Building New vs Buying Old

The New Zealand tax system is a complicated beast. Even your accountant will only know a fraction of what it entails. Fortunately, there are industry specialists out there who are happy to share their knowledge of the property rules, and there are some highly profitable tricks of the trade to be taken advantage of.

Our friends at OPES Partners specialise in property investment financial advice, and were kind enough to share this great example of why building a new rental property can be more affordable the an older house of the same price.

"At OPES we focus on quality investment properties, which is typically achieved through new or near new properties. Generally these types of properties have less risk associated with them, due to lower maintenance and less vacancy. In addition, cashflow is often far better once tax has been taken into account."

Below is a cashflow example for two properties, one old with a higher rent, but slightly higher vacancy and maintenance, compared to a new property.

	Older Property	New Property
Purchase price	$450,000	$450,000
Investment mortgage	$453,500	$453,500
Rental income	$550 per week	$500 per week
Vacancy	7.50%	5.00%
Interest at 6%	$27,210	$27,210
Property management at 7.50%	$1,984	$1,853
Rates	$2,200	$2,200
Insurance	$1,100	$1,100
Maintenance	$1,000	$500
Accounting	$1,000	$1,000
Chattel value	$10,000	$49,500
Cost per week (after tax credit)*	$93	$55

OPES Partners provide personal property investment advice, free of charge for qualifying applicants. Read their past client's testimonials, and find out more about their service at www.opespartners.co.nz