Aussie vs NZ loans

[zoggel]

HI, I'm an Australian (please don’t hold against me)
My brother and I are buying our first investment property together in Auckland.
The thing I can’t quite work out is if I should borrow the money from a NZ bank or an Aussie bank.
Aussie interest rates are lower, so seems to be the better choice, but will we still be able to claim the tax deductions if we are earning rent in NZ and paying interest in OZ?
Also how will currency conversions affect us?

Please help, we are both newbie’s to this and would really appreciate any advice

thanks

[Monkeyboy]

Hi Zoggel

You will probably have to borrow from a NZ bank if you are going to invest here. I doubt that the Aus bank will let you take the money out of Aus. The one way to do it is to get a decent LOC over your own properties in Aus and use that as your funds. A NZ bank will lend you the money so long as the deal stacks up. Income, security etc. While the rates maybe cheaper you do have to watch out for the changes in the market.
There are 3 things you should get if you are going to be investing in NZ. A good property accountant, a good property lawyer and a good Mortgage broker (I happen to know one and can also help you find the funds in Aus). If you put the right people in place you will get the right answers. PM me if you would like some help

[Mark_B]

Zoggel

I'm Australian too and have IPs on both sides of the Tasman. Though I am a NZ resident at this point in time.

I pretty much agree with what MB has said. To the best of my knowledge Australian banks won't lend on NZ residential property.

As you won't be a NZ resident (based on what you have said) you may find that in order to get a NZ mortgage the lender will require enough of a deposit (probably out of your Australian LOC as MB has said) to enable the NZ property to be CF+.

Currency conversions are annoying (I know because I am sending money to Australia at least every month), but that is about where it ends.

More annoying (imho) are the tax requirements.

I think I am right in saying that by owning a NZ IP you will be required to prepare a NZ tax return (the NZ FY is April to March btw).

And you'll also have to include any profit / loss from your NZ IP on your Australian tax return (and do the NZ financials on a July - June FY as in Australia).

But in reality, buying in NZ is pretty much the same as buying in Australia.

M

[MikeO]

Exchange rate risk

In my opinion you are better to borrow in $NZ if you are buying a NZ property even if you need to pay a slightly higher interest rate. Reason = it takes out the exchange rate risk. If the current, historically fairly high $NZ fell you this would reduce the ability of $NZ rent to service the $AU loan.
Admittedly exchange rates could go the other way which would give you a gain but why take the risk?

[Ivanhoe]

More annoying (imho) are the tax requirements.

I think I am right in saying that by owning a NZ IP you will be required to prepare a NZ tax return (the NZ FY is April to March btw).

And you'll also have to include any profit / loss from your NZ IP on your Australian tax return (and do the NZ financials on a July - June FY as in Australia).

hmmmmm....
I understand you own these properties in your own name?

[zoggel]

Thanks for your help guys
Unfortunate this is my first property so I don’t have an AUS property to get a loc over.
But we do have about a 35% deposit.
The property is off the plan and the developers have offered to find us an AUS bank that will help us and also an accountant, but I am reluctant to get all our services from the developers. Feels like it would be safer to have outsiders assisting in this sort of thing. Am I correct in thinking this?
Yes, any contacts you have would be fantastic as I’m totally new to this I don’t have a contact base yet

[Monkeyboy]

Who are the Developers

Who is thecompany that is doing the developing. Put the name here and you will be amazed at the answers you get. Both good and bad.
I would agree to using outsiders for your professionals. That way you are likely to get unbiased information.

http://www.propertytalk.com/forum/showthread.php?t=283

Try this link for all the people you might need.
With your deposit you should be able to get the finance through most lenders. Are you looking to keep the house or sell it. That affects your tax issues and remember there are reciprocal tax laws between Aus and NZ so you have to be on to it.

[zoggel]

The developers are Conrad Properties
We signed up 2 years ago so are stuck with that decision now. (I have heard some negativity about them in other websites)
Neither of us plans on moving to the property so I guess just keeping it for the rental cash flow then eventually selling.
Yeah, I know the tax thing is going to be complicated, that’s why I’d love to find a good accountant, and it’s all a bit too much for me to get my head around.

My other option for the loan is my parents have offered to take some money out of one of their existing IP loans and I would just pay them back at their current interest rate (AUS loan). But I have concerns over the tax implications for both of us if we do this. As if the loan is in their name I don’t know if I can claim my tax back on the interest. And I don’t want to put their income up.
My dad said it will be fine, that as long as we both declare everything is will work out. But I’m not so sure.

[Monkeyboy]

If your folks take out a loan over their property and then lend it to you at the same rate then there probably is no issue re tax and changing your parents tax rate. It would just be a loan from your parents instead of a loan from the bank. Essentially it is no different to the tax dept where it comes from as long as things are declared. And having an unsecured loan from your parents (if it is unsecured) can be quite advantageous going forward.

[zoggel]

Oh great, well maybe my parents might be the best option then.
Pardon my ignorance but what is a secured loan and what is the other type?

[Monkeyboy]

A secured loan is one where the bank holds security of the title. Then if you don't make the repayments the bank can take your house and sell it to recoup their money. An unsecured loan is one where there is no security and therefore you can't lose the house. If your parents are using their house the loan will be secured. If they loan the money to you then they can choose to secure the loan but this often does not happen between parents and children.
Check your private messages for more info or email me and i can work you through it

[calmone]

If it is one of the current crop of Conrad City Apartments it might pay to find what deposit percentage you might need based on the Apartment size before you make any moves. You may possibly require more than 35% deposit.