We have been looking for some time at the best way to use equity in our home and couldn’t afford to top up a mortgage nor invest in anything too high risk with no immediate returns. We basically had 3 goals:
1: Establish beginnings of a passive income.
2: Reduce taxable income and be able to claim more deductions.
3: Using some equity, select investment that will return a positive cashflow return. A bonus would be if the property we invest in increases in value.After exploring NZ property and other options & speaking to various investment & tax specialists, we think we have come up with a winner.
We live in a big Queenslander home on a large block looking out over parkland. There is a concrete slab underneath with power and plumbing etc. For less than 40k we can build a seperate self contained flat with its own entrance etc. We can achieve around $160 rental per week. We can claim tax deductions on capital works, insurance, loan costs and interest, rates etc. The flat will increase the value of our own property and will provide us with a constant income. Once the small loan is paid out we will still have some tax benefits as well as the passive income. Plus its a positive cashflow return. Coucil and town planning will not pose too many problems evidently.
I’m asking some wizz with experience to tell me that I haven’t missed something glaringly obvious and that it can’t be as good as it looks. Or, anyone out there who has done a similar thing…Hi Kelhutch,
Sounds like a good idea to me. Are you sure it will cost less than $40k? Sounds pretty cheap.
The only thing that would bother me with a proposal like this is having to live next to my tenants. Could work out great, could be a nightmare. That’s just my personal position. If you think this option will work out for you and you’re comfortable with the idea, then go for it.
Cheers,
Sue [rolleyesanim]“Be careful not to step on the flowers when you’re reaching for the stars”
Hi Sue,
thanks for your reply. Yes, we have thought of having person living on our property but figure it’ll be just one “carefully selected” person and their place will be self contained and seperate to us so shouldn’t be too bad. More so for them to be honest with you since we have 2 little ones plus 2 dogs so will have to ensure we choose carefully. We are still getting construction prices but as slab is down and some joinery and electricity and plumbing all done it shouldn’t be too bad. It would be nice to come out on top for once! Thanks for your input. kelleyThis is not tax advice, but you may have issues with your principal residence being exempt from Capital gains.
Hi kelhutch
I would suggest you go and talk to the council and see what approvals you need to make it an approved improvement.
The next step will be to get plans drawn up and submit them to council to get official response. This may cost up to $1k but in the long term is a worthwhile investment even if you don’t proceed.
The main consideration willl be fire proofing, particularly if there is to be a kitchen in the granny flat.
Cheers
Hi all, thanks for the advice. We have since discovered that our house is zoned single residential so we can’t claim as a rental property or have any taxable deductions. I have done a bit of a worksheet though and the taxable deductions would have been less than the income received anyway. We now have a draughtsman coming to draw plans and advise on compliance issues which he will submit on our behlaf to council then we plan to build in and have everything seperate other than laundry & elecetricity which will be shared. Then we can advertise for a “boarder”….it all depends on the terms we use!! All income will have to be “under the table”…It still looks like the income we earn will easily cover loan interest and principle costs and of course it’s an ongoing small income so once the amount it paid off, its all undeclared profit. lovely. Any other advice still welcome!
thanks
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