According to industry sources property investors are amongst the Kiwi bach owners renting out their holiday homes in an effort to generate additional income, but while most investors are well aware of the tax treatment associated with their rental property portfolio, can the same be said when it comes to renting their holiday home from time to time?

The following are Inland Revenues “general principles”:

Any rental income received is taxable and should be returned in the owner’s tax return for the income year in which it is received, regardless of whether the activity amounts to a business or whether market rates are charged.

Whether any expenses incurred in owning the holiday house are deductible, depends on their connection with the income earned.

If the holiday house is rented to a tenant on an arm’s length basis for a long term stay then the owner is generally able to apportion expenses on a time basis. However, if it is rented out for only some of the year the owner’s ability to deduct expenses depends on whether the expenses have sufficient connection with the earning of rental income.

If a holiday house is essentially available only to the owner and their family and friends then the Inland Revenue applies a range of specific principles (outlined on www.ird.govt.nz) which cover, for example, the treatment of situations in which a holiday house is used by friends or family who are not charged rent, but instead make a minor contribution towards the owners expenses.

In terms of meeting the statutory test, if the holiday house has mixed uses, the ability to deduct expenditure comes down to a case by case assessment that weighs all the evidence.Objective evidence is required that the holiday house is genuinely available for rent and that there is a real prospect of occupancy and rental income being earned. This needs to be considered separately in relation to each year.

For more information visit Inland Revenue and search for “holiday houses.”

In January the number of  property sales across New Zealand fell to their lowest level in nearly two decades, according to the Real Estate Institute of New Zealand. However East Coast Bays was a little sheltered with our share of the national sales figures increasing. But the median price of $555,500 was 12.3% higher than January 2009, this compares with a national growth of 7.7%. And while the national sales price fell $10000 from Dec 09 to Jan 10, it increased in East Coast Bays by $22000, thats a 4% growth month on month!

The days to sell a house has increased from a low of 30 back in November and December to 38 days in January. These is a normal trend when buying a house comes second in priority to taking a summer break.

The main reasons for this continued high performance is immigration and a lack of residential building in the last few years. We need 1400 homes a year and only built 500 last year. See my earlier blog.

Here are the numbers( if you want specific figures for your street or ‘burb let me know!) :

Brian Dalley, in his Market Blog, reports that while property sales appear to have screeched to a halt it’s just part of the cycle. So, what’s up with house sales on the North Shore?

Newspaper reports state that inaction by property investors anxious about John Key’s pronouncements on revising the tax structure for property investment has caused a pause in the market. And yet, on the North Shore house prices have increased from an average of $526, 500 in December to $535,500 in January, with sales levels about the same as last year at 249 homes sold. (see REINZ residential highlights-Jan 2010).

And wasn’t there a real surge in sales just before Christmas last year? Well, there was, but not really. Real Estate sales people were happy that the usual summer surge happened on the back of low interest rates and mortgagee sales but it was still no where near the volumes we had back in 2004 to 2007.

A Bumpy Ride

2010 is is going to be a bumpy ride, but it ain’t a tsunami. There’ll be more mortgagee sales and a few home owners cashing up to reduce debt due to redundancy or lower cash-flows from their small business.

But as I have previously reported there is an underlying shortage of homes on the North Shore, and the builders have started building again.

This year a well presented, well marketed home will sell well. You may need to be a little patient and a little smart to get the price you want, but keep your head and you will do well.

If you are looking at investment properties, look for positive cashflow- try a home and income. And haunt the mortgagee sales.

Be sure that when you buy a home for your family on the North Shore, it’s a sound investment- the North Shore is New Zealand’s lifestyle city!

And now, as the National government reviews the tax structure for investment properties, home and income properties are going to be increasingly popular with property investors. Multiple income streams mean you can say hello to positive cashflow and  say good bye to negative gearing!

Positive cashflow simply means that the income from the rent exceeds the expenses of owning a rental property. Simply put: you can sleep at night as the mortgage gets paid off quicker or you can use the surplus for something else. Paying the mortgage quicker increases equity and allows you to buy more investment properties. And buying a home and income is an ideal investment strategy. Let me show you how:

Superb Cashflow from Home and Income, Aberley Road, Albany

37 Aberley Road, Albany was recently sold for $750,000.

This is a legal home and income, a 4 bedroom main house and a 2 bedroom unit. It is near new, brick and tile, so low maintenance and easy to own. This is an ideal home for for an extended family, for two couples or as a great investment.

The rental income is $550 per week for the house and $400 for the unit, thats about $47500 in rental income per year.

