Here’s our top four strategies to combat the rise of interest rates and help to protect your assets:
- Stagger you lending – if you break your loans down into several smaller loans, this will help to spread your risk over time, and hopefully average out your interest rates in the long run.
No one can predict the future, however if you split your loan into several smaller loans and stagger them to shorter and longer term fixed loans you will have both the benefit of the usually lower interest rates for a shorter period and the benefit of security over a longer period. Your interest rate over the period of your loan will be the average of the longer and shorter rates over time. A very simple example is as follows: $1m loan split into five $200K smaller loans. If the rates were 1 year @ 2%, 2 years @ 3%, 3 years @4%, 4 years @5% and 5 years at 6%. For this example, we assume that over the 5 years interest rates remain consistent. This would mean that over the course of the years, your rate would average out to be 4% with the added security of having some funds locked in.
- Reduce your lending (duh!),
This probably doesn’t need much explanation. If you can put aside an extra $100 per week, this will be an extra $5k per year of the loan amount. Over a 30 year loan that’s $156k and a lot of saving on your interest.
- Diversify your portfolio with respect to the bright-line rule, interest deduction allowances, and of course your personal circumstances
You can sell off the elements of your portfolio that are not tax efficient and replace them by purchasing one that are for example if you have older properties that are heavily geared, in 2024 you will not be able to claim interest as a tax deductible allowance. If you are in this situation, you could look to sell this property and buy a new build where interest can be deducted before tax, This is one to discuss with you accountant or financial advisor, as there are a lot of rules that you must take into account when looking into this.
- Utilise revolving facilities and interest only loans.
Again one to be discussed with a financial advisor or mortgage broker. If you need to speak to one, please get in touch, as we work with excellent partners who will be able to help as this is about structuring your loan. For example if you currently have $1m loan on interest and principle because you want to pay off your loan, another way of achieving the same goal is to have (say) $900K on interest only and $100K on a revolving facility which you can pay into whenever you choose to. So you could aim to pay $20K of this off each year for 5 years. The benefit is that you can also draw on these funds when you need. Another benefit is that some banks don’t take revolving facilities into account when calculating servicing.
Disclaimer: The information above is not financial advise and should not be taken as such. For professional financial advice, you must speak to a qualified financial advisor. Please contact us if you would like us to put you in contact with one of our specialist partners.
It is now more important than ever to make sure your property is as appealing as it can be to attract great tenants, who are willing and able to maintain the rent and take the best care of your property. Properties need to be presented flawlessly in viewings, and we know from experience that this can often mean investment is needed to tidy up between tenancies. Clean, uncluttered, cared-for properties will rent more quickly, so talk to us about ensuring that your property is rent-ready in order to maximise your investment. Here are our top 5 recommendations for property readiness between tenancies.
- Professional photos taken
- Video walkthrough of the property
- Clean and decluttered
- Gardens and lawns have been maintained prior to photos and viewings
- Any wear and tear fixed where possible and all maintenance completed
From our experience when a property owner works alongside us and enables us to action all of the above the turnaround time between tenancies is minimal and attracts a high calibre of tenant.
***Watch this space for how we’re bringing exciting changes to your marketing.***
It was great to see the announcement by REINZ at the awards ceremony (over Zoom). We are delighted by the news and wanted to share it with you first.
We did it! We received the best award in property management across New Zealand and this is all thanks to you!
“Congratulations The Rental Bureau – REINZ Property Management Small Office of the Year!”
We so proud to be recognised for this award by REINZ. We know that we really and truly couldn’t have done this without the support from our customers, both tenants and owners. You have shared this journey with us and we can all take pride together in this great achievement from a small local business.
Do you ever get to the end of the day and wonder where all the hours have gone? We do too, so we thought we’d look into it a bit. Here’s a little glimpse into the work we do day-to-day to manage our properties.
- Negotiating lease renewal between owners and tenants – this can mean several email exchanges, and often upward of two hours in total time spent just on one property – and we manage more than 200! That’s a lot of emails and hours.
- Chasing rent arrears and negotiating payment plans for tenants who may have fallen on harder times can easily take more than one hour, for one property. We do pride ourselves on having low rates of rent arrears though.
- Completing thorough online rental appraisals for prospective owners can take us around an hour, and that’s with all our experience and access to the right tools.
- Letting a property takes on average four to five viewings, and of course there is travel time involved, not to mention all the behind the scenes work with advertising, organising photography, and managing submissions.
- Completing a thorough property inspection report, including travel to and from the property takes on average between two and three hours.
- A move-in/move out negotiation can take us a whopping six hours on average!
- Diagnosing and arranging maintenance requests from acquiring quotes, to receiving owner approval, through to assigning the work and invoicing can take at least an hour and a half for even the smallest job.
If you add in tribunals and mediations, owners selling, fielding general enquiries, counselling, and the mammoth task that Healthy Homes compliance added to the mix, there’s no wonder our days here go so fast.
Why are we pointing all of this out? Sometimes, it can be easy to underestimate the work involved in managing a rental property, as many first-time property investors find out very quickly. If you know anyone struggling to manage this while holding down a full-time job give us a call and let our award-winning team ease the load!
