Thanks for all your replies . Much apreciated. Hope your year is a good one.
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Thanks for all your replies . Much apreciated. Hope your year is a good one.
Both have risk and returns. Intelligent investors know how to pick great winning stocks and property before the major cycle. Buying property at the wrong time could end up with becoming bankrupt. Only experienced investors and traders will have edge over others in both types of investments. Some are good at stocks and some are good at property.
I heard from a mate today,that some people are buying homes and then renting them back to themselves.
Is this even possible?
Certainly, quite common with trusts and companies owning houses. And with family buying and renting to other family - also common. In those cases, the tenant can effectively be the owner as the property will eventually pass by sale, gift or inheritance. Not exactly what your question was, but more likely than personal ownership renting to the owner.
There are tax implications. If expenses are claimed against rent, IRD require market rent to be either paid or deemed to be paid. If that doesn't happen, IRD will consider it tax evasion.
I rent a property to family, and make sure the rent is within the range on the Tenancy Services site market rent page.
If you do this from the outset, I would say this is tax avoidance, even if you use a company/trust. Is there any other reason than to avoid tax?
To family members is different, especially extended family members (just ensure it is a market rent), or if situations change and you move into property (but if it is long term, you should really do a change of use from 'business' to 'personal').
Basically it screams tax avoidance unless you have a good reason. The IRD will probably shot first, ask questions later if they became aware of it.
If the property is run at a loss it is not likely to create a deducible loss unless you can come up with a damn good reason for the structure. Any scheme with no other purpose than avoiding tax is not recognised by IRD. Otherwise we would all move out and swap with our neighbours.
It is possible but you might want to check this page first
http://www.ird.govt.nz/property/
http://www.ird.govt.nz/resources/1/8...5ab7/ir361.pdf
The second link is hopefully to an IR361 booklet check out page 17.
It might pay to talk to an accountant before you do this as it will most likely be considered tax avoidance.
Hey guys...I say again..check out..the differences between wealth ..and money...just saying.,.
Something I have come across recently is something call "Mark to Market accounting". It works well in the derivative world but apparently gets applied to banks with assets and liabilities reviews every quarter . If the house prices ever crashed in NZ does anyone know if this would get invoked and cause foreclosures like what happened in the states?
Not so long as individual mortgagors continue to meet their repayments. Foreclosure is usually a bank's last resort to secure repayment - in whole or part - and mortgagee sales would act to further depress house prices. Market to market accounting requires "live" market prices for the securities being valued.
Ok ..property or shares....you can have both....who can name the most profitable property company listed over the last 2 decades.
Ryman Healthcare?
No cigar sir...have a wee peek at 5 year chart ..PFI
with the recent changes to the tax situation regarding rentals and more and more legislation coming on; the rental side of things is a poor choice. An indexed share investment would be much better proposal. Government keen on hitting landlords and kissing tenants. Im getting out of rentals almost totally as I see them as only an enforced savings plan( why pay off capital on a mortgage that the tenant pays the interest? ) too many defaults, bad tenants, idiot damage, costs not claimable, kitchen/ bathroom replacements and paint every 8 years etc. Shares have none of these and you can build from zero adding as much as it compounds.
Government has now gone too far the other way and we will see mums and dads exit the market over the next while. The capital gain promise doesnt offset the continual costs they are now burdened with. This is all without a property management ticket clipper.
Commercial may be better, but have two of these, one sat empty for 9 months, another one had a tenant go under in, all losing propositions for the landlord. And the roof needs replacement, water leaks, etc,etc,etc.
Don't disagree with you, but two things to consider ...
First - leverage. Easier with property, less risky for banks. Speaking generally of course. Secondly - if the rental pool shrinks, and it looks like it is, higher rents and good tenants are on the cards. Of course those higher rents are needed to pay for the tax and compliance changes, but think of it as getting the tenants paying to upgrade your asset.
Also, it is at least possible we will have a different government next year, and National is yet to announce its housing policy. They may walk back some Labour initiatives, esp if landlords let them know how much their rents are going up to pay for those policies. (National has already said they will take the bright line test back to 2 years from Labour's 5.)
As for mom & pop rentals it is tough and the experience i've seen is the risk is very high if you're going in the game with just only 1 or 2 houses. A wise landlord told me the key reason is econmies of scales ; when you have 1 house and it sits empty, you've essentilally lost 100% of your return on the investment. In his case, he owns a 25 dwelling apartment complex which is fully tenanted most of the time. But don't take my word, just look at the large pool of seminars going around NZ getting the small mom & pop investors into the real estate game. They pool the investors $ together to buy real estate all over NZ and work out the projected returns etc. and managing (again, on economies of scales).
As I mentioned before, there's good reason why one can leverage into buying real estate. It's because the banks like it. But when you ask them for a loan to buy equities they'll gladly show you the door. The risk levels are entirely different because banks want low risk loans. Go to a NZ broker and ask what their margin lending rates are and the fees they tack on for borrowing $.
Either 2 or 5 years, the brightline test does not worry me. Where I came from (Canada), any 2nd or 5th purchase of a house will always have CGT or straight income tax rates. The compelling issue in NZ is there's a huge inequity on investments between NZ real estate and foreign share holding equities because the former can be 100% tax free while the latter attracts FIF. So any person that looks to do index ETF investing needs to determine 1) do I pick NZ shares because they're exempt from FIF and have tax free capital gain like on a house? (of course book value rarely rises on NZ shares as they're mostly dividend paying focussed) or 2) buy real hard assets like houses because the bank knows that houses & land does not walk away and maintains their value unlike share holdings in a pooly managed company.
It's been a while since this was discussed. What are people's thoughts now that we've gone through an election and Covid? If you had $200-300k cash, the same amount in shares, 15+ years from retirement, would you consider using some of that cash as a deposit on a property in Auckland?
Are you thinking of a rental? If so the current and soon to be in place rules are quite ridiculous and carry big potential fines for non compliance.
Check these docs with new rules for a start, not forgetting the Residential Tenancies Act with a few hundred more rules. I have a pretty good understanding of the rules and no way would I be putting money, time, effort and risk into (more) rentals now.
This one only has 52 pages LOL.
https://www.hud.govt.nz/assets/Resid...ember-2020.pdf
Haven't counted the docs at this site but there are many links to excruciating detail.
https://www.tenancy.govt.nz/healthy-homes/
Yeah was thinking of a rental. The new rules do sound quite involved, and I guess the risk of non-compliance is still very real even if using a property manager. Still, the way the prices are going at the moment, other investors don't seem to mind taking on those risks. I'll probably leave my cash alone though :)