Say you pay a deposit of $75000, and secure it against your existing property, Borrow $675,000 at 6.5% interest, easily achievable on todays market. The mortgage cost is approximately $40500 per year, leaving $7000 for rates and insurance.

It is easy to see that this is going to be a trouble free investment. You can watch your equity grow as there is a housing shortage on the North Shore and investors will increasingly turn to this type of investment, driving values UP.

Here are a few home and income properties we have on sale right now:

Home and Income in Buncrana Place, Albany

7 Buncrana Place, Albany

Built of brick and tile to stand the test of time, this single level home and income offers a 3 bedroom home (master ensuite) and a separate self contained 2 bedroom unit.

Situated in a quiet street in Rangitoto College zone and very handy to Pinehill School, Massey University and all of Albany’s amenities. This will sell quickly!

Asking price $749,000. Currently earns about $40000 per year. What would you offer? Call me right now.

Multiple income property in East Coast Road, Browns Bay

541 East Coast Road, Browns Bay

Three bedroom home with expansive sea views. Built of brick, tile and weatherboard construction plus two x one bedroom units – one under and one beside. Ideal for extended family or buyer looking for additional income. Close to main bus routes, walking distance to Rangitoto College, motorway access.

Highly motivated vendors liquidating assets. Strike while the iron is hot.

Asking around $800000, earns about $55000 per year. You work out the numbers and make an offer

Home and Income, Noel Williams Place, Mairangi Bay

18 Noel Williams Place, Mairangi Bay

Rangi Zone Home and Income Huge purpose built home and income in Mairangi Bay is on offer. Main house consists of 5+ bedrooms, 2 bathrooms.Minor dwelling is 2 bedrooms, single level and also has level outdoor living. We’ve appraised this as earning more then $50000 per year with an asking price of $799,000. you do the math!

You can find out more on property investment and especially home and income properties on Brian Dalleys website Property Profit here.

Brian has written two books on Real Estate and Property Investment in New Zealand and now through PropertyProfit, you can get them sent to your inbox for FREE! Just click on this link, now!

The million dollar question that

we are asked at the moment is

“what do you think will happen to the interest rates

this year, how high will they go?”

A lot of people are uncertain about what’s happening with interest rates so they are going on the floating rate to watch and wait. People are doing a mixture of variable and fixed rates and we want to make sure when they look at what’s available they see they get a good rate.

One of the major banks says most people are looking to fix because it is perceived that rates will go up in the middle of the year, however there is still strong demand for the floating rate with 40% of drawdown’s on the floating rate.

Another economist says we are seeing a change in the floating rate now because of weak data and unemployment numbers which suggest the official cash rate, which is at a record low of 2.5%, won’t rise until June. Previously many economists were expecting a rise in March or April. He says if any other banks make movements he expects them to be minor because there has not been much of a change in 90-day bank bill yields and it is more expectations of them changing rather than the immediate cost of borrowing changing.

He believes the option of floating looks best for most people and as we approach the time when floating rates start rising – mid-year – for a while the optimal thing may be to fix one year, as many are still choosing to do at the moment. His advice for borrowers is to budget for about a 3% rise in floating rate borrowing costs between the middle of this year and the end of 2011.

No change from last week with Interest Rates of the week:

6 months  5.69%

12 months  6.15%

18 months  6.60%

24 months  7.20%

36 months  7.79%

48 months  8.49%

60 months  8.60%

ASB however did move down their rates this week, which is a welcome change as they have been leading the charge with rates going up!

Give your home a hug this Valentines Day!

Valentine’s Day is usually spent taking a romantic vacation with your significant other or spending tons of money creating the perfect day.  Like many you can end up spending hundreds of dollars for one day.  If you are like many couples currently experiencing the difficulties of the recession and trying to sell your home you just can not afford to do both this year.  If this is your situation, I have the PERFECT solution: give your home a hug by spending Valentines Day staging your home.  And do it with your lover. Spend Valentines Day staging your home and reward yourself at the end of the day with a nice bottle of wine and dinner at home. Your house will love it, you’ll like the look once you’re done and with luck you will have increased the value of your home and made it easier to sell

One of the great things about staging your home is that it can be done with little or no money. No matter what your budget is, even if it is zero, you can use staging techniques to increase the appeal of your home.

When it comes to selling your home you want it to really appeal to buyers in a positive way. You want buyers to love your home, to look around and go, “Ooh, look at that,” or “Wow, that’s beautiful.” Your home should have some pizzazz, some sizzle. In other words you want to trick your home out and give it some bling!

