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Changes are coming…
Interest tax deductibility. We mentioned in the last news snippet, the interest tax deductibility rules for residential property have changed and interest limitations are being phased back out.
From the 1st April 2024 – 31st March 2025 you can claim 80% of your interest as an expense and from the 1st April 2025 onwards it will be back to 100%.
Bright-line. The bright-line property rule has also changed. From 1st July 2024 the bright-line property rule will only apply if the property is sold within 2 years of purchasing. (Pre July 1st 2024 the current bright-line periods continue to apply).
As always, please check your own personal circumstances with a Financial Advisor, as these rules are complex and have exemptions and quirks. You must ensure that you receive advice tailored to your financial position before making any decisions.
Residential Tenancies Act updates
The Amendment Bill is being developed by the Ministry of Housing for introduction to Parliament in May 2024. IF the Bill passes, it could become an Act in late 2024.
The bill includes the following;
(1) Reintroducing 90-day ‘no cause’ terminations for periodic tenancies, meaning owners can end a periodic tenancy without requiring a specific reason.
(2) Reintroducing owners’ ability to give notice to end a fixed-term tenancy at the end of the term without requiring a specific reason.
(3) Notice periods for when an owner wishes to either move back into their property or have an unconditional agreement for sale requiring vacant possession will revert back to 42 days. This is a changes from the current 63 days and 90 days respectively.
(4) Returning tenants’ notice period for ending a periodic tenancy to 21 days.
(5) Making it easier for owners to accept tenants with pets by introducing pet bonds which will be 2 week’s on top of the current 4 week’s bond collected. Owners will still need to consent to tenants having a pet, however consent can only be withheld on ‘reasonable grounds”. You can read the Beehive’s announcement Pets.
For further information on RTA Amendments read more HUD updates.
Combat rising interest rates
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.
Marketing your property
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.***
Healthy Homes – the facts
Healthy Homes
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.
