How to Navigate the Stormy Waters of Property Investment Webinar – 17 March 2021
Welcome to the webinar on ‘How to Navigate the Stormy Waters of Property Investment – and how to come out winning the other end.
Auckland Property Management is aware that landlords have a few concerns with recent developments in residential property management legislation and compliance requirements.
It is our strategy to provide our owners with risk reduction strategies to ensure their return on investment is maximised, whilst risks are minimised.
With this in mind we have prepared a webinar focusing on methods to protect the value of your property investment with industry professionals to assist with the discussion:
Roy Adams, a property investment coach from Asset Consulting who will focus on the means to increase equity and cash flow in your rental portfolio,
Randall Hills, chartered accountant and business advisor from Hills and Associates who will discuss some financial considerations and tax implications.
Risk reduction strategies and maximising rental income
What are the two areas that have created the biggest changes for property investors?
The first area is the Healthy Homes Guarantee Act.
Of significance here is to know:
- 1st Dec 2020: statement of compliance for all rental properties is needed.
- 1st July 2021: full compliance for any new / renewed tenancies.
- 1st July 2024: full compliance for all rental homes.
Covers 5 areas:
- Heating: fixed heater in largest living area.
- Insulation: ceiling 120mm, underfloor R1.3.
- Ventilation: kitchen rangehood, bathroom extractor fan (ducted outside).
- Moisture: ground moisture barrier, drainage and guttering.
- Draught stopping: doors, windows, pet doors, open fireplaces, etc.
The second area are the amendments to the Residential Tenancies Act, in effect since 11th February 2021.
The following changes are of significance to landlords:
- Annual rent increases (rent bidding).
- Ending of tenancies (periodic).
- Fixed term tenancies (auto-periodic).
- Minor changes, Fibre broadband.
- Privacy (name suppression).
- Landlord records.
- Enforcement measures, tribunal compensation increase.
How to establish market rent
We often have investors, whether it be their first investment property or they’re increasing their current investment portfolio, approach us for advice on whether a property would be a good investment opportunity.
Market rent is a useful guide for landlords when they’re deciding what the rent will be. If you have determined your rent at the higher end of comparable rents in your area, it may take you longer to find a tenant. Alternatively, slightly under-pricing your rental will likely bring you tenants more quickly.
What do we consider when assessing market rent (similar properties)?
- Tenancy services: market rent determined by number of bonds received over past 6 months.
- Trademe: online assessment of currently advertised properties, indication of market trends.
- Internal database: assess our managed properties, rent being received.
- Market conditions: such as seasonal fluctuations and external influences such as global events and political climate.
- More specifically around seasonal fluctuations, the time of year will determine how quickly your property will be rented; it is known that there are more tenants in the market place looking for new homes during the months of February and March.
- To maximise your income ensure you have a fixed term lease in place that ends during this time. Advertising your property for rent during this time will ensure lower vacancy rates and an increase in tenancy applications allows you to effectively screen prospective tenants for the most suitable tenant for your property, as well as receive a great market rent.
- Property condition, benefits and features: properties that are in pristine condition with lots of trendy upgrades will likely be snapped up by eager renters much more quickly than the average property.
How to maximise your rental income
A few simple areas where property investors could look at to ensure premium rents for properties:
- The total number of bedrooms.
- Outdoor areas – are these fully fenced, high maintenance, suit children or pets, is there outdoor storage, swimming pool, barbecue / entertainment areas, etc.
- Car spaces – garage size, internal remote access, storage space, additional off street parking available.
- Location – distance to public transportation routes, local recreational and shopping facilities, as well as proximity to local schools (noting some school zones are more sought after than others, such as the Auckland Double Grammar zone).
- Future developments and infrastructure – close links to motorways, future planning (new shopping centres or public transportation routes may increase rent income).
- Presentation – is exterior of building well presented, garden recently maintained, is interior of property clean and tidy, i.e. is property showcased to its best potential.
- Fixtures and fittings – are curtains worn and require replacement, is carpet looking tired / stained – perhaps a professional clean, replace shower curtain where required, replace cupboard door handles for a fresher look, etc.
- Views – do you have views of city, mountains, sea, and spectacular scenery? Make note of this in photographs and wording of advertising.
- Heating – wall panel heaters in bedrooms if these tend to be colder, heat pump service, small things to ensure comfort of potential tenants. Healthy Homes compliance.
- Appliances – how old is whiteware, may be worth investing in a new stove or washing machine if the current one is in older condition.
- Security – some areas may be of concern and the installation of a security alarm / window latches may create feeling of security for prospective tenants.
Roy Adams – Property Investment Coach
Roy Adams is a property investment coach from Asset Consulting who joined us to discuss equity and building security through property investment.
The key points Roy discussed are:
- Think about what you would like to do, either build equity or cashflow and plan your work to what you would like to achieve.
- Be aware of the common pitfalls when investing in property (using low quality fittings, not calculating return on investments, over/under capitalising, failing to determine if the work requires a building consent, etc)
- Things like adding a bedroom, modernising the property, converting a garage to a studio, or splitting the house into flats might be possible.
- Plan the work that would be best to give you cash-flow for upcoming legislation compliance.
Listen to the webinar above for the full conversation.
Randall Hills from Hills and Associates
Randall Hills is a chartered accountant and business advisor from Hills and Associates, and he answered questions around financial considerations of property investment including tax implications.
Some key points are:
- Get your ownership structure right (individual, joint, partnership, trust etc)
- Before you buy, ensure you seen professional accounting advice
- Maximise the deductions that you can claim on when you buy a residential property (travel, chattels,
- Know the rules around repairs and maintenance and what is deductible.
- For any repairs or maintenance that is undertaken, take plenty of before and after photos to provide as evidence.
- Minor additions or alterations not involving repairs that do not change the character of the building will be deductible or depending on their value depreciable eg some drought stocking work, through window extractor fans, window stays and door openers and stops.
- Typically putting In insulation is a capital cost and not depreciable. Same would apply to installing an extractor fan through the wall in the bathroom. Installing heat pump is separate asset and can be depreciated. Depending on the type. If it’s a multi unit heat pump and/or ducted through the ceilings then probably it forms part of the structure so would not be deductible.
Listen to the webinar above for the full conversation.
Thank you to both speakers Roy and Randall for joining us in what was a very healthy discussion around those areas affecting investors.
Please feel free to contact any one of us should you have a more specific question around your investment property, contact details for each are on the last slide of the webinar presentation, or feel free to complete the below form.