We live in a time of change and uncertainly. Of course, it is unsettling knowing that the laws and requirements may change without warning. Many landlords are taking a breather, re-accessing their positions and considering where to from here. So what opportunities remain in the NZ rental market? What changes should you be thinking of making adapting to the new norm?
Off-plan properties are becoming increasingly attractive. New builds being exempt from the 10-year bright line and exempt from interest deductibility makes them very popular among investors. But high demand equates to high prices.
Subdivision, maximising land value
Maximise the potential of what you already have. For example, you can add a minor dwelling and build a duplex if your block of land is large enough. You can even remodel your own home to split it into two flats and choose to live in one and rent out another.
A house added to a property, whether stand-alone or attached, a house replacing an existing property, one home renovated to create two houses, and commercial properties converted into apartments will all fall under the definition of "new builds" and qualify for new build exemptions.
Previously you might have held back increasing your rents to match the market rents for fear of losing a good tenant. However, now might be the time to reconsider.
Focus on cash flow positive investments
If you previously focused on the capital gains over cash flow positive investment opinions, you might now be forced to reconsider your strategy.
Changes to the residential property market will see alternative strategies explored. Commercial properties are not subject to bright-line or ring-fencing and often come with stable long-term tenants. And unlike residential homes, commercial buildings themselves can be depreciated.
Paying down mortgages
If you have an option to get the debt down, do it. Move to Principle and Interest repayments, free up some cash. Cash can be used for investment opportunities not only in property but elsewhere, like shares. There will be always opportunities for those willing to be patient, be strategic and do the work.
If you simply can't sustain the impact of interest deductibility changes, you might need to consider selling to deleverage. If you have an option to choose the property to sell, avoid being caught by the bright-line test. Consider this option wisely. With interest rates being so low, the willingness to sell and have cash sitting in the bank will be pretty weak. But if selling is inevitable, then get the process started.
It's time to weigh up your options. Not all properties are suitable investments, and one investment strategy doesn't suit all. So take time to evaluate your prospects, seek professional advice if you need one and make changes when required.
The information contained in this article is exclusively for promotional purposes. It does not in any way constitute legal advice and should not be relied upon as the basis for any legal action or contractual dealings. The information is not and does not attempt to be, a comprehensive account of the relevant law in New Zealand. If you require legal advice, you should seek independent legal counsel. myRent.co.nz does not accept any liability that may arise from the use of this information.