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toast2success
18-01-2013, 01:38 PM
I have been looking at investment classes and what is available. Some people I have spoken to have tried to warn me off property , stating it is not an investment as such (and at times a Kiwi illusion that porperty is an investment). In some respects I could see where they were coming from.

We also got into a discussion over whether one should buy property which isn't likely to increase too much in capital gains, but has rent coming in that covers a significant part of the mortgage etc (i.e. basically covers your expenses) vs. a property that will experience capital gains but your input to the mortgage etc. will be greater .

Would love to hear peoples opinions on these topics

fungus pudding
18-01-2013, 01:53 PM
I have been looking at investment classes and what is available. Some people I have spoken to have tried to warn me off property , stating it is not an investment as such (and at times a Kiwi illusion that porperty is an investment). In some respects I could see where they were coming from.

We also got into a discussion over whether one should buy property which isn't likely to increase too much in capital gains, but has rent coming in that covers a significant part of the mortgage etc (i.e. basically covers your expenses) vs. a property that will experience capital gains but your input to the mortgage etc. will be greater .

Would love to hear peoples opinions on these topics

Whether the property is likely to produce a good income, or is bought purely for capital gain rather than income, it is still an investmernt.

CJ
18-01-2013, 02:07 PM
It is (normally) an investment. Whether it is a wise investment is another question.

The only exception is if you buy it with some other intention, with no concern about money (ie. a beach house to secure the location).

Very few people would buy a property expecting it to go down which is why even your personal home, while probably a liability in the short term, is actual an investment in the long term.

noodles
18-01-2013, 05:52 PM
Whether the property is likely to produce a good income, or is bought purely for capital gain rather than income, it is still an investmernt.

I think the thread is going to head into the Investment vs Speculation argument.

Well let me stoke the argument by saying that if your cost of capital is greater than your rental return, then it is SPECULATIVE.

artemis
19-01-2013, 06:24 AM
One big advantage of investing in property is that it is easy to borrow to purchase it. Provided it is bought and managed carefully - price, condition and location for renting - equity can build quickly over the medium term, through principal pay down and capital gain. The return on the initial investment can be very significant.

troyvdh
20-01-2013, 07:23 PM
Giday....Im fairly short tempered....having been a "residential investor" for some 30 plus years....at times i am somewhat loath to reveal the money we/I have made...

...trust me...it aint rocket science...buying a average house...renting it out...dealing with tenants....hold for 10-20-30 years.......aint that bad....

.....like I say to many foljk I know....Kiwis are great at making dosh....BUT THE BASTARDS CANNOT KEEP IT......cheers troy

....PS....never forget KISS.....

...oops nearly forgot...when asking folk about "investing".....ALWAYS ask what they own ...eg...how many properties....how long for....and if you can ask what they are worth....me various properties...residentail.....in CHCH...nett asset ....around $2m.....cheers

...you should expect the above folk to do the same......cheers

ENP
21-01-2013, 05:28 PM
"An asset or item that is purchased with the hope that it will generate income or appreciate in the future"

1. Is property and investment? Yes refer to definition above.

2. Buying for income or capital gain depends on what you want from the asset class. Overall though, I've come to the conclusion the pennies are made from the rent and the dollars are made from the capital gain.

In4a$
07-02-2014, 06:54 PM
"An asset or item that is purchased with the hope that it will generate income or appreciate in the future"

1. Is property and investment? Yes refer to definition above.

2. Buying for income or capital gain depends on what you want from the asset class. Overall though, I've come to the conclusion the pennies are made from the rent and the dollars are made from the capital gain.
I agree and the day is coming when that capital gain on residential rentals will be taxed. IE capital gains tax

ari
19-03-2014, 07:13 AM
Rent/Own????
http://finance.yahoo.com/blogs/daily-ticker/renting-vs--owning-a-home-143539176.html

fungus pudding
21-03-2014, 02:33 PM
[QUOTE=snapiti;469062]For many ,like alot of investments, property investment is about timing.
I was fortunate to be in the right place at the right time to start a rental portfolio in 1996.
This was when residential properties with a 10% yield were very common.
Eventually,over a period of 5 years, I ended up with 6 rentals.
Most if not all of my residential properties recieved enough rent to cover all the cost. This worked for me because I cant stand negative gearing.
I was lucky to have hit the jackpot, for timing, as my rental investment value went up hugely over a 10 year period.
Tax free capital gains.
I sold every property I owned as soon as I had owned it for 10 years.
This is the undisputed time for the tax man.
/QUOTE]


