In­vestors urged to fo­cus on cash profit

Manawatu Standard - Property Weekly - - Property Weekly -

As the tax net on claim­ing prop­erty losses tight­ens, the Prop­erty In­vestors’ Fed­er­a­tion is urg­ing in­vestors to aim for prop­er­ties that make a cash profit.

At the fed­er­a­tion’s con­fer­ence held last week­end in Blen­heim, pres­i­dent Martin Evans ad­vised mem­bers to re­duce their debt and to for­get about look­ing for cap­i­tal gain at this stage in the prop­erty cy­cle.

He said peo­ple need to avoid buy­ing prop­er­ties ‘‘where they’re top­ping up by $200 a week and then hop­ing that in time it will be­come cash­flow pos­i­tive when they’ve paid the mort­gage off’’.

‘‘They re­ally need to be look­ing at prop­er­ties that are re­turn­ing a cash­flow right from day one.’’

Op­por­tu­ni­ties to buy cash­flow­pos­i­tive prop­er­ties are be­gin­ning to emerge, as the down­turn in the prop­erty mar­ket forces peo­ple who need to sell to lower their prices: ‘‘It’s a buyer’s mar­ket . . . Buy­ers are of­fer­ing lower prices be­cause they’re set­ting their lim­its lower so their high­est price will be show­ing a re­turn.’’

In his home­town of Christchurch, Mr Evans said the earth­quake has cre­ated some un­usual dy­nam­ics.

‘‘In Christchurch there will be op­por­tu­ni­ties be­cause there will be some sub­urbs where own­ers won’t want to own houses and in­vestors might see that as an op­por­tu­nity to put ten­ants in those ar­eas.’’

A cash­flow-pos­i­tive prop­erty could still run at a loss if it earned a tax re­bate, and in­vestors should fac­tor that in when weigh­ing up a prop­erty’s earn­ing po­ten­tial.

But if the Govern­ment takes away in­vestors’ abil­ity to claim rental losses, that would truly hurt the sec­tor, he said. Al­though tens of thou­sands of prop­erty in­vestors use LAQCs (Loss At­tribut­ing Qual­i­fy­ing Com­pa­nies) now, they are des­tined to die out: ‘‘I think they’ll be­come a thing of the past.’’

Newspapers in English

Newspapers from New Zealand

© PressReader. All rights reserved.