2006 and June 2007. The ANZ Outlook reported that home sales plummeted, especially in the investor market late last year and early this year, with the majority of market weakness concentrated in the western and outer suburbs. REIA figures indicate a drop in sales volumes of 12.2% for houses over the year to June 2007 and 16% for “other dwellings” (apartments, units, etc). However, as has been the case in many capital cities this year, the top end market showed solid growth with double digit price gains in Vaucluse, Queens Park, Palm Beach, Longueville and Darling Point over from March 2006 to March 2007 and Sydney’s overall median jumped encouragingly between the March and June quarter (by 0.9% according to the REIA). The REIA June 2007 Market Facts reveals the five most expensive Local Government Areas (LGAs) for houses in Sydney were Mosman, Woollahra, Manly, Hunter’s Hill and Waverley. For other dwellings, the five most expensive were Manly, Woollahra, Ku-ring-gai, Sydney- Inner and North Sydney. The five least expensive LGAs for houses in Sydney were Penrith, Blacktown - South-East, Wyong, Campbelltown and Blacktown - South-West. For other dwellings the least expensive five were Fairfield, Campbelltown, Blacktown (South West), Penrith and Blacktown (South East). Developer sentiment has remained low with fresh supply falling well short of demand and it’s expected that this trend will continue