Forums / Property Investing / Overseas Deals / BOUGHT 2 x NZ PROPERTY – WHAT NEXT

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  • Profile photo of dangermouse99dangermouse99
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    @dangermouse99
    Join Date: 2004
    Post Count: 88

    I have just taken a huge step and bought 2 IP in NZ one bult in 70’s and other built b4 1914, they settle this week and org tennents etc, but need at advice as im new to this.
    They will yield somewhere between 11-14% I put 20% deposit down, so now i need to know what i should I do with the income, one is LOC and the other is fixed, all the income will go into LOC, i keep hearing about quantity surveyor’s, should i employ one, what should I do??? I plan to spend about $NZ3,500 just to tidy up both places on settlement, is this tax deductible???? Should i use spare rental income to periodically renovate/repair properties?? Any advice would be greatly appreciated, ive been thrown inat the deep and and m learning very quickly

    Profile photo of GramyreGramyre
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    @gramyre
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    Dangermouse by name, dangermouse by nature it seems. I hope people here can help you with your questions. I’ll be looking on in interest as part of my preperations for my NZ trip. Though I think I’ll be asking the questions before I go [lmao]

    ______________________

    I know I can, I know I can

    Profile photo of agileagile
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    @agile
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    Dangermouse:

    Would you be able to supply more info on the properties in NZ?

    1. Did you buy sight unseen?
    2. Is your gross return worked out: (52*rent per week) / Purchase price or are you calculating your yeild some other way?
    3. What areas in NZ did you buy in (if you feel comfortable sharing)?
    4. Not sure why you would need a surveyer at this stage unless maybe you were planning on subdividing your land. Maybe more experienced NZ investors can help you more on this one.
    5. Have you sourced the finance through an Australian LOC and only using this? Ie no NZ loans. If this is the case you will need to do regular foreign exchanges from NZ to Australia.

    Regards,
    Tim

    No matter what I say, what I believe, and what I do, I’m bankrupt without love. (1 Corinthians 13:3b – The Message)

    Profile photo of GreatPigGreatPig
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    Originally posted by agile:

    Not sure why you would need a surveyer at this stage unless maybe you were planning on subdividing your land

    A quantity surveyor can do depreciation schedules.

    GP

    Profile photo of yackyack
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    @yack
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    Hope to God you did not buy one that McKnight or Westan have sold.

    Profile photo of oziozi
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    @ozi
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    Originally posted by yack:

    Hope to God you did not buy one that McKnight or Westan have sold.

    Yack, what makes you say that?

    Regards,
    Ozi

    Profile photo of yackyack
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    @yack
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    If they have been selling to take some of their profits then may not be a good time to be buying them.

    I also dont believe new investors should be buying so far from home. Its a recipe for failure. I hope the people here on this forum can help you. I am sure they are the one who initially spoke about its merits.

    I know nothin about NZ property and have no interest in it.

    Profile photo of ANUBISANUBIS
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    @anubis
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    You seem to be doing this arse about face. Surely you should have these questions figured out PRIOR to investing. Do you have a plan/set of goals, an exit strategy?

    I would advise you to learn more before you purchase again, no matter where – you have taken action before thinking about all the factors which is folly.

    Having said that – your $3500 will probably add to the cost base when you sell as it may be termed capital works

    If the buildings are old a QS may not add any great value as there is little to depreciate – go to the ATO website and check out depreciation schedules.

    Repair as required. Renovate to add value if you are selling or wish to withdraw equity.

    Profile photo of aussierogueaussierogue
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    @aussierogue
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    i think you guys are assuming too much. Every house you buy is the result of someone selling so whether its mcKnight or weston selling it – might be irrelevant. they might be seliing just to even up there portfoilios rather than any reason relating to the house being a bad investment..

    they sound like pretty good returns to me. but like the others i think danger mouse needs to clarify a few things. my guess is that the properties were probably bought via a bird dogger and maybe some of threse questions should be directed to them…

    Profile photo of agileagile
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    A quantity surveyor can do depreciation schedules.

    Good point GreatPig. You are 100% correct.

