The start of a new year is a good time to take stock of what is happening with your investments. Think of it like a wellness health check. If you do find a problem, getting onto it early allows you to be proactive and either take a scalpel to it or seek a cure. While there are many adverse changes going on with our industry, not everyone will be negatively affected and in fact some could be advantaged by these changes.
Last month I wrote about ring fencing. While it certainly appears that Government is going to implement this policy, public submissions on the matter don't close until 28 February. The NZPIF will certainly be putting in a submission arguing that this policy will not "level the playing field for home buyers" as Government has suggested. If it is enacted, however, it will take effect from 1 April this year, so if you are affected, you don't have much time to seek a solution.
Firstly, you may not be negatively affected. If you have a negatively geared rental but this is countered with other positively geared properties, then you aren't affected.
If you are affected, what can you do about it? Many people will go straight to selling their rental, but this should be a last resort.
If the affect is relatively minor, check your rental price and see if you can raise it. This can be a sensitive issue and difficult for many rental owners, but it is a business after all.
Is there something you can do to make the property worth more in rent? Can you add or create an extra room or a sleep-out? Can you create extra parking, or buy a used carport or garage? Is there room to add a minor dwelling? Could you move a second dwelling onto the property? Can you subdivide and sell the section to pay down debt or build a second rental? (We should all be doing this even if we aren't affected by the ring-fencing law change.)
If you have two or more negatively geared properties, you could sell one to pay off debt on the other. If the property just no longer makes sense as a rental, then selling it may be the best option. But if you do, look for how you can replace it with a property that does stack up as a rental.
If you use a property manager that used to charge tenants a letting fee, but now charges you, are they worth the extra money? If they are, great, but is there anything mentioned above that may help your situation? Could you actually be in a better position than before? Do you have the time, information and inclination to do it yourself?
Have you checked your ceiling and under floor insulation to see if you will be compliant? Failing to comply with the new regulations will become an unlawful act on 1 July this year with penalties of up to $4,000. If you do install insulation, does this raise the rental value of the property?
Remember that the insulation regulations that come into force on 1 July are from National's Minimum Standards, not Labour's Healthy Homes Bill. Those standards are yet to be established.
Even if you manage your own properties that are well insulated and positively geared, are you achieving a reasonable return for them? Many New Zealanders are achieving healthy pay increases and the previous Governments benefit increases came into effect mid way through last year. No one likes to give or receive a rent increase, but higher costs and therefore higher rental prices are generally expected and you have a right to a reasonable return on your investment.
Attend meetings at your local Property Investors' Association and talk to others about how they are affected and what they are doing. This is a great source of knowledge and advice.