Here are my tips for home staging:

1. Get Rid of the Clutter

One of the most important things to do when it comes to making the inside of your home look desirable is to get rid of the clutter. After living in our home for a while we tend to accumulate stuff. I have heard professional home stagers recommend that the average home owner clear about 1/3 of their possessions out of the house before putting it on the market. Definitely remove any collections of dolls, spoons, Star Wars figures, or any other dust catchers.

Some sellers put their stuff into storage, which can be a great idea. You could try Kiwi Self Storage in Constellation Drive, we have used these guys before and I recommend them, or Smartbox. Smartbox is a super service; they deliver a storage box on a trailer, you fill it and lock it and they store it in their warehouse ready for you to pick up when you are ready. It will cost less than you think!

2. Windows

Make sure your windows are clean! Sparkling windows show off your view or garden and let the sunlight in.

It’s a good idea to have window treatments on every window in the house, if they make sense. A combination of blinds with curtains is best. But here’s the catch, you also want to let lots of light into the house. So the blinds should be raised and the curtains fully open. This creates a nice framing effect on each window.

3. Lighting

In addition to letting in natural light you want to add plenty of artificial light. The trick that home stagers use is to layer the lighting. They use a blend of light from ceiling fixtures, lamps, wall lights and task lights. You want to make rooms bright, without being too bright and not have any single light source overly stand out.

4. Doorknobs, Switch Plates and Outlet Covers, Oh Boy!

If you are going to go to all of the trouble to make the walls and doors look great, you should finish the job by replacing all light switch plates and outlet covers with new ones. I also recommend replacing all of the doorknobs if they look at all worn, because it’s so inexpensive to do it. The reason this is a pet peeve of mine is that freshly painted walls with painted over switches and outlets looks like a cover up job to me. Replacing all of the switch plates and outlet covers in your home should cost you about $100.

5. Arranging the Furniture

If you’ve ever seen a professional home stager in action they seem to have this great ability to take the existing furnishings you have and rearrange them, sometimes into different rooms and make your home look completely different–and so much better. Because the furnishings you have and the layout of the rooms in your home will be completely different for each person there aren’t a lot of general tips I can give you for arranging your furniture. Look in home magazines. It doesn’t cost anything to go to the bookstore and look at them. They are full of photos that can give you great ideas. These magazines share tons of useful tips and tricks for making your home look great. If you run out of ideas, try Homebase, they have a service where they will visit your home and give you a plan, for a few hundred dollars. What I don’t recommend doing is going out and buying whole new furniture sets for key rooms in your home just for staging.

There are a few commonsense tips I can offer that apply, no matter what furnishings you have and how the layout of a room is.

1. Don’t leave large dead spaces.
2. Clearing the clutter applies to too much furniture as well.
3. Don’t have everything pushed up against the walls.
4. Add some greenery, nice fresh growing plants in the entry or in a strategic spot add drama.

6. Master Bedroom

The master bedroom is the ultimate refuge. It is the haven within the home. No matter how large or small your master bedroom is, you want it to appeal to the buyers as a place they WANT to spend their nights. If your master bedroom is cramped, it’s time to move some of the furniture out.

And please, if your home office and computer are in the bedroom, now is the time to put that office stuff away to help create that restful refuge!

Also, closets are a big selling point for houses. Clear out your closets out. If your master bedroom closet is jam–packed, buyers will look at it and decide there just isn’t enough room, even if your closets are huge.

7. Bathrooms

Your bathrooms should be so clean you can eat off the floor (but no need to test it this way!). There shouldn’t be any mildew, soap scum, toilet rings, body hair or anything else that makes the buyers think they are buying your dirt. Make sure the mirrors sparkle.

8. Kitchen

“Kitchens and baths sell homes.” Pretty much any real estate agent in the country will agree with this. Making your kitchen look the absolute best it can is well worth it when you are trying to sell your home. The beautiful thing about staging your kitchen is that you really don’t have to spend any money to do it.

Clean out any food that is past it’s “use by” date, and sending old plastic and glass jars to the recyclers. Check that your cupboards, refrigerator, and stove are clean, now is the time to spring clean, don’t wait til settlement day!

These tips will help to save you money while trying to sell your home and allow you to still spend time with your loved one on Valentines Day. A well-staged home that is competitively priced consistently outsells non-staged homes, even the do ups. By the way don’t forget the flowers! If you would like more tips for do-it-yourself home staging techniques call Tony on 0800 61 8888 or check out  Wendy Patton’s book  Rent-to-Sell by clicking HERE. she has some great ideas that might just help!

WENDY’S VALENTINES DAY SPECIAL OFFER: Purchase Rent-to-Sell before February 14, 2010 for ONLY $9.95.