    Is is my understanding that depreciation may not be able to be used as a write off for NZ property if the property is positively geared. Also as the properties are old there may not be much of a benefit to paying the quantity surveyer once his/her fees are taken out of the benefit.

    Kind Regards,
    Tim

    No matter what I say, what I believe, and what I do, I’m bankrupt without love. (1 Corinthians 13:3b – The Message)

    Profile photo of dangermouse99dangermouse99
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    @dangermouse99
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    I bought around Hawkes Bay area, very cheap!!!
    I did alot of reading, homework, asking questions to a point a felt confident enough to make a purchase, i felt after time I had to take a punt and go for it, I was originally going to go through Westan as it was my 1st NZ property and was going to buy unseen, but demand outsripped supply and I tracked sumdown myself and actuually found one place had a sleepout which will give me a even better return. Somewhere between 14-17% gross yield and the other place ill get roughly 12% gross yield. I have had g8 team behind me, solictor, Builder, Bank/conatct who have highly been recommended an they feel the deal/s are very good, I feel the risk isnt that bad, I only paid mid 50K for both so i think im on a winner and cant see me loosing, Im looking to the long term and can ride out any market downturns, its only 50K which i can afford, you have to take sum calculated risks at times and have done so in the past and have been mostly on winners. I have got answers to all my questions but there is always one or 2 that you may overlook but that will come with experience and im sure i will make little mistakes along the way, its all part of the learning process.
    I hedged against rising interest rate by fixing one loan to a ANZ 2yrs fixed and the other a flexi (LOC) where all the income and bills will go in and out from. I did want to go through CBA’s affiliate ASB but they didnt want to know me re: properties under $NZ80K. I feel as well have +ve CF will go well against a heavily -ve geared property I have in Sydney which will have good capital return. Still be intersted to know more about survey/depreciation??? and What is the best way to hanle to rental income, especially when it comes to Tax time??? Advice appreciated

    P.S I am a little suprised by some pesimistic views, this was carefully researched but obviosuly being new to all this I will earn from the smaller mistakes I miight have made.

    Profile photo of depreciatordepreciator
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    @depreciator
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    Unlike Australia, depreciation is claimable on buildings of any age in NZ.

    We’ve often toyed with the idea of expanding into NZ, but I’ve been unable to find people on the ground with the skills I need – especially in regional areas.

    Not sure about Agile’s comment regarding depreciation not being claimable on positively gearded properties. That sounds odd.

    Depreciation rules are more simple in NZ, so a report shouldn’t cost as much as they do over here.

    Tax Depreciation Schedules
    Australia wide service
    1300 660033
    [email protected]
    http://www.depreciator.com.au

    Profile photo of agileagile
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    @agile
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    Depreciater you said:

    Not sure about Agile’s comment regarding depreciation not being claimable on positively gearded properties. That sounds odd.

    I need to clarify that I am not certain about the depreciation with + geared properties in NZ. This was an informal comment I heard and I need to research it further when I find a good accountant.

    Also you are right about there being no cut off date for depreciation write offs in NZ.

    Regards,
    Tim

    No matter what I say, what I believe, and what I do, I’m bankrupt without love. (1 Corinthians 13:3b – The Message)

    Profile photo of PurpleKissPurpleKiss
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    @purplekiss
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    Well Dangermouse, if there is no cutoff for building depreciation in NZ then it’s probably worth getting a report done. Contact a Quantity Surveyor over there and explain the age etc and ask them it’s worth doing one, one of the team you have behind you may be able to recommend one.

    Good Luck
    PK

    Profile photo of masteraccountantsmasteraccountants
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    @masteraccountants
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    Hi,

    Okay, it’s a big step for anyone first time out. The properties should be positively geared, as the yields are in the region of 11-14%, so you should not have to send money across to New Zealand to top up loan repayments.

    The properties are likely too old to make it worth getting a quantity surveyor to do a chattels valuation for a depreciation schedule. You can check at no cost by contacting the Valu-It website and requesting an appraisal. They will look at the addresses of the properties, check the building construction and determine whether it is worth doing – given the cost. They will advise you accordingly and quote you for the work – around $480 each The website link for appraisals is http://www.valuit.co.nz/book_appraisals.asp.

