The rules for property investors have changed, removing tax deductibility for rental loan payments and extending the bright line test to 10 years.

 

What are the current pros and cons of property investment?

 

Property investment is now more expensive. This will put it out of reach for more Kiwis, particularly for first-time investors.

 

The biggest downside of rental ownership is risk. It’s much more hands-on than investing in, say, shares. With more regulations being introduced all the time, managing tenants is not getting any easier – being a landlord can be very stressful. It may also cost you money to own your property, and while negative cashflow can be a form of enforced savings, this is a much riskier strategy than just putting money into an investment fund.

 

However, there is one big upside that is unchanged by the new legislation. The most significant advantage of investing in property is leverage. Unlike almost every other investment class, you can borrow large sums to buy houses, giving property investment impressive wealth-generating potential over the long run.

 

Is property investment right for me?

 

Property investment can be a good choice for many Kiwis, but it depends very much on your individual situation and your appetite for risk. You can talk to us about how it might impact your tax situation, we’re here to help!