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JUL 20 2020
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Things to watch when turning your family home into an investment property

Posted by: Connie in Property Investing

When you have decided to upgrade your family home, you may want to keep your current home and repurpose it as a rental property rather than selling it. So, what should you consider before making the move?

This week, our guest speaker, Allbright Liu, shared insightful knowledge in things that investors should consider when turning their home into a rental property, and discussed how a well thought out structure could be surprisingly beneficial in achieving asset protection and tax efficiency.

What happens when turning your home into a rental property?

When it comes to converting your residential to an investment property, building the right structure is one of the most common and challenging parts. A poorly designed property structure at the time of purchase could have potential negative impact when the initial structure was modified at a later stage. For example, when you restructure after settlement, IRD may check your motivation and make sure it was not a move for tax avoidance, which carries a fine equate to the value of 25% on the short payment. 

We’ll start with a case study for changing from owner occupied to a rental property:

  • Mike (husband) and Mary (wife) are currently employed (PAYE) with good income.
  • Their family home (value at $1.2 million) is under Mike’s personal name, with $200k loan against the property.
  • Their current home was purchased before the marriage, while Mike and Mary were in a de facto relationship
  • For better school zoning, they are thinking about buying a new house as a new primary residence
  • They have found a new home with a loan pre-approval of $1.5 million, and they can hundred percent borrow for the new property at $1.5 million
  • So, they are planning to turn their home into a rental property after they move into their new house

When you decide to convert your residential property to an investment property, there are some aspects that Mike and Mary need to be aware in this case. For more details, please watch the video. If you have any question, Allbright will be happy to discuss the options with you and explain in more detail how this might work for your specific situation.

Guest bio: Allbright Liu is a New Zealand Chartered Accountant and a property investor. She has more than 10 years’ experience in business advisory services, taxation, business planning, and auditing and she was also a property wealth coach, which equipped her with a solid understanding of the best structures that will give investors the edge to success. You can contact Allbright via: allbrightl@allbright.co.nz: or by calling: 021 101 4098


Prosperity Finance – here to help

We are mortgage broker in New Zealand. If you’d like some home loan help, we’re here to help. Call us at 09 930 8999 for a no-obligation chat with our adviser.


Other Blogs You Might Like:

Incorrectly converting home to investment property could cost you extra $7k a year

Why is property ownership structure more important than you think


Tags:

When you have decided to upgrade your family home, you may want to keep your current home and repurpose it as a rental property rather than selling it. So, what should you consider before making the move?

This week, our guest speaker, Allbright Liu, shared insightful knowledge in things that investors should consider when turning their home into a rental property, and discussed how a well thought out structure could be surprisingly beneficial in achieving asset protection and tax efficiency.

What happens when turning your home into a rental property?

When it comes to converting your residential to an investment property, building the right structure is one of the most common and challenging parts. A poorly designed property structure at the time of purchase could have potential negative impact when the initial structure was modified at a later stage. For example, when you restructure after settlement, IRD may check your motivation and make sure it was not a move for tax avoidance, which carries a fine equate to the value of 25% on the short payment. 

We’ll start with a case study for changing from owner occupied to a rental property:

  • Mike (husband) and Mary (wife) are currently employed (PAYE) with good income.
  • Their family home (value at $1.2 million) is under Mike’s personal name, with $200k loan against the property.
  • Their current home was purchased before the marriage, while Mike and Mary were in a de facto relationship
  • For better school zoning, they are thinking about buying a new house as a new primary residence
  • They have found a new home with a loan pre-approval of $1.5 million, and they can hundred percent borrow for the new property at $1.5 million
  • So, they are planning to turn their home into a rental property after they move into their new house

When you decide to convert your residential property to an investment property, there are some aspects that Mike and Mary need to be aware in this case. For more details, please watch the video. If you have any question, Allbright will be happy to discuss the options with you and explain in more detail how this might work for your specific situation.

Guest bio: Allbright Liu is a New Zealand Chartered Accountant and a property investor. She has more than 10 years’ experience in business advisory services, taxation, business planning, and auditing and she was also a property wealth coach, which equipped her with a solid understanding of the best structures that will give investors the edge to success. You can contact Allbright via: allbrightl@allbright.co.nz: or by calling: 021 101 4098


Prosperity Finance – here to help

We are mortgage broker in New Zealand. If you’d like some home loan help, we’re here to help. Call us at 09 930 8999 for a no-obligation chat with our adviser.


Other Blogs You Might Like:

Incorrectly converting home to investment property could cost you extra $7k a year

Why is property ownership structure more important than you think


Tags: