Kiwis love investing in property, and it’s traditionally been a great way to build up your wealth over the long term.
Property has one major advantage when compared to investing in other asset classes: it’s much easier to borrow to buy property than it is to buy shares. This can maximise your potential gains – or losses – of owning property.
Over time, property prices tend to increase. However, in the short term they can fall quite significantly. This means property investment requires a long horizon, and you should always be buying with long-term goals in mind.
Commercial or residential property?
There are important differences between investing in residential rentals (renting a house to tenants) and commercial properties (leasing a retail, office or industrial building to a business).
The advantages of residential property include:
Wide range of property types to choose from, many at affordable prices.
Ease of finding tenants.
Relative ease of securing a mortgage.
The main downsides? Residential tenancies are typically much more time-consuming than commercial ones, and tenants can be higher maintenance.
The advantages of commercial property include:
Not needing to adhere to the Residential Tenancies Act or Healthy Homes legislation.
Higher rents and yields, returns are usually much higher.
Long-term tenancies.
On the downside, quality commercial property tends to be very expensive, and finding tenants can be a challenge.
Being a good landlord
Whatever type of property you choose, you’ll need to find good tenants, keep them happy, and maintain your property to a high standard. There are significant ongoing costs to property ownership, and if you can’t afford to do regular maintenance and repairs on a property, this probably isn’t the right investment for you.
Other ways to invest in property
If you don’t want to be a landlord, or it doesn’t suit your budget, there are other ways to invest in property. From just a few dollars, you can buy shares in listed companies that own or build properties, either residential, commercial or retirement. This is a totally hands-off way to invest, which you can access using an online trading platform.
Talk to us about the tax implications
Whenever you invest in property, there are important tax considerations – including the bright line test, variations for new builds, and whether you need to pay GST when you purchase a property.
We can help you navigate your tax obligations, fine-tune your strategy, and work out the optimal structure for owning a property. We can also get your accounts sorted out if you’re applying for a loan. Just drop us a note or give us a call, we’d love to hear from you.
