Discussing the NZ Investment Market - Guest Interview: Daniel Carney, Goodlife Financial Advice

Jul 21, 2021 22:41 · 4203 words · 20 minute read

Hi everyone thank you for dialing in we are talking today with Daniel Carney from GoolLife Financial Advice uh Daniel is located in Auckland but deals with clients nationwide and we’re just going to talk a little bit today about what Goodlife are seeing with their clients what what they do what they’re seeing with their clients and how it relates to the property market so thanks for dialing in Daniel just just tell us a little bit about what Goodlife does for their clients and uh and yeah just tell us sure well we’ve been in business for 23 years we help people really to become financially independent that’s our i guess our number one goal is to help people on their journey to not having to rely on the government or or an employer or whoever for their income so there’s various um things along the way that we assist them with to achieve that goal really in terms of wealth creation the main things that we’re helping our clients with is residential investment property something that we’ve been big on for you know the 23 years we’ve been around we do have about 43 million dollars under management of client money with a fund manager that we partner with so we take that seriously as well a chunk of that is KiwiSaver but funds under management is a key part of that journey as well of course how clients structure their mortgages their insurances everything is all wrapped up in that too but effectively if i had to sum it up we’re helping people in a holistic way financially to become financially independent cool okay so yeah let’s talk about the um property side of things um because it’s been a few changes in the the market recently and government likes to pick on investors so uh it seems like uh that’s been affected the most but i guess the big one is probably well in my view the big one is the tax changes that happen i mean it’s been the LVR that was you know there was that prior to 2013 um uh from 2013 rather and uh and it’s now been re-implemented but i think the big one was the tax changes and the treatment of interest tax deductibility um what are your thoughts on that um in terms of how it will affect the market and and will people look to new builds or you know ditch existing properties what’s your thoughts yeah you know i i mean most of what we do 99% of what we’re doing with clients is new build property anyway so it’s very rare it’s only in in the cases of where we have to um it’s not a bad thing but where we have to it’s usually clients with a lower borrowing capacity that we’re looking at existing property stock um so you know when we’ve when we’ve run the numbers uh admittedly it’s on interest rates uh sort of similar to what we’re seeing now it hasn’t actually been that big a change for our clients who have got existing property so i think the media can really you know sensationalize things and and concern people or worry people more than is necessary when clients talk to their accountants and look at the actual numbers probably the changes to the financial or cash flows are are probably quite minimal when they do the calcs so anyone that’s concerned i would encourage to before they draw any negative conclusions actually just do the calculations hey if it is too too much of a change well it might be a time to look at selling and maybe reinvesting into new builds but new builds for us has always been a preference anyway for many reasons they’re more tax efficient easier to rent easier to sell less maintenance issues uh chattels are worth more et cetera et cetera so it’s a it’s really just i guess helped our client base out and that what we’re doing in terms of the fact that we’re we’re pro new builds anyway um but i don’t we haven’t really seen much of a negative impact and uh myself included in terms of what my wife and i have in terms of existing property we haven’t seen much of a negative true impact with the with the recent changes um but nonetheless we are pro new builds anyway and that’s mostly what we’re doing anyway so they are exempt uh to those changes so it’s really business as usual and if anything if anything we’re getting busier um you know look i’m the same right from a mortgage broking perspective new builds are easy to finance they’re uh they’re good you don’t have those issues where suddenly you buy an existing house and you need to fork out ten thousand dollars for a new roof um so they come with a lot less risk for that for the client i think so yeah it’s it’s good and now those um well we don’t know what those tax deductions are as of today we can we can hazard a guess from what they’ve put to the IRD uh um but yeah it’s there’s certainly going to be some benefit to new builds going forward so um yeah yeah and i mean look for us it it’s quite easy for us to sum it up and this is why new builds work well in this in this model was because you know we see it much the same as KiwiSaver and what i mean by that is you know KiwiSaver just ticks away in the background you’re not phoning your KiwiSaver provider every five seconds and asking them to tell you what’s going on and call you every time there’s changes within the funds and blah blah it’s just something that’s ticking