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> Property
is a rewarding investment for those that are looking to make
the most of their available funds. Residential investment property
provides a 3 way return as follows: |
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Example: A
3 bedroom freestanding house purchased for $200,000 rented for
$300 per week. This is purchased with a $20,000 deposit and $180,000
financed at a fixed rate of 7.00% pa. |
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> 1.
Rental Income |
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When looking at an investment property you should assess how much rental income
it would generate. A return on investment can be worked out by totalling the
annual rental income ($15,600) divided by the cost (or value) of the property
($200,000) equalling in this case 7.80%. |
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> 2.
Capital Appreciation |
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Many different figures are quoted on how much the property market
increases every year. These figures range from 1% to 10% pa. This
would mean an annual increase in value of between $2,000 and $20,000.
There are many other ways in which to increase the value of your investment
property (ie. painting, improvements, landscaping etc.) but it should
increase regardless. |
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> 3.
Tax Benefits |
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Before you start investing in property, speak to one
of our consultants to determine the best steps to take in order to
improve your tax benefits. As the NZ Government is unlikely to provide
state housing to suit everybody in New Zealand, they make it more
attractive to investors by providing tax benefits. Property is like
any business; you have an income (rental) and cash expenses incurred
while obtaining this income (interest, rates, insurance). There are
also non-cash expenses such as depreciation on buildings and chattels.
Depreciation can be maximised through the use of a chattel valuation,
which enables you to depreciate items at a higher rate. The general
idea is to make a cash profit but a non-cash loss, which means that
instead of paying tax you receive a tax refund.
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