How will this change what we do for you? It won’t actually change much at all, we were already self-regulating many of the things that are very likely to be be put in place industry-wide. Here’s are some insights as to what property management may look like post regulation…
- Gain a license to practice – Hurrah!
- Be trained and qualified (all our PM team are fully trained to NZQA level)
- Follow a professional code of conduct (we’re already registered with REINZ)
- Have insurance (we have always operated with insurance)
- Have a separate client trust account (yes, of course, we already have this)
- Have accounts independently audited (we already do this annually)
There will also be a formal, independent complaints process in place – Hurrah!
So in a nutshell, we whole-heartedly welcome the changes for the industry and really hope it means we will start to see fewer of those unscrupulous PMs on the scene. For TRB however, we’ll just continue doing what we have always done to give you the best rental experience. Rest assured – you are in good hands.
Here is a brief summary of the proposed changes;
For properties that already meet the 2008 Building Regulations such as new build properties or properties that have been renovated to meet this regulation specifically for glazing and insulation,
- Heating standard deadline extended. The 90-day compliance requirement will not start until 6 months after this change comes into effect. If the change was in effect now and a new tenancy agreement signed, the compliance date would be 6 months plus 90 days.
- Top-up heating requirement. Currently, if your heat source installed before July 2019 falls short of the requirement of 1.5Kw or less, you can top-up with an electric heater. This has changed to allow up to a 2.4Kw top-up shortfall.
- Tolerance for existing heating. Currently, if your heat source was installed before July 2019 and is within 90% of the requirement then you comply until the heating needs to be replaced. This has changed to 80%.
- Ventilation. Currently, kitchen and bathroom extractor fans that passed the building consent process after 1st November 2019 may not be compliant with Healthy Homes Regulations regarding capacity and ducting diameters. This change allows compliance for Healthy Homes where the consent process has signed this off. In summary, the processes are now aligned.
For more information, please see the following link;
We’re leading the way in Healthy Homes Compliance. We have 90% of our clients either fully compliant or awaiting jobs to be completed to be compliant. We are committed to achieve 92% compliance by March 31st
This means our tenant clients are feeling the full benefit of this legislation early. It also means our owners are not at risk of non-compliance. It means that our properties are of a higher standard and more desirable when in becomes time to re-tenant them. We think all of this hard work is paying off and it’s another WIN-WIN-WIN for us!
Any new tenancies or renewed tenancies that commenced after 1st July 2021 have 90 days to become fully compliant for Healthy Homes. For properties that are brand new to the rental market, owners had to obtain a healthy homes assessment, obtain the quotes required to become compliant and then book the contractors in to do the work. In a 3 month timeline, this is already a challenge for some, however throwing a 5 week L4 lockdown into the mix made it almost an impossible tasks for property owners.
We hope that the Government listens to the wise words from Joanne Rae – Head of Property Management at REINZ and applies the same logic to our industry as to the car industry by extending Healthy Homes compliance just as they extended the WOF compliance.
(1) Bright-line test timeframe to double from five years to ten years. In a nutshell, the current bright-line rules currently provide that a sale of residential property is taxable if sold within five years of acquisition and the property is not your main home. (Other exemptions can apply). The bright-line test will move to 10 years for residential property acquired on or after 27 March 2021. Property acquired before 27 March 2021 (and after 29 March 2018) remains subject to the five-year bright-line test. “New builds”, will continue to be subject to the five-year bright-line test.
(2) No deductions for interest on residential property held for newly purchased investment properties. For residential property acquired on or after 27 March 2021, from 1 October 2021 no deduction will be available for interest on loans used to acquire them. The premise is that tax should not provide a shelter to reduce the cost of ownership for investors.
(3) Progressive 25% reduction each year on deductions for interest on residential investment purchased pre-March 27th 2021 (starting Oct 21) For residential property acquired before 27 March 2021 interest on loans remains deductible initially, however on a reducing basis over the next four years. This will be a progressive 25% reduction each year, with a final outcome of no deductions (for any residential property acquired at any time) for interest from the 2025/26 and later income years.“New builds” are excluded from the above ruling. With respect to deductibility (or non-deductibility of interest), this appears to have been modelled on a similar change presented in the UK.
(4) New build exemption The exemption applies to ‘new builds’. This is defined as properties that received the final code of compliance (CCC) on or after March 27, 2020, and the exemption applies to both the initial purchaser of the new build and any subsequent owner within the 20-year period. The ‘new build’ definition includes prefabricated houses and the conversion of existing dwellings into multiples where a final CCC has been obtained post march 27, 2020.
From 1st July 2021 every new tenancy, tenancy renewal or amendment needs to include a Healthy Homes statement. We have created a simplified version of the statement and a comprehensive E-Guide explaining what is required.
The statement either needs to demonstrate compliance OR if the home is not yet compliant you have 90 days in which to complete the work necessary to become Healthy Homes compliant.
If there are no changes to your tenancy, then you will have until 1st July 2024 to become compliant.
Over 90% of The Rental Bureau homes are compliant for Healthy Homes.
For more information on Healthy Homes compliance, or to get a copy of our free Healthy Homes E-Guide, please contact us.