Ki­wis keen on ‘rentvest­ing’

South Waikato News - - Property - COLLEEN HAWKES

Long-term rent­ing may be the only op­tion for an in­creas­ing num­ber of peo­ple liv­ing in our less af­ford­able cities – but in­creas­ingly it is also a cho­sen op­tion.

As house prices soar, many peo­ple are think­ing out­side the square in terms of prop­erty own­er­ship, and look­ing at other ways to se­cure a prop­erty for re­tire­ment.

Buy­ing a prop­erty in an­other town or city, like the South Waikato, has be­come an in­creas­ingly pop­u­lar op­tion.

Rent­ing out such a prop­erty means it could be fully free­holded by the time you re­tire –a move now com­monly re­ferred to as ‘‘rentvest­ing’’.

Mark Collins, chief ex­ec­u­tive, of Mike Pero Mort­gages, says this is not about prop­erty in­vest­ment for cap­i­tal gain, which could be sub­ject to a cap­i­tal gains tax.

Rather, it’s about buy­ing a prop­erty for re­tire­ment, or for use as a fam­ily hol­i­day home.

‘‘Buy­ing out­side the big cities means you are vul­ner­a­ble to re­gional changes. Up un­til about two years ago, when the halo ef­fect started hap­pen­ing in towns out­side of Auck­land, some of the re­gions were go­ing back­wards when you ad­justed for in­fla­tion – up to 13 per cent in some cases. The yields, around three to four per cent, are also not great. If you were sim­ply look­ing for cap­i­tal gain, you would need to as­sess such a prop­erty in­vest­ment against all other types.

‘‘But this is not the best use of rentvest­ing. It’s more about plan­ning for re­tire­ment 10 to 15 or more years out – se­cur­ing a place­holder at to­day’s prices, rather than the price that house will be in 20 years’ time.’’

Collins him­self pro­vides the per­fect ex­am­ple. ‘‘We moved to Auck­land for work but there is no way we can af­ford to buy a house in the area where we want to live. So we are con­tent to rent a prop­erty in the area and send the chil­dren to the schools we pre­fer, while keep­ing our home in Ro­torua.’’

The Ro­torua prop­erty is rented as a hol­i­day home, which helps cover costs. Other own­ers of such prop­er­ties of­ten rent them out on a more per­ma­nent ba­sis, with the rent cover­ing all costs.

‘‘In our business we are see­ing an in­crease in the num­ber of peo­ple do­ing this, es­pe­cially Auck­lan­ders. Peo­ple think they will never get a foot on the prop­erty lad­der, but they can buy a home else­where that will cost them half the price of a sim­i­lar house in the mar­ket they are liv­ing in.’’

Collins says peo­ple may need to think about re­tire­ment a lit­tle ear­lier than in pre­vi­ous years, to safe­guard against huge price rises.

Rentvest­ing is prob­a­bly not an op­tion for first-home buy­ers look­ing to use Ki­wisaver funds, how­ever, as the house would not be their prin­ci­pal place of res­i­dence. Collins also cau­tions that lend­ing in­sti­tu­tions will want to see an in­come that could cover po­ten­tial in­ter­est rate rises.

The con­cept has gained plenty of trac­tion in Aus­tralia, where rentvest­ing sta­tis­tics show around one third of such pur­chasers are first-home buy­ers, ac­cord­ing to a Mort­gage Choice sur­vey.

Buy­ing in cheaper South Waikato towns and rent­ing them out could be a may for first home buy­ers to get on the prop­erty mar­ket.

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