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6:00 am, February 20th, 2021 - 56 comments
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What regional development could look like….I hope the PGF is backing these types of initiatives in spades
https://www.rnz.co.nz/national/programmes/countrylife/audio/2018784336/miro-bringing-jobs-home
The man who gave the world the term "feminazi" is dead at 70.
How those supermarket 'collectable' campaigns work. https://www.stuff.co.nz/business/124260714/the-summer-of-smeg–why-new-worlds-knife-promotion-worked-so-well
Marketing 101, the two NZ supermarket chains are very good at it.
Quite a chunk of the Australian wine industry has simply collapsed due to Chinese trade retaliation for alleged price dumping.
https://edition.cnn.com/2021/02/16/business/australia-china-wine-tariffs-dst-intl-hnk/index.html
And yet the price of Penfolds hasn't dropped here. I think it should.
You know it is not quite like the international oil market but
Maybe people should consider not using nature to make money from the unreliable global economy.
Love to see the carbon footprint of shipping wine across the planet too.
It's almost like people don't understand there's an massive crisis on the horizon.
Ad-so Australia takes a moral stand on human rights issues in China (while NZ keeps sucking up to China) and all you can see is a chance for cheap wine from Oz because China has retaliated.
Some moral compass you have there Ad.
The natural endpoint of chardonnay socialism was their discovery of the Barossa Valley reds.
My wine collection is almost exclusively Aussie reds.
This isn't hard – the world is waking up to the fact that Xi Xinping's regime is acting like an enemy not a trade partner.
Once this has sunk in – everyone will start to work out ways of decoupling existing trade and supply chains out of the CCP's reach – ASAP.
Aussie wine producers have been done a favour here with an advanced heads up.
Wait until China controls the international monetary system and endlessly imposes illegal sanctions like the US, instead of deciding who it will trade with and when.
More likely to go the other way though isn't it.
Say you were to discover that a majority of prices in the economy are set via some form of cost + markup pricing, and not supply and demand. Would you still expect Penfolds to give you their wine at a discount?
http://socialdemocracy21stcentury.blogspot.com/2014/05/mark-up-pricing-in-20-nations-and.html
That would, I hope, depend on a completely unregulated market free from any other constraint other than my perfect knowledge of the market, a Licensing Trust able to attend to me needs without thought for its internal mass buyers, the market's perfect knowledge of Penfold's, and and zero impact from any government or regulation, anywhere.
That would just be so sweet.
@ Sacha @ 3:
Yes, I read that one too.
I reckon it is no different with the stories we weave and the necessary narratives to tell and develop these stories. The story must be complete, an integrated self-consistent set of facts and factoids. Some people will go to great lengths to make sure no pieces are missing and sometimes people will force a piece into the whole/hole even though it doesn’t fit neatly.
Stories? This is a must-read (so, read it! 🙂
https://charleseisenstein.org/essays/to-reason-with-a-madman/
A tantalising title 😉
I just might read it.
If forests could or should be considered and/or are indeed superorganisms, why would this stop at the DoC signpost at the boundary? Is it just the flora or does it also include the fauna? If yes, what does that mean to the boundary? What does rain and wind mean for the boundary, and streams and rivers? Is communication bi-directional, does it travel upstream and upwind? I think there’s a good story in there, about the terror in the forest and the Dark Woods.
https://www.stuff.co.nz/environment/124256600/the-mysterious-existence-of-a-leafless-kauri-stump-kept-alive-by-its-forest-neighbours
People worry about schools closed or not closed or not closed long enough due to Covid-19.
Maybe they should worry more about this instead:
https://www.stuff.co.nz/environment/climate-news/124183902/rising-tides-put-up-to-94-schools-at-risk-of-flooding-and-closures
Yes, I know, very mischievous of me to phrase it as a binary but when in Rome …
They were going to die anyway …
Another Covid-19 myth busted.
https://www.newshub.co.nz/home/world/2021/02/coronavirus-the-average-covid-19-victim-had-16-years-of-life-left-in-them-study-finds.html
What a lovely bloke landlord Andrew McKenzie is.
