Jeff’s Two Cents: Why New Builds Make the Best Rental Properties
For several years now I have been encouraging Futurebound clients to consider building wealth as part of their retirement plan through new build rental properties.
Firstly, let’s just consider why you even need to create a plan, after all, you’re probably in a two-income household and doing really well right? The problem is that you’re not always going to be in a two-income household. In fact, it’s just a matter of time before you’re in a zero income household as that’s what retirement means…no more jobs.
The problem that you’re trying to solve is a future problem, not a current one. Investing now is important as while it won’t change your life much currently, it will change your life significantly in the future. This means making some decisions now to get a result later because there is a consequence in doing nothing.
New build reasons:
- New Zealand has a housing shortage and it’s pretty major. You can be a part of the solution, being both a patriotic Kiwi, while looking after your future self. Do it for your country!
- First home buyers are trying to get their very first house. Do you think we should support them and give them more of a chance? I do. This means not competing with them for existing houses but staying out of their way and creating a new house from scratch.
- New build houses meet the healthy homes requirements set out by the government. You don’t have to install insulation, double glazing, underfloor heating etc. It’s all done for you as part of the new building code. This means that you’re supplying a great quality home for a New Zealand family to enjoy and live healthy lives in.
- New build houses are brand new. This means no or low maintenance costs for many years. That means more money in your pocket as you’re not having to put money aside for yearly maintenance immediately.
- New build houses are clean, dry and warm. This means it will be easier for you to find long-term tenants.
- New builds qualify for lower deposits (equity or cash). This means your equity will go further with new builds compared to existing houses.
- Still to be confirmed at the time of writing this – but it’s looking like new builds will only have a 5-year bright-line test and the interest on any lending will be tax-deductible.
If you own a house already, in most situations, the bank will lend you 100% of the purchase price and your tenant will likely cover 100% of the costs (mortgage repayments, rates, insurance and a property manager). It’s as close as you’re going to get to a free house, so what’s not to like?
Many Kiwi’s still think of New Zealand as a country of 3.5-4 million. But we’re now a country of 5 million and it’s a matter of time before we get to 7 million and then 10 million inhabitants. Geographically, we’re similar in size to Japan or England and look at how much bigger their populations are compared to ours. We are underpopulated and yes, there is room for us to have a lot more people living in this country and yes, I believe that it is just a matter of time. All these people need houses to live in and they need to be built. This is where you come in.
One day, in your retirement, you will be able to earn an income off your rental property or you’ll be able to sell it and put a bunch of coin in your pocket. It will transform your retirement.
If this has opened your eyes to some possibilities, then book a 15 minute mortgage chat to start your journey to a more prosperous retirement.