I had a client come in yesterday who is building a brand new 5 bedroom investment property in Hamilton.
This particular client is building very cheaply, so this is paritally why this equation isn't too bad. On completion there should be $80k equity, which does help alot.
Rent less expenses plus tax refund (not huge but includes chattels depreciation) = ($2,000) per year or $40 per week topup.
Client earns $100,000, so tax cuts will save then $70 per week.
So extra $70 per week tax cuts, property only needs $40, so still $30 per week better off then before, plus own property.
There is obviously two major risks
1) Interest rates going up - reasonable rate in calculation.
2) Whats in the next budget
BUT, rents should also go up over the next 1-2 years.
But these are long term investors, and they are looking for reasonable capital growth long term. They require 0.56% growth to match the weekly topup. They think this is easily achieveable over the next 10 + years.
I'm not saying that everyone should rush out and purchase one of these, but this equation can be reasonable for some investors.
So for a small investor doing one rental on a high income, they are probably worse off. Where the loss of building depreciation hurts is for investors with more than rental, or investors with low incomes.
There is also townhouses in Hamilton where the rent - expenses + tax benefits = 0 or breakeven.
Ross
This particular client is building very cheaply, so this is paritally why this equation isn't too bad. On completion there should be $80k equity, which does help alot.
Rent less expenses plus tax refund (not huge but includes chattels depreciation) = ($2,000) per year or $40 per week topup.
Client earns $100,000, so tax cuts will save then $70 per week.
So extra $70 per week tax cuts, property only needs $40, so still $30 per week better off then before, plus own property.
There is obviously two major risks
1) Interest rates going up - reasonable rate in calculation.
2) Whats in the next budget
BUT, rents should also go up over the next 1-2 years.
But these are long term investors, and they are looking for reasonable capital growth long term. They require 0.56% growth to match the weekly topup. They think this is easily achieveable over the next 10 + years.
I'm not saying that everyone should rush out and purchase one of these, but this equation can be reasonable for some investors.
So for a small investor doing one rental on a high income, they are probably worse off. Where the loss of building depreciation hurts is for investors with more than rental, or investors with low incomes.
There is also townhouses in Hamilton where the rent - expenses + tax benefits = 0 or breakeven.
Ross
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