Enter Coupon Code: VALENTINE to purchase Rent-to-Sell Today! Share this article and coupon code with  your friends and they will thank you later

As New Zealand’s Lifestyle City, the North Shore has a lot to brag about with many of its local shopping centres hugging the coastline. The local retail experience tends to be  laid back compared to places such as Newmarket and Ponsonby; MSS on the Shore can be interspersed with a swim, a picnic or a stroll on the beach.

I can’t say I never venture into a mall. But I like the fact MSS allows for independent retailers to ply their trade, without the horrendous overheads of a mall, and the experience can enliven the senses of even the most jaded of shoppers.

Browns Bay Shopping Centre
This is an oldie but a goodie, without a mall in sight. It really has a relaxed, beachside feel about it, and reflects the diversity of its local citizens. All your weekly shopping needs can be satisfied in Browns Bay as it is well serviced for food, clothes (both men’s and women’s) and financial services. All the major banks are here, including Post Shop; there are 2 supermarkets, a South African specialty store and cafe, Janssen’s Specialty Meats and Bramptin’s English Grocery. A good number of restaurants and cafes offer a variety of fare including French, Chinese, Japanese, Indian, Italian, English and German. It has the good old fashioned basics like op shops, clothing repair, a wool shop, stationers and manchester, as well as some that are becoming increasingly rare such as a CD store, a fish shop and butchery. Browns Bay is substantial enough to have a WINZ office, a hearing clinic and a pet shop. On your way to the beach, you can call in for a sweet treat at the ice cream parlour.

The shop that has me travel to Browns Bay shopping centre? The German Cafe and Deli called Tasty and Delicious on Inverness Road. They have all things “lecker schmecken”  – pretzel, black bread, torte and chocolate included.

Helga in her fine food oasis

Mairangi Bay

Though much smaller than Browns Bay, Mairangi Bay Village packs in a lot of lifestyle retail choices. It’s a favourite with Ladies-Who-Lunch.There’s plenty of free parking behind the shops, but you might be lucky and score a park on the main street. Apart from being dominated by Real Estate offices (something the Business Association in Browns Bay is strongly opposed to), the main street has more than its fair share of women’s clothing boutiques (from everday wear to the high-end fashion of Lejose) and eateries. There is a supermarket tucked discreetly away up a side street, and you can buy fresh fish from the local fish monger. Specialty shops that are unique to Mairangi Bay are Janbells Uniforms (very busy right now supplying school uniforms), and Nikau – selling beautiful New Zealand giftware.

The shop that has me travel to Mairangi Bay Village? Martini Interiors in The Gables. It’s a little bit of Grey Lynn on the Shore. Owners Terry and Karen specialise in “retro chic” -  furniture and collectables from the 50s, 60s and 70s.

Terry at Martini Interiors

Takapuna Shopping Centre

This is the shopping centre that holds the most memories for me, with the iconic Hall’s Corner Building, The Strand and The Promenade. This is where I would go to shop with my mother as a 5 year old when we lived above the old Takapuna Post Office. Much has changed about The MSS, and of course the mall has been a fixture since the early 70s. The town is not without its share of controversy, as there are those who believe it should be the North Shore’s premiere shopping precinct, with its beautiful beach and some of the most expensive real estate in Auckland. The recent addition of The Department Store in Huron Street a collective of high end designers such as karen Walker and Simon James Furniture and Blackbox Design.Scott Donovan of Life For Men is one local retailer who has always believed in the strength of Takapuna as a shopping destination, and he demonstrates his belief by operating two menswear stores on Hurstmere Road covering all the bases from beachwear to Hugo Boss suits and shoes.

Rents are high in Takapuna, so there’s very little free parking available (unless you’re shopping in the mall). The most beautiful parking spaces in Auckland must be those on The Strand. Your vehicle gets to gaze out over the beach to Rangitoto all day. Wouldn’t it be lovely if we could have some cafes there instead!

Mainstreet Takapuna, like Browns Bay, is a large, well-serviced shopping centre with a focus on entertainment rather than everyday needs. There are well over 50 eateries, from fast food joints to cafes and restaurants, taking in a wide ethnic diversity. If you love shopping for clothes, Takapuna is bound to have what you want with more than 25 stores (that’s not counting what’s in the mall!). The place is also well stocked with optometrists, banks (the only place on the Shore to have HSBC and TSB)  florists, giftware, beauty therapy and tanning clinics. There’s a couple of bookshops, some op shops and 2 nail bars. Specialty shops include a hard-to-find music supply shop in Lake Road, a Shaver Centre which sells and services small appliances and shaving paraphernalia on Huron Street, The Olde Lolly Shop in the Parkway Arcade and “Auckland’s Largest Choclate Shop” at Choclate Heaven. Just to remind you there’s a beach not far away, there are two icecream parlours, including a morish Movenpick shop.