After recently putting up the rent 14%, he then kicks out a mother and her son who has learning disabilities on the eve of a law change to protect tenants because "he deciding what to do".
He says it is business first, but then other landlords say theirs is an important public service, first.
Who to believe, or should we believe none of them?
https://www.stuff.co.nz/life-style/homed/housing-affordability/124297655/rental-law-change-casualties-evicted-tenants-fear-homelessness
A quick search on the govt tenancy website shows the range of rents for 3bed homes in Wainuiomata is $500 – 550pw.
Increasing the rent to $430 pw shows that McKenzie had let the rent fall well behind market. It never does anyone any favours in the long run – and I can well understand the dismay of the mother who not only has to try and find a new home in a very tight market, but faces a rental jump in the order of $100pw at the same time.
A 3 bed home in Wainui is probably worth north of $700k if he'd been getting a rent of $380pw – gross income about $19.7k pa – that's a yield of under 3%. His net in the pocket after fixed costs, mortgage and tax was almost certainly less than $5kpa.
No wonder he wants to sell.
Apparently, he has not yet decided what to do with the property except to ‘renovate’ it AKA“a paint and a tidy up”.
Another ghost house.
By evicting when he did he avoided having to sell or move in. The new law requires him to do this.
Looks like he wants to sit on an empty house and enjoy capital gain. Nikki And Cole Prier don’t come into it for landlords.
At least it will have a nice fresh lick of paint and be tidied up. That’s all aspiring new tenants wish for nowadays and they won’t mind paying the price because beggars can’t be choosers.
Yup, the CG is already locked in.
Nikki And Cole Prier don’t come into it for landlords.
Given how far behind the market their rent had fallen – I'll bet you that their unfortunate personal position actually did 'come into it' for McKenzie.
We've got one older couple who've been with us for over a decade and they pay way below market – but we deliberately choose to carry them because they both contribute to their community magnificently.
But as I said above – in the long run it may not be doing either party any favours.
Make what you will of this:
As I indicated the other night – my own average rent at the present is $384 pw – a very similar number to the story above, and the properties are newer and in a more desirable suburb. Any thoughts on whether I should sell up and 'evict' a whole bunch of people from their homes?
Because honestly that's what's going through my mind. Our equity would do a whole lot better for us in Australia at the moment.
Will someone not think of the poor landlords!
That's pathetic. I'm giving you real life facts and figures from my experience as a real world landlord for almost 20 yrs. If you don't understand how the business works then anything you say is going to amount to little more than pious, futile prattle.
I'm not asking for anyone's pity – how I choose to run my business is precisely my responsibility and no-one else's. But I am prepared to educate you in some basic numbers and their consequences.
Stop with the ridiculous claim you are under so much pressure then.
And your real life facts and figures is simply virtue signalling.
Why do you think this is a 'ridiculous claim'?
As I mentioned the other night – one of the reasons why we moved to Australia 8yrs ago was because our mortage was indeed putting us under considerable pressure.
Essentially over the past 20yrs we've actually had to put money into the business to keep it afloat, and our tenants in their homes. We're now in the position of having shitloads of equity, but crap cash flow, and because I'm close to retiring that isn't something I can sustain anymore.
What would you do? Sell and evict – or hold on and hope the business environment doesn't continue to become more hostile?
Sell and evict – or hold on and hope
When the legal balance between landlords and tenants is about right, selling with a sitting tenant will be a plus, not a minus.
I get where you're coming from, but from the perspective of an investor they will often be looking to add value, usually a significant renovation, and vacant possession will be important to them.
And if the new owner wants to live in it ….
The trouble with this is that I've heard this description from not only landlords but farmers as well, except farmers don't like to flaunt their equity in public.
