Tony Brazier
The Press - Tuesday 05 May 2009
Who buys and What they buy
Every house can be rented but it doesn’t necessarily make it a great investment. There are as many reasons why property investors invest as there are attributes of properties they may buy. Some reasons for purchasing change with the markets, others are always present.
One reason that is available to all investors in most circumstances is tax deductibility. New Zealand tax laws are among the best in the world for investors as the government recognises the excellent service private landlords supply on their behalf.
In acknowledgement, that the government will eventually net a greater tax haul from an investor, they make it very worthwhile for the investor to save tax along the way. These investors are less conscious of return and generally prefer newer, lower yielding properties as opposed to positive cashflow (which doesn’t help their tax situation). Townhouses and better locations are attractive.
Conversely other investors wish for immediate income whereby the more money left over after operating expenses (opex) the better. They know that some of it will be lost in tax. These investors are often comparing nett returns with other more passive forms of investment and at times like these, (of low deposit rates in banks) property becomes a real option.
Many other investors with a long term view are looking at simply increasing their asset base and concentrate on building as large a portfolio as possible that will later turn into immediate income (taxable) when it is paid off. For other investors the reason to buy is for their own employment so they may look for a Bed ‘n’ Breakfast, Hostel, Boarding House or for Room by Room rentals which are higher maintenance and workload but also give greater nett returns.
We also work with people who are simply looking for “Pride of Ownership”. Just like vintage car owners these people will expend their own blood, sweat and tears restoring something to its original grandeur so that it is not lost to the city. Others can also come in the form of the area conscious investor, where it doesn’t matter what the return is, it just has to be in a certain location.
Add to these the traders, developers and buyers who just want something “with a twist” and there is usually someone readily available to purchase what is described as a residential investment property. Most of the time investors can be any one, or a combination of, the above descriptions and the market conditions will dictate which. The investors mantra of “Buy, improve, re-rent, re-value, re-finance and buy again,” can be laid across the top of all of these reasons to purchase.
As mentioned above not all rented property is considered a real investment by all investors and certain types are traditionally favoured. The 1970’s-80’s blocks of flats are popular but are rapidly becoming scarce as they have been split onto titles and sold to individual owner occupiers. Some of these are getting close to being worth more for the land underneath them than for the return given. Converted houses have fluctuations in their attractiveness dependant on whether developers are looking for land or not. If they are, they sell for low returns. If not, they must offer a healthy return. Apartments have come into their own for the tax benefits and long term capital gains whereas houses that are rented really need to have some kind of ‘Plan B’ for purchasing them. This could be to rent them ‘by the room’, turn a living area into a bedroom, subdivide off the back or have adequate parking space to lease it to a medical practice. Add to these, vacant lots, boarding houses, old motels, B & B’s, corner dairies, etc and the investor has a wide variety of property types to make an investment out of. As the classic movie “The Castle” says, “It’s not what you’ve got, its what you do with it”.
It’s time to get creative.
Footnote:
Tony Brazier has serviced residential investors in Christchurch for over 21 years and runs two real estate companies under the brand of Braziers specialising in the sale and management of this type of property respectively.
|
RSS | About Us | Policy
