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Residential Property Syndication Arrives In New Zealand

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Brian Dalley
Brian Dalley

Although not new to the Commercial sector it is ground breaking news in the Residential Market. Very much like car pooling, several people share the same vehicle to reach a common destination Residential Property Syndication (RPS) will do the same for Property Investors.

RPS was born from brain storming with several interested parties. It was agreed when we sat down that we weren’t going to get hung up on trying to reinvent the wheel, but rather work out how we could keep the vehicle moving forward.

Just like the brain storming session, it was going to take a group effort to design the vehicle so it was capable of manoeuvring around obstacles such as affordability; interest rates, overly cautious lenders, and the sandwich board doom and glom merchants positioned on every street corner.

First, like any good investment we needed an exit strategy; a term of ten years was decided upon. This wasn’t a figure randomly plucked from the air. Housing New Zealand preferred lease periods are for a term of ten years with the right of renewal for a further five years, so that decision was a no brainer.

Now to fuel the vehicle, turn it on, and propel it towards the exit on predetermined tracks we needed to identify the size of the vehicle.

Whether it is three people investing in one property or five people investing in ten properties it was decided this wasn’t a decision that needed to be chiselled in stone until such time as all the ducks were in a row. However, it was decided that before any green light was given, rules would be in place not too dissimilar to an employment contract. After all it is a business venture so should be modelled on basic business principles. Hench the drafting of the Share Equity Agreement, refereed to in my second book “Blueprint” Investing in New Zealand Real Estate, as the SEA agreement.

Because of the obsession New Zealanders have with owner occupied property it will be extremely unlikely that house prices will move much lower than they are, for to do so would mean a further down-sizing in people’s misconception of wealth, the equity they have in owner occupied property.

Therefore, the time must be right to invest in property, but unlike in the past when one could reasonably expect capital gain one should instead be thinking debt reduction hence the birth of RPS Residential Property Syndication.

Personally, I feel there have never been better times for Investing in Residential Property but one must first understand, THERE IS A NEW RULE BOOK.

The buzz word of post recession, “negative gearing”, has been replaced by a new and more meaningful phrase “debt reduction”.

Gone are the days of investing in real estate in the hope that it someday will increase in value and we can then reap the rewards. How can one have an exit strategy with that belief, as the key fundamental of investing is the exit strategy?

RPS Residential Property Syndication will make it easier for people to invest and reduce debt within realistic time frames, generating REAL wealth at unprecedented levels and with, I may add, very little risk

The reduction in debt, coupled with guaranteed income will far out weigh capital gain reliant on market influences alone and will start to generate a return on investment at a predetermined date unlike the idealist thinking that has been prominent for over a decade.

Bottom line, excluding large cash injections, RPS Residential Property Syndication will be the way forward for astute Residential Property Investors for some time to come.

Brian Dalley is a qualified NZMBA Mortgage Broker, Property Investor and former Real Estate Agent.

You can read more of his views and opinions on his website

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