I'm not sure where or how you got that idea, but I doubt if the taxman sees it so black and white. Length of ownership is one factor, but the taxman is more interested in the wider picture - and if there is one over-riding factor, it is intent.

fungus pudding
21-03-2014, 02:35 PM
For many ,like alot of investments, property investment is about timing.
I was fortunate to be in the right place at the right time to start a rental portfolio in 1996.
This was when residential properties with a 10% yield were very common.
Eventually,over a period of 5 years, I ended up with 6 rentals.
Most if not all of my residential properties recieved enough rent to cover all the cost. This worked for me because I cant stand negative gearing.
I was lucky to have hit the jackpot, for timing, as my rental investment value went up hugely over a 10 year period.
Tax free capital gains.
I sold every property I owned as soon as I had owned it for 10 years.
This is the undisputed time for the tax man.



I'm not sure where or how you got that idea, but I doubt if the taxman sees it so black and white. Length of ownership is one factor, but the taxman is more interested in the wider picture - and if there is one over-riding factor, it is intent.

fungus pudding
21-03-2014, 03:50 PM
actually it was my accountant that informed me if you own a residentail investment for over 10 years there is no capital gains tax BLACK AND WHITE. Does not matter what your intent was if you have owned it over 10 years.
Any other period shorter than that it come's down what the taxman believe's your intent was WHICH CAN BE A VERY GREY AREA.
If you want clarity on the 10 year rule it is in black and white available from IRD.


Here is black and white from IRD site.

How long do I need to hold the property to make it a capital gain?

There is no time limit. If you buy a property with the firm intention of resale, it doesn’t matter how long you hold it - the gain on resale will be taxable (and any loss may be tax-deductible).



Example

You buy a property with a firm plan to resell it for a profit. The property market falls and you decide to hold onto it instead. You rent it out for 15 years and then sell it when the prices are again rising rapidly. Any gain on that sale 15 years later is likely to be taxable.


As I said, intent is the over-riding factor. I have never seen a mention of 10 years anywhere in IRD information. Intent is never a grey area as you claim.

fungus pudding
21-03-2014, 05:24 PM
keep researching you will find it.
Unless of course they have altered there position on the 10 years since I sold my last property about 3 years ago.
I doubled check with what my accountant was telling me at the time directly with IRD some years ago so I know that was there ruling back then.



Nothing has changed, and I don't believe it is there to find. Perhaps you could find and post it?

fungus pudding
21-03-2014, 07:18 PM
Like I said if it's not there IRD have had a play around with the rule.
It is not unusaul for them to do so.



I do not think you understand tax law. Any activity you undertake to make income is taxable. The IRD have no discretion whatsoever to make rules about who pays or to decide that something is no longer taxable because 10 years have passed. If it is deemed income by IRD it is taxable and always has been. Yes, you'll almost certainly get away without being taxed if you haven't traded or drawn attention to yourself and claim you bought for the income but it didn't work out, or you were sick of it, had kids now, more work in day job, blah blah etc. , but that is not to say there is a 10 year rule. You'd be in trouble if you admitted your plan was to sell after 10 years for the gain. Back in the early 70s when prices were going gangbusters like they do every so often, Wallace Rowling introduced a speculation tax to cool the market. If you sold within 6 months you were taxed 90% of the profit, and it abated to a lower amount every six months to zero after 10 years - but that was spec tax, not income tax. It didn't last long because it dried up the market and prices skyrocketed. (I've always been grateful to Labour for that cos I'd just bought a few) Introducing capital gains tax will have a similar effect but it will be a one off rise. (If Labour get in stock up on a few houses before the CGT is introduced, the tax will probably be 15% of profit as far as I can find out, but it will be a good move) Anyway, believe what you like. Just be careful about giving such advice to your mates.

fungus pudding
21-03-2014, 10:20 PM
The IRD are constantly reviewing and changing all sorts of tax rules/laws.
Tax legislation is always changing.
I think my accountant calls it closing loop holes and my accountant is forced to go to several seminars a year, to keep his practice licience, because of all the rule changes.
So what are you on about.
Get your head out of the sand.


