Rental Property Overveiw
Property is a popular investment option in New Zealand. Almost one in ten NZ Couples own rental property, and one in five own some form of investment property, according to a 2001 survey by Statistics New Zealand. It is estimated that approximately 90% of the assets of New Zealand households are held in housing. This shows that a lot of New Zealanders believe that property is a good investment; but it is important to understand the unique character of rental property in order to make it really work for you.
Rental property is popular because the investment is in a physical asset, which the investor has control over. On the flip-side this means the owner is responsible to put in the effort needed to make the investment generate a return; it is not a passive investment.
The return on rental property is in two forms: Capital and Revenue. Capital returns are due to an increase in the land’s value over time. This can be substantial but is not guaranteed, being related to the wider economic growth. Capital returns are presently non-taxable for rental property investors, which can mean that a significant portion of your overall return on the property is tax free.
The income return is taxable, being the value of rents received after paying the expenses and financing costs. Calculating the actual taxable profit or loss is unfortunately not so simple, being governed by complex tax law, and you need specialised advice to maximise your claim. The income return depends largely on how much equity the owner has. Higher borrowing on a property (leverage) tends to result in a lower income return and higher net capital return but increases the borrower’s risk and vulnerability to adverse economic events.
The best way to manage a rental property investment depends on many individual circumstances. These also determine how your rental is owned. There are many options available; including Look Through Companies (LTCs), Qualifying Companies (QCs), partnerships and trusts. We have been helping residential rental property owners for over 20 years, and can offer specialised insight and tax advice.
Unsure what records we need for your rental tax return? Download a checklist here
You can download a copy of our 2012 Rental Property Owner's Annual Questionaire from HERE
Financial Planning & Budgeting
Individuals often benefit from planning their asset purchases and mortgages. Consequent interest savings will add to retained income.
Budgeting for future events or planning to establish a farm or business is best begun early.
Investment monitoring to ensure every dollar works for you, your investment is secure and earnings are in line with the current market are functions offered for your protection.
Often financial pressure can be relieved through a debt restructure or creditor arrangement. We can assist you in dealing with finance companies and completing application forms.
Our experience with banks and other lending institutions can save you interest. We can advise the most cost effective source and level of borrowing you qualify for within asset and income constraints. This service no only provides clients with a professional and informed approach to financiers but protects them from unscrupulous lenders eager to cash up securities.