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She'll Be Right

Debbie Roberts with the best strategies for investors after the government’s recent announcements.

By: Debbie Roberts

1 May 2021

A lot has happened since the last issue! There have been a number of major changes that will affect many property investors across the country. Some of these changes may even have you questioning whether or not it is still worth it.

The biggest changes are the extension of the bright-line test for properties purchased after March 27, 2021, and the removal of tax deductibility for the interest on rental properties. Do these changes mean that property investment will no longer work? Of course not.

The way that we invest in property might change (it will now be more important to focus on after tax cash flow than ever before), but property investment will always be the best way for everyday Kiwis to get ahead financially over the long term, as long as you are buying the right property for your financial position.

I wanted to call this story

“She’ll be right? Yeah, nah …”

This is because what we’ve seen is that the majority of mum and dad investors have previously bought property using the emotional side of their brain rather than the analytical side, especially over the past couple of years due to the high levels of FOMO.

This strategy of buying something based on the belief that property will continue to increase in value over a period of time, is a severely flawed strategy now. Capital growth and market rent are almost the ONLY aspects of property investing that you have absolutely no control over as an investor, so why would you base your entire investment strategy on something beyond your control?

In order to become a successful property investor you need to have a thorough understanding of the numbers, and the effect each purchase will have on your financial position. If you don’t have this knowledge yourself, then you either need to learn it, or ensure that someone on your team of professionals does. Expert independent financial advice is more important now than ever. Make sure that your adviser is suitably qualified and most importantly that they have experience with property investment.

Who do you need on your team of independent advisers? A property accountant, a mortgage adviser (rather than dealing directly with one bank), and a financial adviser who is not just going to try to sell you a new build … to name a few. It is really important to remember that there are still a huge amount of things that are “under consultation” with regards to the Government’s announcement. We have seen a lot of advertising for new builds since then, which clearly state that new builds are exempt from the tax changes. Yeah, nah. Not yet they aren’t! The ability to deduct interest on the mortgage for a new build is actually one of the items that is under consultation. So, don’t purchase a new build based purely on the flawed belief that you will still be able to deduct the interest on the mortgage, because you might find that you can’t.

Property investment is not a solo sport, and as Henry Ford once famously said,

“If you are the smartest person on your team, your team is in trouble.”

The way to reduce risk with property investment is to learn more about it. If you already own rental properties and are worried (or need clarification) about your financial position with these recent Government announcements, get some help from your accountant and/or a financial adviser.

If you think you don’t have time to learn more about property investing, or you don’t want to invest in your education, or pay for professional advice and a support network, then be prepared to learn from your mistakes (which will generally end up costing you a lot more money in the long run).

Property Apprentice is 100% NZ owned and operated, and is NZ’s leading property and real estate investment coaching program. With their lifetime coaching support program, and no vested financial interest in any property you purchase, they are there to help you to reach your property investment goals.

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