How much $ do I need to get started?

[niv]

That's the thing - I don't think it's "fair" when some people are taxed, but others aren't. I don't plan on doing this as my main job, and besides, I already pay taxes through my job.

[niv]

However, if I sell more than 1 property every few years, or in a regular pattern, then I will probably be required to pay taxes and I think that is fine. But otherwise, I know a lot of people who are doing this and not paying taxes (under the advise of their accountants) and IRD is fine with it. I will clarify this issue with an accountant once I'm actually selling.

[Wayne]

That's the thing - I don't think it's "fair" when some people are taxed, but others aren't. I don't plan on doing this as my main job, and besides, I already pay taxes through my job.

Welcome to the real world - it isn't always fair!

[Tan]

Are you aware your parents may be put under financial stress and/or lose some of their money
What happens if you couldn't make your payment/s
Also, if you get into a relationship and the property legally become joint

How would you and they feel in these and many other scenarios?

[donthatetheplayer]

In two years, I might not be able to afford anything..!

This is a terrible reason to "buy now". Trust the property cycle niv. It seems like it will never stop now but in the not-too-distant future things will change. I remember 2010-2011 and people were saying property would crash and it was a buyers market! I kick myself for not buying more then.

If you really want to buy something and learn about property do it on your own. You might have to buy a one bedroom unit in Hamilton as your first property but you'll learn a lot with minimal risk. When the market in Auckland turns, and it will turn, you will be armed with real knowledge - from experience. If you must risk your parents money this is the time to do it, not right now mate.

I say do what you can with your own funds now. In a few years you can go bigger. In the grand scheme of things waiting a few years will not change a lot to your final outcome. But rushing in like you are talking about might end in tears.

[Courham]

That's the thing - I don't think it's "fair" when some people are taxed, but others aren't. I don't plan on doing this as my main job, and besides, I already pay taxes through my job.

And many, many NZers don't think its fair that people like you get into property to make a quick buck and not pay their fair share of taxes on income earned- same as any other business does. Think how much better our health and education systems would be if the money taxed on your property profits went where it should to the benefit of all.

There is a reason IRD is cracking down- popular opinion is not on your side. Just because people have been getting away with it, doesn't make it right or fair.

Craig

[DaveW]

I would go by Gary's advice and buy now, except I wouldn't dive into doing any renovations unless it was quick and substantially increases rental returns.

First you would need to, 1) educate yourself on how to maximise rental returns to make your property positive cashflow - this is crucial for your survival, 2) seek advice from a property accountant - before you begin to buy anything, and 3) view lots and lots of properties - equally crucial in order to build your ground knowledge.

[Eugene]

Don't buy in Auckland now.
No one can possibly have any idea what the property cycle is doing.
As an example, Kieran Trass wrote an excellent book on the property cycle, full of useful stuff, however he put a time on the cycle, acted on it, and got it wrong. The consequences for him were extreme - I don't know if he is back in the business even yet.
Take on board what Ross and DHTP say.
There might be gains for a while yet, there might not be, no one can ever know. If you buy up big time now you are taking a large risk.
Always take on board pretty much everything Ross says.

[PTILoveYou]

Don't buy in Auckland now.
No one can possibly have any idea what the property cycle is doing.
As an example, Kieran Trass wrote an excellent book on the property cycle, full of useful stuff, however he put a time on the cycle, acted on it, and got it wrong. The consequences for him were extreme - I don't know if he is back in the business even yet.
Take on board what Ross and DHTP say.
There might be gains for a while yet, there might not be, no one can ever know. If you buy up big time now you are taking a large risk.
Always take on board pretty much everything Ross says.

I heard that divorce cost him more.

[donthatetheplayer]

Interesting thread. We are all showing our risk profiles. I guess the question is what is nivs risk profile and more to the point what is his parents!

I'm willing to take very informed risks. I'm not at all keen on losing it all and starting again. Slow and steady is me...

[speights boy]

I guess the question is what is nivs risk profile and more to the point what is his parents!

Precisely; and this is the biggest risk IMO.

The parents are borrowing 1m from the bank (perhaps even putting their PPOR up as security); they know little about investing; they haven't a formal written agreement; they are not aware any gains are taxable, the other partner has very little income....and throwing it all into the current AKL market.

Families have been broken apart for a lot less than that.

[Gladdynook]

why do you want to sell in 2-5years time? why not keep it for 20+ years? borrow against it for another purchase, repay your parents their share, etc.

Keeping it long term will reduce, or eliminate the risk of market fluctuations. I'd never advise someone to buy property for less than 10 years.

[Anthonyacat]

However, if I sell more than 1 property every few years, or in a regular pattern, then I will probably be required to pay taxes and I think that is fine. But otherwise, I know a lot of people who are doing this and not paying taxes (under the advise of their accountants) and IRD is fine with it. I will clarify this issue with an accountant once I'm actually selling.

Ross is an accountant. And he told you the truth. If you buy with the intention to sell for a profit (doesn't matter whether it's property, shares, gold, or groceries) this is a taxable activity, and the gain/loss will be taxable in the year of sale.

I am disgusted that there are accountants advising people they can buy with the intention to sell and not pay tax. They are either acting unethically, or are grossly incompetent. Or else you're mistaken. The IRD is very clear: https://www.ird.govt.nz/property/pro...ention-resale/

I don't know about 'most people', but I certainly never intend to sell my property. If I do end up selling for whatever reason, whether it has increased or decreased in value will be the last of my concerns. I purchased it for ongoing rental income, and the ongoing ability to leverage my money at a cheap rate to buy into the stockmarket. The only difference changes in its market value have now are whether I can revalue it to borrow more. One day with 5-10 properties freehold, I will no longer need to work. Who needs capital appreciation, when you have an ongoing income stream?

How will the IRD know your intention? Well, for one, you've spelled it out right here on the website, and have been told that it's taxable. So if they were to see it (not that they will, but who knows) and link it to you in a few years time, you couldn't even claim ignorance; pure tax evasion. Not that ignorance is a very good defense with the IRD anyway. Alternatively, most people at some point in the purchase process tell their bank manager their intention.

If you bought with the intention to sell, and didn't declare the profits when it sold, could you 'just not tell' the IRD, and get away with it? Probably. Heck, almost certainly. Just like you could go out every weekend as a self-employed plumber earning $40-50k per year cash, and not tell them. Chances are you'd never be caught. But either way, you're breaking the law.

[Damap]

Mr Trass is now a Buddhist and in India actually.

I would be trying to buy under the median in Auckland and sit tight on it. You won't get into any trouble that way.

[speights boy]

I would be trying to buy under the median in Auckland and sit tight on it.

Which does not appear to be the way the parents expect to make their money.
They may be in for a bit of a surprise if niv is calling all the shots.

get their symbolic 'approval' before proceeding.

Perhaps more research, an honest round the table discussion, and then a formal written contract between you all should be considered.