The total values of assets that can be realised is the figure that most people will focus on. If you have $10M in equity but moan your a**e off about pitiful cashflow, then you generally won't get a lot of sympathy.
I've made it clear I'm not asking for sympathy. I chose to get into this business and have stuck at it for 20 years now. That's my responsibility and no-one else's. All I'm doing here is explaining how the business works in order that people can make informed sense of these stories they read.
Rule No. 1 in all businesses is that cash flow is king. No matter how much shareholder funds you have, how much capital, stock, ring-fenced tax loss, forward orders or anything else – if you cannot meet this month's cash burn the business is bankrupt. And what I've explained here – overshared if you will – is that most residential rental businesses, like many NZ businesses (certainly those with substantial debt), are running on pretty thin cash flow margins. Or are being propped up by the owner's PAYE income.
Just as an extra data point – fixed costs used to run at about 20% of rental income, and here in Australia we can see this is still the case. By contrast in NZ they've risen to somewhere between 35 – 40% in recent years. And in the past most people could reasonably run the business themselves, but increasingly the environment has forced owners to use professional managers – and there's another 10% of cashflow gobbled up.
So even small extra costs imposed by new govt rules, or bad tenants, or even just letting the rent fall too far behind market because you felt sorry for a tenant, can have a big impact on the bottom line cashflow.
The total values of assets that can be realised is the figure that most people will focus on.
Equity means nothing unless I either sell or borrow more against it – and neither is a non-trivial decision. It's this background that helps decode what was going on with the original Wainui story above.
Stepping back, this is as you've pointed out, a wider theme with the whole NZ economy, too much has over the past three decades has tilted toward capital gain for profit, rather than cash flow. It's a structural flaw across many sectors that has distorted our decision-making and tends toward market failure. (I recall writing on this here at TS over a decade ago.)
It's especially chronic in agriculture. About that time we had looked at diversifying into a small horticultural business – and I recall one offer that was priced at over $2m for a business that barely turned over $160k. Utterly nuts – literally.
Which is why I was a strong supporter and promoter here of TOP's Comprehensive Capital Tax proposal. Not so much because I thought the party was a ripper – but because in my view it was a intelligently designed tax that would actually achieve what it was intended to do.
I was going to reply to your comment the other night about landlords creaming it but decided not to – it is sitting there half-finished. I think it is much better this way.
Why you would want to evict your tenants from your rentals is unclear to me except to free up equity. If you need (to do) that, then you can justify it, at least to yourself. It is your decision.
Don’t ask for business advice here, unless you really want/need it and intend to follow it. Ask a professional instead.
Don’t share your business wheeling and dealing here unless you want to cop the flack for it. Over-sharing carries many risks online for little gain/benefit even though your intention might be to provide a different PoV to guide/inform discussion and lift to a ‘higher plane’ than the usual ‘landlord-bashing’, which I respect and understand, but it doesn’t get you far, does it?
I could do similar things on discussion topics here but I’m not prepared to die in the ditch for those unless it is about a core value of mine – details are less important and there are other ways to get your point across without divulging too much personal information or history; arguments should be able to stand on their own legs of merit and persuasion.
These are my genuine well-meant thoughts for you.
Make of it what you will.
Bye
Fair enough.
Don’t ask for business advice here, unless you really want/need it and intend to follow it. Ask a professional instead.
In effect I am the professional here and I've been sharing information on how the residential rental business actually works. I've been doing this solely in the hope that some people here might stop treating their landlord as some spawn of the devil – and start focusing on the real reasons why the housing market in NZ has gotten into the mess it has.
But maybe you're right – the effort was doomed to be futile from the outset.
HT to Robert Guyton.
The other important tension that exists in this landlord/tenant discussion is for one party it is a business. The tax benefits, passive income etc, the leverage available…
The other party it is home, a place for family, a garden, pets, to love, laugh weep. A turangawaewae.
Failing to acknowledge the other view is where the argy barty begins.