away in the background that’s there to help fund your retirement it’s a wealth creation strategy for us property is the same we would like as much as possible to have it in that set and forget space so with new builds that’s a lot more likely because there’s a lot uh less likelihood of issues with a new build than there is an existing property as as you mentioned things have to be repaired or changed out or whatever so you know at the front end we have the right people helping to find and analyze it and then out the back end the right people to look after it and and i stress to clients that’s not to take the power away from them they can get as involved as they want but it’s more our clients are busy they’ve got lives to leave it’s and we put it in the same category as KiwiSaver it’s just a thing to grow in value over a long period of time 10 years plus hopefully and you just get on with your life so yeah it’s another reason why we like new builds yeah and and rental property managers as well they take all that oh yeah that has helped yeah i remember switching from doing the um management of investment properties myself to giving it to a rental property manager and after about two years i said to my wife ah do you think we should check on the property because we hadn’t heard anything it was just running smoothly absolute no-brainer and we we budget for all of that stuff so the reports we give to clients we budget for every fathomable cost you could think of because again we don’t want them thinking about oh i’ve got to pay for this and that and where’s that money coming from blah blah blah no we property manager lawyer accountant rates insurances maintenance it’s all budgeted for so you just need to know what the bottom line is and that’s it and just get on with your life and yes property management a good property manager because there’s property managers and there’s property managers yeah um you know they just help you just get on with your life yeah yeah so i think uh CoreLogic said that they’d seen about a 20% drop off in investor activity which isn’t significant it’s probably seasonal to be honest i don’t know whether they seasonally adjusted those numbers or not but um but uh you probably find that winter just probably curled away 20% anyway i um i wonder if there’s an opportunity there and keen to hear your feedback on whether um this is an opportunity if there’s a little bit of a dip of those super keen people for people that are a bit fatigued with hunting and you know if they’re trying to do it themselves as well is this kind of an opportunity to jump in um and grab some grab some properties while the you know while the queues are a bit shorter uh yeah um well yes always i would say yes you know funny funny say that because we’re not seeing a drop off in fact we’re we’re we’re busy as we’ve ever been um you know i i was explaining to you um earlier that you know for our clients if we rock up to a property provider whether that’s a builder or a property search specialist or a developer or whatever and you know we’ve got joe and jane blogs who have gone through a full process of of being you know going through a financial planning process understanding what property what role prop property plays in that uh then they’re getting pre-approved they’re spat out the other end of pre-approved clients those those clients are gold for for people selling property so a lot you know in a lot of cases we are getting property stock that is not even hitting the market it’s being given to us because we have red hot clients ready to go so i really would feel sorry for people out there trying to do this themselves because property stock is difficult to come by and thankfully we’ve got many many years of relationships we’re got strong relationships where we get given these opportunities and we we can fit clients in with with their specific financial situation and needed cash flows etc um we’ve got opportunities there so yeah so funny we’re not seeing really a drop-off um and and yeah we hope we’d like to hope that we’re able to shuffle our clients to the front of the queue um keep them away from multi-offers and and auctions and um and competition really and let us have that stress and hassle of finding the right opportunities because we live and breathe that space it’s a big part of my job every single day to be to be finding and sourcing and qualifying um stock for our clients so yeah uh i’m not seeing any uh drop drop off that’s for sure yeah so if i um you know Tony Alexander does his mortgage broker uh survey and things and um let’s take you know anyone who turns up to a mortgage broker is by definition keen to buy so it’s always hard for a mortgage broker to tell the taste of the market because everyone that turns up is uh getting to buy this spectacle the same but but the the numbers themselves aren’t dropping off i i would agree notice me dropping off yeah no i i don’t think so stock stock is certainly hard to come by good stock um and that’s always an ongoing mission for us to find the right property in the right areas with the right rent uh you know that yield is um something that we’re all constantly chasing um not to the detriment of the growth of that property either that that is to me more of a mission if you will is is finding the right