2018 – A year of opportunity for property investors?
Welcome to the fist of our 2018 monthly disbursement messages.
Healthy Homes Guarantee Act:
It shouldn’t be news to anyone involved in residential property rentals that the Labour Government have it in mind to ‘tidy up’ the rental market. Just how successful they are remains to be seen. One of their initiatives is the Healthy Homes Guarantee Act. Tenants advocacy groups have been vocal stating that the advent of the new Act will be a wake-up call for landlords and that landlords are concerned about it to the extent that they are exiting the market in their droves. The reality is quite different. Most landlords (and certainly the large majority) are in favour of providing a healthy and safe home for their tenants. They realise that in the long-term that will also translate to longer tenures by tenants and better rental returns. The Auckland Property Investors Association recently surveyed their members in terms of assessing the ‘favourability’ of various policies on the horizon. Here are the results, with the Healthy Homes Guarantee Act coming in as the 3rd most favourable.
Not surprisingly, the idea of a capital gains tax came in last:
1. Relaxation of current LVR restrictions
2. Longer fixed-term tenancies
3. Healthy Homes Guarantee Act
4. Extension of Bright Line Test
5. Limiting rent increases to once a year
6. Removal of negative gearing
7. Ring-fencing tax losses
8. Removal of 42-day notice to terminate
9. Debt-to-income restrictions
10. Capital gains tax
2018 – a year of opportunity?
Most of the investors we’ve spoken to recently believe that the market has stabilised, and the foreseeable future is reasonably predictable. Generally, they are all in agreement, rents are going to increase. It’s a no brainer – landlords are going to want to recoup the added costs involved with upgrading insulation, installing smoke alarms etc. and the best way of doing that is increased rents, which will over time result in increased yields. The landlords who have sold or are considering selling because of the implications of upcoming legislative changes are the ‘chicken little’ investors. Contrary to what they might think, the sky isn’t falling in – in fact there will be good investment opportunities throughout 2018 with an easing of the LVR’s, strong immigration, low interest rates and generally a good level of business confidence. So, the choice is yours. You can sell up and invest your money in the bank at 2% or (if you’re lucky) 3% or take advantage of the opportunities 2018 will present – and the probability of increased yields.
Licencing of Property Managers and Property Management companies:
There’s been speculation in the media recently about the compulsory licencing of Property Managers. Bring it on we say! Here at Walker Weir we make no bones about it – we whole heartedly support the licencing and regulation of the property management industry. All too often we hear of landlords who have missed out on receiving their rent from the property management company responsible for collecting it on their behalf. That, should be punishable by severe fines and expulsion from the industry. There’s no room in property management for cowboys. They give us all a bad name so the sooner they are forced out of the industry, the better.
Five things a Property Manager hates to hear:
1. “this house is so much cleaner than when I moved in” – and it isn’t!
2. “I thought because it’s only a puppy it would be OK”
3. “I keep the windows closed and the curtains pulled to stop the mould getting worse”.
4. “I spent more than I should have over Xmas and don’t have enough to pay my rent now, so you’ll just have to wait”
5. “I took the batteries out of the smoke alarm because they were flat and the beeping kept me awake at night”
Holiday Home rentals:
If you have just left the batch after your Christmas holiday and you’re looking to rent it out during the year then you need to be aware that there are different tax rules for ‘mixed-use holiday homes’. The tax rules come into play where:
1. You stay in the holiday home yourself sometimes
2. You rent it out to others sometimes
3. It’s not used for a total of 62 days or more during the tax year.
If you earn less than $4000 a year from renting it out then you don’t need to include this income in your annual tax return, but you won’t be able to claim any expenses either. If in doubt have a word with your accountant.
You should also talk to your insurer if you are renting out your holiday batch to make sure that you are fully covered. You may also need to consider public liability insurance to protect you if a guest gets hurt while staying at your property. Remember that decks more than a meter high need to be fenced, as do pools more than 400mm deep and if you provide kayaks or boats they need to be seaworthy and life jackets provided.
Q: At the end of a tenancy can I have the property professionally cleaned and pass the cost onto my tenants if they haven’t left the property clean enough?
A: Section 40 (1) (e) (iii) of the RTA states that on the termination of a tenancy the tenant shall leave the premises in a reasonably clean and reasonably (our emphasis) tidy condition. Landlords often struggle with what is reasonable and invariably have a higher standard of what constitutes ‘reasonable’ than the outgoing tenant. Strange that. The best way to approach this from a landlords point of view (or in our case from a Property Managers view) is to take a common sense approach and consider what an unrelated 3rd party would consider. If you still feel that the property needs additional cleaning to bring it up to a reasonable standard, then the services of a cleaner can be engaged. But be warned! If it ends up at the Tenancy Tribunal you may not get all of the cleaning costs back, or any at all if the adjudicator feels that the property was left reasonably clean at the end of the tenancy.
Mid-month – Thursday 15 February 2018.
Given the opinions expressed in parts of this email it’s important that we make it clear that the contents of this email are opinions and observations and made in good faith. We suggest that in all cases independent legal and financial advice is sought.
Regards from the hard-working team at Walker Weir.
Business OwnerFebruary 15th, 2018