Taranaki Property Investors' Association
It is the start of what is likely to be a challenging year for rental property providers. Hopefully you will have some time off work and while rest and recreation is important, it is also a good time to take stock of your investments.
Everyone is going to be impacted to a greater or lesser degree through changes from the new Government. There may also be a possibility of interest rate rises.
It seems sensible that we should research the local rental market and compare our rental prices to the current market level. This should be done every six months but new legislation may push rent increases out to 12 months.
The NZ Property Investors' Federation website has a rental calculator with 10 years of rental data behind it. You can select the suburb, number of rentals and quality standard for nearly 100 areas around NZ and view a graph of price changes over the past 10 years. The data is updated monthly.
You can also look online for similar rentals being offered to better gauge how your property compares to others and what you could achieve. This will also give you a good idea of whether your property rents in the low, median or upper end of the market, making the NZPIF rental calculator more accurate for you.
Ringfencing rental property losses is likely to have the largest affect on many rental properties, so calculate what it would take to get your property at least cashflow neutral. It may be that a rental price increase to market level is all that is required to remove the imposition of rinfencing.
If rental price increases are insufficient, look at what you can do to the property to improve your rental yield. Property investor associations are a great source of strategies to improve your return.
Have a look at your expenses as well. Are you getting all the discounts that your NZPIF card provides? Perhaps other banks are offering better mortgage interest rates. From the NZPIF website you can get a quote from rental property insurance providers Initio to see how it compares to your current provider. You may also choose to change to a higher excess and reduce the cost of your insurance premium.
Although the Healthy Homes Bill has now passed into Law, it is the Ministry of Business Information and Employment who will determine what those standards will be. If you don't believe your property suits a heatpump or your tenant doesn't want one, perhaps hold off buying one until the new standards are announced.
If you analyse your situation and you can't see a way of making it work, perhaps selling and replacing your rental with a different type and higher rental return may be a good strategy.
Everyone's situation will be different, which is why it is a good idea to take some of your holiday downtime to look at where you are, establish how you are going to be affected by the looming changes and work out a strategy that is right for you.
Enjoy your holiday and all the best for the rest of the year.