property opportunities um out there for clients um and keeping that that flow of stock coming through but that’s just that just means i’m having to be on the on the phone every single day to our providers um you know finding out what’s coming up in the future so that we can be earmarking that for future client uh contact have you ever seen any change and you know well people who buy in Auckland are traditionally chasing capital gains or capital growth uh they’re definitely not chasing yields that’s for sure and have you seen sort of a change of people what what they’re chasing what they’re asking for does it tend to be that you guide them on on what you think is best in the market at the moment how do you how do you sit with that yeah you know what that’s it’s a little bit of a loaded question for us because um our clients are coming to us usually because they want help and they want advice and we are pretty uh we we feel strongly about the the kinds of things we’re putting forward because they we’re doing that for a very specific reason so that’s why we do avoid those areas like central Auckland because the yield isn’t there um what we’re trying to balance out basically is four things with our clients we want to be buying in the right area but we want to be getting the right rental yield so we’ve got to get good growth over and for us isn’t this isn’t a speculative thing this is a 10 year plus investment for our clients they can hold it for however long they like but we recommend for it to be a 10 year plus thing so we we’re you know we know we’re looking at areas that are earmarked for some nice gain over the next uh 10 years with that are going to give us a good rental yield that is done in a good tax effective manner so that’s really a two-fold thing that’s new build property and who is your accountant and that’s a whole other conversation yeah and the the last one is can you afford it in the best and worst case scenario so we stress test everything we put in front of our clients so so our clients are not to pigeonhole people but they are average everyday normal Kiwi mum and dad investors they all learn very similar similar amounts of money all got similar amounts of children similar ages so it’s a very specific type of offering that we tend to give those kinds of clients and an advice piece that comes with that so we’re more giving them advice around that kind of stuff but uh behind the scenes it’s a balancing act for us to make sure we’re buying in the right area and getting the right amount of rental yield and that is an ever-evolving space um but that’s again not the client’s problem that’s our problem it’s your job right yeah i look i i think i say this in every interview i do nowadays that the days of DIY property investment are probably gone um and and uh on your side finding property um in the right areas and things uh but but also as you mentioned uh with an accountant you know what what losses can you pass through how is the interest rate uh you know how’s the interest tax deductibility treated what’s the brightline test i mean it’s just not something you can do uh easily by yourself um anymore so really really interesting um new world of property investment which i think is a good thing right if you’re plonking over seven hundred thousand dollars you should probably get some advisors around you right totally totally people have fumbled along and got got some capital gains along the along the way but it is it is a minefield out there you know even just the the property management side of things you you don’t do one little thing correct and low and behold you can’t claim on your insurances because something’s happened and you didn’t meet certain criteria that’s just one of many many things that you need to be making sure you’re getting right so yeah i i would as i said before i would hate to be going out there and going this alone um there are you know good advisors out there who can help in that space and you really do want to have that good network around you and i’m really big on that you know a good property manager a good lawyer a good financial advisor or property specialist financial advisor mortgage broker and risk insurance type person um you know accountants if i didn’t say that already these are people who you need to surround yourself by you would be amazed the things we see on a weekly if not daily basis even just yesterday i got an email from a client from one of the big brand international brand um accountant firms giving advice to a client which was which was blatantly wrong and i was gobsmacked to be honest um so people have to be very careful and this isn’t to have a [ __ ] in a moan about other professions we just want to make sure people are marrying themselves up with a good network who are experts in that space uh they’re not oh they’ve just heard there’s a bright line to change and better there no yeah i’ll just put that in an email no no they need to know what they’re talking about and and really though that that network is there to grow and protect your wealth and they should be all working together not butting heads with each other uh for the betterment of that particular client yeah absolutely a um final thing be difficult to do an interview without talking about interest rates uh we were seeing 2.

