OFFICE
CLOSURE
The
office will be closed over the following period in the near future:
- Tuesday
28/4/2015- reopen Tuesday 5/5/2015
CHANGES
TO THE KIWISAVER FIRST HOME DEPOSIT SUBSIDY AND WITHDRAWLS
Effective 1 April 2015, Government has changed the rules around
KiwiSaver HomeStart grants and KiwiSaver first home withdrawals.
The key changes are:
- The KiwiSaver First Home Deposit Subsidy has been renamed the
KiwiSaver HomeStart Grant.
- KiwiSaver members, if they meet the criteria, will be able to
withdraw their member tax credits (MTC) to help towards the purchase of
their home.
- The introduction of a second HomeStart Grant for people wanting to
build their own home or purchase land to build their homes on.
- The house price cap has been increased in certain areas.
For more information see:
PROPERTY
INVESTMENT- RENTAL, CAPITAL AND TOTAL YIELDS
Rental yield is the ratio of rent
received divided by the cost of the property.
The gross yield for any investment property is
12 months rental income divided by the value of the property.
Therefore a residential property that is tenanted at $300 per week with
a market value of $300,000 would have a gross yield of 5.2%
($15600 rental per year divided by the $300,000 market
value).
The net yield
takes into account the likely cash outgoings of rates, insurance,
repairs and maintenance, property managers fees and loss of rent due to
an untenanted period. For example, based on the above example and
say per annum rates are $1500, insurance is $300, repairs and
maintenance are $300, allowing for untenated 2 weeks $600, that is total
of all these costs are $2700. The net yield is
4.3% (12 months rental income less $2700 divided by market
value $300,00).
Capital yield (or capital gain)
is the ratio of the increase in the value of the property to the cost of
the proerty.
For example ,
if you purchased a property for $100,000 and the value went up to
$115,000 after one year the capital yield would be 15% (the increase
$15,000 divided by $100,000)
Total yield is a combination of
the two.
You could work out these ratios
on a before or after tax basis.
Historically and generally:
-
Properties purchased for lesser prices in "less attractive and less
exclusive" areas have higher rental yields than properties purchased
for higher prices in "more attractive and more exclusive
areas". It should be remembered, however, that all rental
received is taxable.
-
Properties purchased for higher prices in "more attractive and more
exclusive" areas have higher capital yields and higher dollar capital
gains than properties purchased for lower prices in "less attractive
and less exclusive areas". It should be remembered, however,
that capital gain is not assessable under current legislation.
PROPERTY
INVESTMENT- PRINCIPAL AND INTEREST OR INTEREST ONLY DEBT
If
you are investing in property and all your debt is tax deductible, then it
depends on your attitude to risk, and your proposed portfolio growth , as to
whether you should be funding only interest free debt, or principal and
interest.
The
more aggressive you are, and depending whether you want to accumulate a
portfolio of several properties, the more likely it is that the debt will need
to be interest only. This will ensure that properties can be
accumulated without over-committing your income in the eyes of the banks. You
obviously have to pay debt back eventually, but on this basis you can pay it
back upon downsizing your property investment portfolio
Alternatively,
you can consider paying back progressively by making principal and interest
payments over the life of building your portfolio.
Features
and benefits of principal and interest debt payment are as follows:
-
pay
less interest
-
lower
financial risk
-
pay
off mortgage quicker
Features
and benefits of interest debt payment are as follows:
Choosing
interest only payment is cheaper, but paying principal and interest debt can
sometimes mean outgoings are too high to enable you to borrow further. If,
for example. the property investor pays interest only, then the purchase of
another property may be affordable. Many investors also believe too that
the potential capital gains to be made by accumulating more property can also
outweigh the cost of paying more interest.
