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Getting your ducks in a row to purchase a rental property

The real estate and rental landscape in New Zealand is poised for change, driven by recent political shifts. If you’re looking to invest in a rental property, 2024 may be a good time to make your move. To ensure you are best prepared to take action when the time is right, we’re looking at what you should be doing to get your ducks in a row.

Understanding the political landscape

With a new Government, it’s essential to be aware of policy shifts that will impact current or prospective property investors. Two significant changes are alterations to interest deductibility and changes to the bright-line test.

Interest deductibility

Interest deductibility rules have changed, with the ability to deduct mortgage interest as a claimable expense being restored once again. The coalition government has adopted a phase-out of the current rules over the next three years. Interest deductibility will be restored to 60% in the 2023/2024 financial year, 80% in 2024/2025, and completely restored to 100% in 2025/2026.

Bright line test reduction

National has reduced the bright-line test, meaning that the length of time that residential property sale profits are subject to tax has been reduced.  It’s advised to stay updated with the latest political developments so you can be informed on how this will affect you.

If you want to be best prepared for when the time is right to take up a rental investment opportunity, here are some things you should be thinking about now to ensure you are ready.

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Financial assessment

Before diving into the real estate market, conduct a thorough financial assessment. SBA can help you evaluate your current financial position, assess your borrowing capacity, and determine the feasibility of your investment plans.

Tax planning

Given the coming changes in interest deductibility, proactive tax planning is essential. Get in touch with us to explore tax-efficient strategies and identify opportunities to optimise your tax position within the evolving regulatory framework.

Legal consultation

Stay on the right side of the law by seeking legal advice. The reduction in the bright-line test may have legal implications for your property transactions. Consult with legal professionals to ensure your investment strategy aligns with the updated regulations.

In the ever-changing landscape of property investment, being well-informed and adaptable is key to success. At SBA, we are committed to helping you navigate the complexities of the market, considering the potential political changes on the horizon. By getting your ducks in a row and proactively adjusting your strategy, you can position yourself for a successful and sustainable rental property investment opportunity.

If you need help setting up your rental property structure or help managing your accounting, talk to our team.

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