Of course they are always reviewing things, Tax is a very complex area but any law changes have to go through the minister. Govt. depts. cannot make or change law. There is not and never has been a 10 day rule. Argue all you like, but you'd be better spending your time finding out the truth if you don't believe me.

fungus pudding
28-03-2014, 03:52 PM
To clear this up...
if you purchase a property as an "investment" (ie. with no intention to resell the property) then no tax is payable on any capital gains regardless of the length of time you owned it.
if you purchase a property with an intention of selling it you are deemed to be a "speculator" and tax is payable on the capital gains regardless of the length of time it was owned.
if you are a "dealer" in property (ie. you regularly buy/sell/develop property) there is a 10 year exemption period where property that was purchased as an investment and which was never part of the rest of the tradable property pool, is exempt from tax on the capital gains.



The 10 years in that case is one factor the IRD will consider, but it is not a hard and fast rule. If there is an apparently good (acceptable by the IRD) reason an investment can be sold in a shorter term by a trader without incurring tax. Equally if the IRD don't swallow the reasons stated, tax can be levied after 50 years. There is a degree of safety in that the IRD are unlikely to query the transaction after a lengthy term but nowhere to my knowledge is 10 years cast in stone. Nothing over-rides intent, and the IRD are not always convinced by what they are told. A trader selling an investment is always on slightly thin-ice, but the longer the term - the thicker the ice gets.

JBmurc
28-03-2014, 05:01 PM
Interesting only lived in our Family trust home for 3-4yrs looking to sell accountant doesn't believe I'm liable to pay TAX and I have a history of trading /spec building within a company >>>>

fungus pudding
29-03-2014, 08:12 AM
the ten year rule is enshrined in the legislation, so it most definitely is a hard and fast rule. Even the IRD has to comply with the actual law. Here, go read the Income Tax Act for yourself, in particular Section CB 9-11

http://www.legislation.govt.nz/act/public/2007/0097/latest/DLM1512301.html

As I read it, this defines sales within 10 years as income and points to exclusions. No argument with that, it's what I stated in my last post; but where does it state sales after 10 years are exempt?

(P.S. I'll go along with your previous post where you cover intention - regardless of length of ownership)

fungus pudding
31-03-2014, 02:33 AM
It doesnt have to. The purpose of the Income Tax Act is to specify what IS income subject to tax, not what is not income. Just as the Crimes Act specifies what is a crime, not what is not a crime.
If the money earning activity is not covered by a specific clause in the Act, it cannot be declared to be income, and thus no income tax is payable.

There are many taxable earning activities not specifically covered by the act. Intent is what matters.

fungus pudding
31-03-2014, 10:48 AM
All I know is my accountant assure's me that it is best practice for someone in my position to hold properties for at least 10 years and by doing that it covers the intent issue(very grey area) very nicely.
I trust his professional advice on property matters.

Precisely. It's best practise. All I have said, and your accountant will agree is that the 10 years is not cast in stone, or in law. The IRD will be the final judge on your intentions, and will not necessarily believe the taxpayers story. As far as having the final word - that's simply because various posters insist I am wrong yet will not cite the relevant tax ruling. That's because they can't.

False Profit
31-03-2014, 11:30 AM
I agree and the day is coming when that capital gain on residential rentals will be taxed. IE capital gains tax

only if Labour get in and they doesn't appear to be on the cards. The momentum gained by Cunliffe has petered out leaving a lonely central figure. They're even going on the record to ridicule Russell Norman and the Greens - now that's clever of them - not.

artemis
01-04-2014, 08:15 AM
this will all depend on how desperate Cunlife is to make a deal.
Cunliffe priminister, Norman Deputy priminister, Mr Peters finance minister and who ever is in charge of the maori party will be minister of moari affairs.

Mr Cunliffe will do whatever it takes, I agree. And I still think the election is not a done deal for National.