Like Kiwi attitudes to land. One view is my property, my rights etc. The other is stewardship, a responsibility to pass it forward in better knick, to treat and see it as if it were alive. A strong spiritual bond.
Well Red, you've made tonnes of equity over the years.
Rent + tax preferences + equity increases = a reasonable rate of return.
You sound like you're in a steady place.
This is a leftie site so few will have patience to give non-Socialist advice.
But you are still of sufficiently sound mind that you can throw the dice another way than real estate.
In New Zealand, Victoria, or Queensland we need more people prepared to cash up and invest in fresh local growing business that's better for the whole economy.
You've done good. Do even better.
Reading the article, he actually comes across as a pretty decent landlord. If Red Logix's numbers correct, then he has been giving her a very good deal for a long time.
Unfortunately, this is a consequence of the new rental laws. If he was intending to sell or do a major upgrade, I thought under the new rules he could still give the 90 day notice?
So it seems a bit like he 'panicked' and gave notice now when in fact if he decides to sell in a years time he could still give notice.
More reason for rent controls then. More regulation around the cowboy residential industry would give surety and guidance to both tenant and landlord.
More rent controls will probably make more landlords sell which may be ok as possibly first home buyers would buy. But could be less rentals available. This tenant has been paying $380 per week up until recently which sounds extremely cheap, so he has been subsidizing her for some time now, so he sounds like a very reasonable landlord. He possibly could have given her notice several years ago and rented it out for far more if he had been greedy.
Just a hunch but I don't think he's reasonable at all, I think he's disorganised.
[RL: Deleted. Damaging speculation that puts the site at risk. Be more careful in future.]
So you think the landlord is disorganized because for example, he decided to charge her $380 per week instead of the going market rate for the last few years? Well you will be pleased to know that there are many landlords out there that are well organized, and will charge as much as they can, and also raise the rent as often as possible. Many other people would refer to them as greedy rather than organized!
Lol. RedLogix flexing his muscles from Brisbane.
I guess the elephant in the room is that no doubt the tax payer will subsidize the next rental through accomodation supplements.
I can't help but think that a big part of the issue we have is that public funds are paid to enable tennants to meet rents far above their normal income allows.
The policy came from a good place but the unintended consequence of the scheme sas that it has in effect acted as a wealth transfer and helps fuel the house price increases.
Imagine if there had been no supplements from govt, the money required to pay the huge rents required to pay the equally huge mortgages/provide a return just wouldnt be there, ergo banks would have been far more reluctant to lend and price increases would have closer matched incomes.
The govt getting out of social housing and essentially contracting it out to the private sector was a huge mistake and one that is not able to be undone in a hurry. Nonetheless the only solution I can see is that we get stuck in on a massive state backed building program aimed at sucking air out of house price increases. Pouring more money in to help first home buyers or renters for that matter will not help.
Given that he's also pissy about the healthy homes regulations anf the july deadline for that, and that timeframe means it's likely that most of the bonds issued in the last 6 months will be for healthy homes, it's possible he was keeping up with the market rates.
When myopic birdwatchers can’t tell the difference between a Kea and a Kiwi.
https://www.engadget.com/twitter-birdwatch-fact-checking-crowdsourcing-partisanship-citation-173611388.html
Still, it is an experiment in its early days so let’s watch & learn from it.
Some of the findings are not at all surprising if you have been around the block more than once 😉
here is a civil debate that is well worth taking the time to watch…
Taibbi & Eskow: The Marcuse Match
Nice to see MIQ workers getting first doses of Covid vaccine today – gratitude and respect are due for the work they do.
or just pay them some really really awesome bonuses – weekly.
Stiffing 'em on a goodly portion of the interest and commissions, too.
https://twitter.com/KawsachunNews/status/1362176105332019201
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https://twitter.com/KawsachunNews/status/1362192605996539911
https://threadreaderapp.com/thread/1362176105332019201.html