Ungaro&Co

Buying an Investment Property

Frequently Asked Questions

*Disclaimer: We do not provide tax or investment advice – please refer to your accountant for more specific information relating to tax issues

Is property investment a smart way to build wealth in this current climate??

Whether it is your own property, or a rental poperty, we can help. Property prices will rise and fall and so will interest rates, but for a couple of reasons, property investment may be a good way to build wealth because of:

• The capital gains tax rules in NZ.
• Tax deductibility of some expenses.

What are some of the ways that we can obtain finance for investment properties for you??

• If you already own a property, in some cases you can ‘leverage’ off equity in your own property in order to obtain funding for the next property. In these cases, you need not put any cash into the new property, providing you have sufficient overall equity in your overall portfolio.
• Investment property loans are not normally any more expensive than owner-occupied loans – providing it is secured over residential property. Just be aware that once you get past 10 investment properties or so, the banks will generally try to classify you as a ‘business / commercial banking’ customer – and different criteria and pricing may apply
• When determining how much you can borrow for a rental property, the bank will take into account rental income on the proposed purchase, as well as your personal income.

What’s the best ownership structure??

Please seek the advice of an accountant and/or your lawyer and in some cases, your lawyer, when deciding how to ‘own’ any property. Following are some things to be aware of from a finance point of view:

• Family Trusts: It is important to note that the banks will require a guarantee from the trustees of the trust – so you are in no way removed from your obligations from the banks when purchasing or borrowing through family trusts. The reasons behind why you would put a property through a family trust are numerous and to make an informed decision around this, please talk to your accoutant or lawyer.
• Personal Ownership. This is the simplest form of ownership and your accountant may in some instances advise that this is best for you.
• LTC or Look Through Company. This has effectively replaced the LAQC structure that used to exist.