Investment property No.1 good , bad , ok?

[rx7rotary]

Hey guys,
after a few months of research I have finally bought a first investment property. It is a unit in heart of Henderson. Built in 70s , concrete block and brick. Two stories and 86 sqm. I bought it tenanted but the tenant is leaving in 2 months and great oppurtunity to raise rent as they were paying $285 for the past 4 years.
I paid 250k for this unit 2 bdroom and carport.
The rent in all other 3 units currently is around 320 - 330. I am looking at getting someone in long term at around 310.
Also I have done everything through kiwi bank. I have everything on floating now and will be looking to fix at some point. Also if someone can chip in on how I could claim tax on this and is there anything I need to do in the beggining to set it up right?

Any advice would be apppreciated.
Thanks
mark

[Ghouly]

Wow, big ask getting someone on a forum to do all your accounting for you... Especially as your first post. Best of luck though!

Why would you be looking to underlet it if the others are fetching higher prices? Under letting can attract the wrong type of people to the property.

At the return rate you're getting, I would be looking at fixing for a decent amount of time to increase your own personal security. As unlikely as interest rates are to skyrocket, small changes could very quickly dampen any profits you're looking to make out of your capital gains. In terms of income tax, I'll leave others more in the know to answer that.

[rx7rotary]

Wow, big ask getting someone on a forum to do all your accounting for you... Especially as your first post. Best of luck though!

Why would you be looking to underlet it if the others are fetching higher prices? Under letting can attract the wrong type of people to the property.

At the return rate you're getting, I would be looking at fixing for a decent amount of time to increase your own personal security. As unlikely as interest rates are to skyrocket, small changes could very quickly dampen any profits you're looking to make out of your capital gains. In terms of income tax, I'll leave others more in the know to answer that.

Hi there, firstly it is not my first post. My account was deleted not so long ago and the history with it went. Secondly I am not asking anyone to do my accounting thanks very much. You seem to be one of those that stereotype quickly...

Thanks for advice I wasnt looking at figures or accounting... I just wanted general thought and perhaps some guidance.

Appollogies to all if this was missunderstood

Thanks

[Ghouly]

You seem to be one of those that stereotype quickly...

Ah irony, how I love you.

Ah okay, well if you give some more details as to what you are after rather than "general thoughts" I am happy to help out, as will a lot of others I'm sure.

[rx7rotary]

Ah irony, how I love you.

Ah okay, well if you give some more details as to what you are after rather than "general thoughts" I am happy to help out, as will a lot of others I'm sure.

Thanks but I am good with how much you helped already. Go and play supermario now LOL

[flyernzl]

I will assume that you have bought this property in your own name.

Most important is to set up a bank account where all the transactions for this property are carried out. Rents paid in, costs paid out without mixing them up with any of your other financial activities.
This will separate and clarify all property-related transactions for your taxation purposes, minimise any accounting costs and help prevent any arguments with the tax man.

Bear in mind that any maintenance or upgrade work on the property within the first year of ownership could run the risk of being considered a non-tax-deductable expense by the IRD.

I second the comment that you should charge a market rent for the property and not attempt to undercut the market. Make sure that you have a properly documented tenancy agreement and run a credit check on your prospective new tenants when that time arrives.

Best of luck with it all.

[rx7rotary]

I will assume that you have bought this property in your own name.

Most important is to set up a bank account where all the transactions for this property are carried out. Rents paid in, costs paid out without mixing them up with any of your other financial activities.
This will separate and clarify all property-related transactions for your taxation purposes, minimise any accounting costs and help prevent any arguments with the tax man.

Bear in mind that any maintenance or upgrade work on the property within the first year of ownership could run the risk of being considered a non-tax-deductable expense by the IRD.

I second the comment that you should charge a market rent for the property and not attempt to undercut the market. Make sure that you have a properly documented tenancy agreement and run a credit check on your prospective new tenants when that time arrives.

Best of luck with it all.

Thank you so much this is exactly what I was after!
Much appreciate your comment around bank accounts and the rent.
Kind Regards

[Damap]

Only comment on rent is to know what condition the other units are in. You may have to spend a few bucks to get the same rent if your place is a bit "scruffy". But other than that charge as much as you can. This is a business not a non profit :-)

[AMR]

I'm surprised the rents are so low. At 86 sqm it's definitely a comfortable unit not the usual 60 sqm sardine can and is bigger than some 3 bedroom houses, and it's in a reasonably small block. Do it up and charge $350 pw.

[Rosco]

Consider getting a chattels valuation through Valuit. It depends on what chattels are included and there condition. I mainly look at carpet, curtains, dishwasher, stove and heating.

The gross yield is around 6% at $310 for 50 weeks. I would try to improve this long term. You could look at fully furnished (not saying it is better, but is an option to consider). 6% is not great, and figures on 100% finance would have you losing money.

what is your floating rate? Generally 1 year fixed is much lower than floating, so maybe you should consider some 1 year to save interest. Also 5 year rates are around 5.99%, so can give good long term protection. Normal 1 year is 5.25% and floating is 5.75%. You can get better rates, but shows that standard 1 year rates are 0.50% below floating.

We charge around $600 + GST. To complete individuals tax returns and financial statements for a rental, depending on the standard of your records. PM me if you would like to discuss this further.

in general for accountants
- go for a Chartered Accountant, because they have compulsory training, and reviews from the Institute of Chartered Accountants
- Don't go for a one man band, make sure there are some other staff to answer questions, look after things during holidays, sick periods etc
- Make sure they specialise in property. Look at website, or ring. If they do business, auditing, farming and property, then they aren't really property specialists or experts.

GRA in Auckland isn't too bad, to give you another option.

Good luck

Ross