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How to hold onto your rental property

In a post-covid market, with the added pressures of rising interest rates, inflation, and the tightening of tenancy laws, owning a rental property is no longer the surefire moneymaker that it once was. With all the financial stress and uncertainty associated with owning a rental property in 2023, you may be wondering if now is the time to let it go. 

Housing is and always will be a finite, in-demand resource, so it’s a good investment to bet on in the long term. Here are some tips to help you hold onto your rental property even when costs are high.

Fix your mortgage as low as possible, when possible

Homeowners have benefitted from low-interest rates since 2019, up until last year. In response to inflation, the Reserve Bank has increased the Official Cash Rate (OCR), resulting in rising interest rates that will drastically increase mortgage repayments for many homeowners in New Zealand.

Typically, homeowners that are nearing the end of a fixed term will opt to refix their loan at the lowest rate on offer for as long as possible. However, it comes down to timing and making the right decision for you. If you believe inflation will continue, fixing your loan for the longest possible time period may be the best option. With this approach, it’s important to consider that you run the risk of paying ‘above market’ for the duration of your fixed term if the Reserve Bank drops the OCR.  It is very much a balancing act but talk to your broker or your bank about your best options.

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Stay on top of maintenance

Keeping on top of maintenance will save you money in the long term, as your property will remain in good shape and you will avoid larger maintenance bills down the road. Ask your tenants to keep you in the loop about any maintenance issues, such as breakages, leaks, mould, or general wear-and-tear. Stick to an inspection schedule so you can keep tabs on the state of your property. Remedying problems when they arise will ensure they won’t escalate and lead to a large repair bill.

Save your money by doing the easier maintenance jobs yourself, if you can do so safely. If you’re unsure, hire a professional to ensure the fix will last. It’s best to get a few quotes before settling on a tradesperson to undertake the repair work, to ensure you get the best deal available to you.

It’s a good idea to avoid over capitalising on renovations during an economic downturn, but if you want to make some improvements, stick to projects that will have a high return on investment. Some projects to consider that are low cost but will have an impact on the appeal of your property include painting and replacing heavily used fixtures such as door handles and cabinet hardware.

Take advantage of claimable expenses

Making the most of your tax deductions is vitally important to saving money on your rental property. Some of the running costs associated with your rental property can be claimed as a deduction against your rental income, which will reduce the tax you have to pay on that income. These expenses include rates and insurance, repair costs, travel expenses, accounting fees and more. See our full list here.

If you need advice about buying a rental property or managing the finances of one, get in touch with SBA today. We’re here to help.

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