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How to maximise your investment properties
Find out what the costs of your properties would be in the coming years. Unless you've been M.I.A recently, you probably know all too well that you won't be able to claim interest soon. As sure as the sun will rise, costs will continue to rise, and while interest rates are currently at record lows, they are also expected to rise in the next couple of years. Do some quick math's, and check your property's ability to generate income, while also ensuring the properties are up to rental standards. Check how long you've fixed your interest rates for as well. Add up all these costs and give us an indication of your plans for your portfolio in the next few years – there could be some sneaky tax hacks in there that you didn't know about.
Capital gains or yield
Are you chasing capital gains, or do you buy for yield? In the past, investors were willing to run their rentals at a loss as they expect house prices to rise, but this can be risky because property prices won't keep rising forever! Alternatively, you can focus on getting a good yield and have the property pay for itself instead of dipping into your own pocket for the next 20 years. You can calculate the yield by dividing the property income by property value and comparing its value with other rental properties or investment opportunities. Arm yourself with data before deciding!
If you wish to add another property to your portfolio but are not sure how long you would hold it for, you can look into buying new builds. Maintenance and repair costs are lower and you would still be able to take advantage of the five year bright-line test, and old interest deductibility rules. However, IRD is still determining how the new legislation will deal with new builds, so you might want to hold that thought for now.
Investment properties are still income-generating assets despite the recent changes in legislation!
Got any questions about property investment and the recent tax changes? Give us a buzz (https://www.outsideaccounting.co.nz/