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How Can I Expand My Rental Portfolio?
So you’ve taken the first step and bought your first rental property. What are the next steps to expanding your portfolio? Here are our top tips for growing your property investment.
Focus On New Builds
Looking towards new builds is a great strategy when expanding your rental portfolio. As new builds are exempt from the tax changes that came in March 2022 this makes them particularly attractive for investors.
The tax advantages of buying a new home are significant. New build properties and purpose-built rentals are eligible for a 20-year exemption from recent change to the tax laws which were introduced to encourage investment in properties which add to the overall housing supply. The changes removed tax deductibility for interest costs for existing properties. However, new properties are still eligible to deduct the cost of interest for tax purposes. To be considered ‘new’ properties need to have received their Code of Compliance after March 27, 2021.
Another benefit of buying new is that new builds are more likely to comply with Healthy Homes regulations, saving the hassle and cost of bringing older properties up to the standard. Healthy Home Compliance is not a certainty though; even new properties that meet the requirements for a Code Compliance Certificate may not meet the Healthy Homes Standard in respect of heating. However, by buying new you are minimising your costs and maximising your returns.
Find out more about Buying Old or New?
Consider Selling One Property to Buy Two
If you’re keen to expand your rental portfolio but you don’t want to outlay too much capital, consider selling one older property and buying two smaller new builds.
When buying investment properties it is important to think with your head and not your heart. Two more affordable properties will likely yield a higher return than one larger property and new builds have the added tax advantages discussed above.
With Auckland house prices a hot topic, it’s important to understand the market you are buying into. Our experienced Sales Agents are always happy to discuss the what’s happening in the market and how they can help you invest. The team work closely with our Property Management team and have a large database of potential sellers. Read our article on What Makes a Good Property Investment for further tips on how to get into the property market.
Consult a Mortgage Broker
If you’re keen to grow your property portfolio it’s essential you talk to a financial advisor or mortgage broker who can talk you through the best way to leverage your first property. Borrowing against your existing rental property will allow you to buy your second.
Mortgage brokers know the market, can save you time and money and can provide specialised expertise, all free of cost to you.
Find out more about Why You Should Use A Mortgage Broker.
Enlist the Help of a Property Manager
The more properties you own the more work you will inevitably take on. While taking care of one investment property may be manageable, more than one can become time consuming. Don’t let the work of management put you off expanding your portfolio.
Engaging a property manager can in fact save you money in the long run. Experienced property managers such as Crockers will ensure your properties are rented consistently and potential tenants will be thoroughly vetted. A property manager can also provide guidance on compliance matters – helping avoid the hefty penalties that can apply for infringements. They’ll also provide regular rental appraisals, ongoing inspections and deal with maintenance issues.
Importantly, engaging an experienced property manager such as Crockers will free you up to spend more time finding further new investments and adding to your successful property portfolio.