Residential Investment Property

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residential investment property

Dan_ccWe make no bones about it: Residential investment property in NZ is the best performing investment out there. Especially investment property in Auckland. If we can jump on the investment in property for our clients, we will. Most of our clients buy investment property within the Greater Auckland area.

Utilise our Property Search & Analysis Service to ensure you buy the right residential investment property.

Over the last 100 years, residential investment property in NZ has out-paced inflation by 1.5% and it’s showing no signs of slowing down. If we use the government inflation target of 3% per annum, that puts us on 4.5% per annum growth for property right?

Using the above (and very conservative) numbers, if we have a $300,000 investment property and we add 4.5% to that after year one, we now have a property worth $314,000. Year two, we have a $329,000 property. And, so-on. The approximate out-of-pocket running costs for an investment property should be about $50 per week. That’s $2600 per year.

Turning $2600 per year into more than $14,000 per year is a no-brainer! What a great investment!

Why is residential investment property such a powerful investment? Three words: “Other People’s Money”. By ‘other peoples’ we mean the ‘bank’! It doesn’t take a rocket scientist to find investments that grow better than 4.5% per annum, but you’d have to save that money first! By borrowing the money, you’re the one benefitting from the growth on the property, not the bank. And, remember, the growth is on the $300,000! You didn’t have to come up with that money, but you benefit from the growth of what it bought you: Residential Investment Property.

So where do we come in?

Our goal is to remove emotion from the mix and replace that with factual analytical data. This is purely so that you can make an ’educated’ decision.

The following four characteristics are essential if you’re going to get it right in investment property. Slip up on any of these, and financial ship-wreck is much more inevitable. We get this right for our clients so that you don’t have to navigate these waters alone.

Let’s examine those four key characteristics:

Growth

It’s a common fact that pretty much any property in NZ will grow in value. So how can you go wrong? That’s a good question actually. But, we don’t think that this is what you should be asking. You need to be asking: Which properties or areas have more potential for growth.

Being based in Auckland, we know the areas here that have better growth potential. These are areas where land values are still low. There are various hot-spots in Auckland and even Hamilton that we will help you uncover. It is essential to get the right area if you are thinking about entering the investment property game or wanting to expand your investment property portfolio.

We rely on external ‘Property Search Specialists’ to point our clients in the right direction. It’s these long-standing relationships that have seen our clients buy in the right area, every time, without fail – At or under valuation.

Income

Growth is one thing, but the right rental yield must go hand-in-hand. This is why we steer clear of areas like central Auckland. You just won’t get the right rental yields.

We will analyse every property recommended to you, and if it doesn’t bring in the right amount of rent (rental yield), we will throw it off the table.

The right rental yield means less out-of-pocket costs for you. If you can benefit from the growth of a property and not forgo much of your own hard-earned money, then we’ve done our job.

Tax Effectiveness

We can’t even begin to tell you how many clients we have that when they originally came to us, they were getting this essential characteristic drastically wrong.

Our clients generally get between $5000 and $15,000 back from the IRD every year. Can you now see how this is an essential arm to managing investment property?

It comes down to two things: The right Accountant, and the right legal ownership structure for your property.

Accountants are a dime-a-dozen. But, a good one is worth their weight in gold. They’re just like doctors in that a good Accountant will specialise in certain things. You don’t want a ‘GP’ managing your financial health. You want a ‘specialist’. We will point you at an investment specialist Accountant that is good at what they do, and doesn’t cost more than your average Accountant.

If you’re a couple, you need to speak to an Accountant about setting up a limited company (LTC) to own your investment property(ies). This way, you can split the losses accurately according to who pays the most tax and receive the biggest tax return you possibly can.

Paying for your investment property debt should be first the responsibility of your tenant, second the ‘tax-man’, and third (contributing the least) you.

Affordability

It’s no good for us to tick the last three boxes, if you can’t afford it. Our in-depth analysis of every client means we check the viability and affordability of owning residential investment property. If it’s not affordable, and there’s no changes that can be made to your circumstance, we won’t recommend it.

Contact us now for more information!

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