No matter what the trepidation in the property market, Kiwi investors are still more fond of property than any other instrument to salt away the nest egg. But becoming a property investor generally means becoming a landlord. What do you need to know?
1. The Tax Man Cometh: Property investing is a business like any other, so you need to have the appropriate business structures. This is not a DIY job, as the penalties from Inland Revenue for getting it wrong can be quite severe. Find an accountant and lawyer who specialise in property (www.ird.govt.nz). Be aware: the IRD reckons some $100 million a year is being lost to the Government from undeclared income from property investors and they are cracking down. Be scrupulous how you set up arrangements under loss attributing qualifying companies (LAQCs) as the IRD has put out a tax alert on this. And if you plan to be a property trader (rather than long-term investor) income earned from property sales is like any other income, and is taxable.
2. Ignorance is no excuse: Whether you have one tenant or 100, you have to manage your property to the letter of the law. Even if you plan to hire a professional property manager, you need to know the law. Fortunately, the Department of Building and Housing has an extensive database of information sheets, along with standardised forms, checklists and agreements - even sample letters that are helpful when communicating with tenants. Check out Tenancy Tribunal news and recent orders to keep up to date with trends.
3. Learn from the masters (and mistresses): Many other people have gone before you and already made the dumb mistakes. Property investors are a generous lot with their knowledge: network with them through the local branch of the New Zealand Property Investors Federation (www.nzpif.org.nz). Their bywords are professionalism and success. Other members can help you tap into the best local property managers, funders, real estate professionals, discount cards and more.
4. Become a swot: Read and learn. Sure, there are charlatans and get-rich-quick books and courses aplenty, but there is also good-quality, sound advice. Comb your local library or bookstore - property investment is a huge category. Subscribe to New Zealand Property Investor magazine or go to www.landlords.co.nz for specialist advice and forums (both published by Heraldhomes columnist Philip Macalister).
Source: NZ Herald