JBmurc
29-06-2014, 01:12 PM
http://www.theage.com.au/business/t...ession-is-holding-us-back-20140627-zsodc.html

“It’s not a house, it’s a home.” Daryl Kerrigan nailed our obsession with home ownership in the iconic Australian film The Castle.
But is this obsession actually doing us any good?
The International Monetary Fund (IMF) warned in June that housing bubbles across the Anglo-Saxon world are doing a lot of damage.
“IMF research shows that of the nearly 50 systemic banking crises in recent decades, more than two thirds were preceded by boom-bust patterns in house prices,” said Dr Min Zhu, deputy managing director of the IMF.
One country that has struck the right balance is Germany, argues economist Jim Kemeny, who teaches housing and urban sociology at the University of Uppsala and has been criticising the Australian homeownership ideal for the past 30 years.
Europe's biggest economy has not had a single housing boom in the post-war period, he says.
That record comes courtesy of a cultural disinterest in home ownership, progressive social housing programs, conservative banking policies and government legislation that protects and encourages long-term renters.
Over the last decade, the ratio of house prices versus household incomes has been falling in Germany, and despite a slight pickup over recent years, it was still almost 17 per cent below its long-run average at the end of last year.
By contrast, Australia has the third-highest house price to income ratio in the world, at 4.3 times the average annual income according to the Australian Bureau of Statistics.
Despite a relatively affordable housing market, Germans just don't seem that interested in purchasing property. Certainly not for investment.
“Germans are inherently debt averse,” said Oliver Hartwich, a German expat and executive director of the New Zealand institute.
“German banks are also very conservative, in the past they have demanded up to 33 per cent of a mortgage payment up front, with a 10 to 30 year fixed interest rate.” said Mr Hartwich.
Gee Lee, a German who works for the German-Australian chamber of commerce, said he “would never consider purchasing a house in Germany.”
Neither would Christiane Sier, who emigrated to Australia in 1985.
“Here it was all, house, house, house, I just thought they were crazy about it,” she said.
“Unfortunately I married a builder so I had no choice.”
Only 41 per cent of Germans own a house. And that's a fact that 93 per cent of them are very happy with, according to the OECD.
Instead, Germans are renters, very long-term renters.
The German rental market is highly regulated, with laws favouring tenants over landlords.
“It’s pretty much impossible to get rid of a paying tenant,” said Mr Hartwich. “It’s a big enough struggle to get one out that isn’t paying.”
An eviction can make headlines, as in the case of Friedhelm Adolfs, who after 40 years was evicted from his Berlin apartment for chain smoking.
A 40-year lease is not uncommon in Germany, where the majority of rental contracts are indefinite.
The combination of long leases, a solid supply of rental housing that keeps rents low and a market that does not provide a significant return on residential investment means that Germans have no desire to ‘trade up’ for better properties.
Germans are far more interested in raising capital in more productive ways such as investing in businesses, said Mr Hartwich.
And once they’ve got the capital required, often not until they are in their 50s, they tend to buy a house that will last generations, said Mrs Sier.
“They stay put, build a community and bring other generations of the family into it,” she said

fergus
29-06-2014, 07:57 PM
The security of owning ones own home with the added attraction of being able to get cheaper finance of the back of it is a much safer option in life as being a mere tenant. The reason houses are so expansive here is the ridiculous cost of compliance plus the 15% GST added on at the start. Solution is Govt pays back the GST to first home buyers to add to the deposit with the transaction recorded on the title to be paid back on the sell price of the home further down the track. This in the end would cost the Govt nothing as the price of the house rises along with the GST. I thank GAWD that I bought my first house a great number of years ago, and used the equity in it over and over in my various business ventures living rent free in my delap years. Fergus

skid
21-10-2014, 07:53 AM
I dont remember paying GST on any of our 4 houses--Are you sure you are not talking about newly built homes(I could see how that would be possible or possibly if it was somehow business orientated)

Meanwhile,I think that there are elements of truth to both of your aruments Snaps and FP--I think if an investor took the time period and the intent rule into consideration ,they would be realitively safe.

skid
21-10-2014, 07:58 AM
It better bloody be. I'm committing the next 4 years of my life based on the fact Labour will not be elected!

Youve got me curious now KW Are you in to property?

skid
21-10-2014, 08:23 AM
As much as I hate keys National Gov (for being in bed with the States) I think Labor were just downright stupid in many issues.
They certainly shot themselves in the foot with the Capital Gains tax.
If they had clarified it a bit more ,they may have had a chance--(family home exempt- others valued at this point and go from there--That way everyone starts at the same place) Any talk of CG tax on retrospective value would most likely fail