19% then one brave bank uh decided to increase their profit this quarter now bravely increase their profit i actually don’t know if that’s true they might have had a source of funds increase but um so 2. 55% and all the other banks followed what what’s your sort of i mean for starters if anyone has been pulled out of the market because of a 0. 36% increase i’m very concerned for the fragility of their portfolio they shouldn’t be actually in the market because of that but it is an indication right so what what do you think interest rates are are going to do in the next sort of year or so if yeah if you had to gaze into a crystal ball yeah for sure um so it’s interesting because there’s two sides to this um there’s the you’ve got your ANZ and your ASBs who are giving me sub two percent build rates yes which you can get 90% lending on uh well obviously that puts a bit of a premium on top but you you can still get good low rates out there especially if you’re doing builds uh and and as i say hey ANZ and ASB have put their hands up in that space but yep you’re right um you know interest rates are creeping up i i look i don’t have a crystal ball uh but i did i did funnily enough i did put this to Tony Alexander in an email about a month ago because in my mind my my thought was look surely any rise incremental rise in the OCR when that happens and that hasn’t happened yet um but the inter the banks have just started putting their their rates up i guess an expectation surely it’s only going to take small incremental rises in the OCR to really pull back the the economy um that was something that he agreed with now i don’t know whether he’d like me to be quoting him in this particular video so i’ll be careful but but it makes sense to me that it it wouldn’t take too much of a rise of interest rates to really slow down uh the the will slow down people’s spending uh habits which is really what the OCR is trying to do is trying to control the control inflation we are seeing inflation so interest rates are going to go up but i don’t think they’re going to go up um either a quickly like big jumps i don’t think so uh i think they’ll be incremental again could be wrong um and i don’t think they’re going to go up so so when we when we’re doing stress testing with our property investment analysis reports that we do we’re using a 5% rate in our worst case modeling at the moment um i feel comfortable with that uh i i would be surprised if rates go up much more than that now i hope i’m not proven wrong there but there is the reason i say this is because there is so much debt out there now so many people in New Zealand who have got a mortgage have got big amounts of mortgage debt because of the cost of buying property has gone up up above so there’s a lot of debt so surely it’s only going to take very small incremental rises to have the whole of New Zealand mortgage population population collectively gasp and not go and buy that TV or spa pool or whatever it was that they were going to buy and stop themselves because uh-oh rates have gone up because they’ve got a lot of debt so for those few reasons i i just think it’s going to be slowly put up to see what impact happens to the economy and i can’t see it going up much more than 5% my notoriously smokey crystal ball a notoriously inaccurate crystal ball uh yeah i feel the same yeah it’s um 5% a lot right like that’s double what it is now so i think there’d be some people who would be responding uh to quite a bit at the 5% um and and for clarity i think we’re talking over a three or four year period i’d be very surprised to see a one-year rate at 5% of the next year um i mean you’ve got the 0.

75 COVID kind of relief drop of that on the OCR that they did um just post the lockdown you could see that disappearing disappearing reasonably quickly yes but um beyond that it would have to be an external cause i think like inflation or or some sort of international events uh that was causing our OCR  to go up not properly and they’ve got so many other levers on property with LCR and and DTIs which they hopefully don’t introduce um but yeah i think that they can control the market other ways but yeah all right no that’s great and to reiterate that was uh all um pie in the sky guessing and not uh do not make your financial decisions based on this conversation yeah yeah you’re right but just just just quickly um it’s it’s interesting though just in you know anecdotally uh when we when we’re running numbers on property when we’re doing our best in worst case modeling the properties we’re seeing at the moment are putting probably about 50 to 150 into a client’s pocket every week cash flow positive net that’s net after all expenses are taken care of when we blow out those interest rates it’s probably going to cost a client somewhere between about 200 to 250 a week when we’re around about that 5% interest rate mark so those are the differences we’re seeing cash flow positive uh with what we’re doing around about that sort of as i say 50 to 150 ish mark through to costing a client 150 to 250 per week top-up so if a client feels well yeah i could do that that’s affordable um well then that’s that’s about what we’re thinking is a realistic worst case modeling for the types of things that we’re predominantly getting our clients into at the moment yeah that’s great excellent hey well thanks for um dialing in if uh if you want to catch up with you or have a look at your website what’s the website name man um it’s goodlifeadvice.

co. nz goodlifeadvice with a c dot co dot is it uh they can then uh email us info@goodlifeadvice. com or we even have 0508 GOODLIFE how cool is that so yeah so they can do any of those things yeah yeah funnily enough 0508 MORTGAGE was taken a lot earlier than mortgage levels around so yeah well done again good good phone number hey well thanks for that mate and uh and appreciate you dialing in and we’ll talk to you soon now my my pleasure thank you rupert i appreciate it cheers.