    The money that you are planning to spend on settlement will be classed as preparing the properties for rental, so will be capital in nature. You will not receive a 100% deduction in the first year. You will have to capitalize it and depreciate it over a number of years. Depending on the repairs carried out, the depreciation rate will likely be from 4% to 25%.

    After the properties have been rented out, you will be able to claim for repairs as a 100% deduction. If you can delay the repairs until the properties are rented, your tax claim will be better.

    You may benefit from a free copy of our 31 page Rental Booklet. You can request this on-line through our website link http://www.masteraccountants.co.nz/index_files/enquiries.htm. It has been written mainly for New Zealand resident investors, but the information has application for anyone investing in NZ rental properties.

    For more specific advice for overseas investors in New Zealand, we would need to correspond with your email address that allows articles as attachments.

    However, I can advise you quickly that a New Zealand Trust would be the most suitable structure for owning your NZ properties. You would be able to avoid paying CGT in Australia, and there is no CGT in New Zealand. If the properties have been purchased in your name, then you will be liable for CGT in Australia when you sell them.

    When you signed the sale & purchase agreement, did you have the name as yourself “and/or nominee”? This would allow the Trust name to be inserted before settlement takes place. Even if you did not do this, you may have time prior to settlement to ask your lawyer to ask the vendor to approve a name change to the Trust. This change is normally accepted.

    Christopher Raynal
    Master Accountants Group Limited
    PO Box 46018 Herne Bay
    Auckland New Zealand
    Ph +64 9 360 3259
    Fax +64 9 360 2180
    http://www.masteraccountants.co.nz

    Profile photo of Playa ChickenPlaya Chicken
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    @playa-chicken
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    dangermouse, I live in the Hawkes Bay and finding a + cashflow property for $50K that is liveable in a decent area is, sadly, a thing of the past. [glum2]I hope you’ve done your homework on LOCATION!

    Cheers,
    Vicky
    [email protected]

    Profile photo of kiwiduvetkiwiduvet
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    @kiwiduvet
    Join Date: 2004
    Post Count: 92

    I agree with Vicki, unfortunately Hawkes Bay has really thrived on the boom and the places where employment is at its greatest, napier, hastings and havelock north have especailly gone thru it check http://www.pmigroup.com.au for there latest report on all areas of NZ, I lived in hawkes bay for 3 years and now live in the UK but have 3 IP’s in lower North island, NZ, and am cautiously looking at adding +ve cashflow props only, as i agree with steve mcknight interest rates will follow the US and go up and regional town rentals will be the first to be empty in a recession

    hey nah

    Profile photo of hallk9653hallk9653
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    @hallk9653
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    Post Count: 3

    I hear alot about bird-doggers in NZ. Does anyone know how to contact them?

    [cap]

    Profile photo of grae1grae1
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    @grae1
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    Hi Dangermouse,
    A quantity surveyor is called a Chattels Valuer in NZ. I have found it a very good idea to have this valuation done. It usually costs around $200-$250, quite a lot cheaper than Australia. It is possible to claim 4% per annum of building cost no matter the age.

    I own my properties over there through a company structure called LAQC – Loss Adjusting Qualifying Company. This allows you to offset any losses eg depreciation against personal income. However if you don’t actually pay any tax in NZ the IRD wont give you a tax return as such – just tax credits against future profits. Once the depreciation runs out though the profits will be liable for tax and the credits will be able to be used then.

    Don’t let too many people dampen your enthusiasm, just go for it, but don’t forget the research first.

    Regards
    Grae1

    Profile photo of masteraccountantsmasteraccountants
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    @masteraccountants
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    Post Count: 77

    Hi,

    For a NZ bird dogger you can try CastleDreamer. She is a member of PropertyInvesting.com. Check out her profile.

    Christopher Raynal
    Master Accountants Group Limited
    PO Box 46018 Herne Bay
    Auckland New Zealand
    Ph +64 9 360 3259
    Fax +64 9 360 2180
    http://www.masteraccountants.co.nz

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