The shop that has me travel to Takapuna? Life For Men when I want to buy something smart for Tony to wear.

Scott Donovan at Life For Men

Birkenhead (Highbury)

Highbury has only a small mall, so most of the shops are out on the street. All the basics are there, with an emphasis on home improvement and food. There are 2 butcher shops!!, a fish monger and 2 clothing alteration places. There are also many high-end shops, catering for your fashion, interior design and health and beauty needs.

Specialty shops include Wallace Cotton (a little hard to find, but well worth the search), a Hobby Shop and Earthly Treasures (supplying rocks, crystals and stamps to avid collectors). If you need new glasses, shoes, a hearing aid or stationery, you’ll be able to buy them in Highbury. If you’re down on your luck or you love a bargain, there’s a big pawn broker and a number of op shops on the main street. You’ll always find somewhere good for lunch or dinner in mainstreet Birkenhead, and if you want something really special, wander down towards the wharf to sample the fare from a number of great cafes and restaurants. There are some lovely antique and giftware retailers there, too.

The shop that has me travel to Birkenhead? Ashore Fine Foods & Wine for their imported and local boutique beers, Denheath Custard Squares from Timaru and lots of other deli treats.

Devonport

The North Shore’s oldest main street shopping centre and the only one with that authentic, old-fashioned village feel, Devonport attracts many thousands of local and overseas tourists to browse, eat and relax in a picturesque maritime setting. Thanks to the staunch attitude of the local heritage trust, Devonport has retained much of its original Victorian architecture.

Devonport is a place to admire and buy beautiful things, whether it be artwork from one of the many galleries, such as Peter Raos Glassware, original women’s fashion, vintage and rare books (they’re not second-hand in Devonport), or some objets d”Art from an antique or interior design store. You can also enjoy beautiful food from any number of cafes and restaurants, whether fine dining at the Esplanade, or good hearty English pub fare from The Patriot. The building formerly known as Jackson’s Museum is now a high-end retail outlet housing such exclusive boutiques as Oscuro Lamps, a Millinery (where you can take lessons in hat-making) and Bramptin’s The UK Grocer.

Everyday shopping needs are well catered for in Devonport; it even has a sizeable Hammer Hardware – such practical shops are becoming a rarity in MSS – a specialty butcher, pharmacy, optometrist and hair and beauty salons. Wild and Woolly Yarns will supply all your knitting materials, and there’s also a patchwork fabric shop. It is good to see the music shop still in existence (now owned by Marbecks). The Shore’s best supermarket is in Devonport and there’s a gelato shop you can call into on your way to the wharf.

The shop that has me travel to Devonport? There are many, but the Stone Oven Baker, in Clarence Street, is a favourite.  They make great bread from scratch. And I can’t leave out Devonport Chocolates which produces some of the most delicious hand-made chocolate in existence!

Milford

MSS in Milford is functional, with a supermarket, 2 green grocers and a hardware shop, but you’ll also be able to enjoy a great meal. Most of the fashion happens in the Mall (which is excellent as far as malls go). Milford Cellars is an excellent place to buy wine as the owner is passionate about his product and will always have a story to tell. Tea Total sells a huge array of specialty teas; and the Dutch Deli is excellent for purchasing local and imported cheeses and other Dutch products. They also sell delicious gelato which they make on the premises.

The shop that has me travel to Milford? Arazzo – you’ll always find a special gift in this beautiful shop and Diana, the owner, does an amazing gift wrap.

What will this year bring us in the property market? It is only a year since all was doom and gloom with no end to the recession in sight. Right now, it seems like we are going to have a great year! According to Alistair Helm CEO at Realestate.co.nz, sales of residential property in New Zealand were up 10% on the previous year and he predicts that there is plenty of scope for more: 

“In the last 12 months there were a total of 67,197 residential sales as compared 60,981 in the period to October 2008 – a 10% increase. The good news is there is great scope to see sales rise even more in 2010 – based on a 10 year average of sales as a ratio to the number of houses across the country we should be seeing sales averaging 96,000 a year! – so there is upside growth in sales to come, hopefully we will see some of this in 2010.”

Yesterday I sold two family homes in Milford and Forrest Hill. Both homes had multiple offers within 48 hours of listing, with 9 buyers wanting the  two houses. The were both sold well in excess of the asking price. So what is driving the property market, and more particularly what is happening on the North Shore, the highest value real estate in the country? Why is it so buoyant, why now, and will it last?

Simply; Supply and Demand. Every year the population of the North Shore increases by about 4000 people and that rate gets gets faster, every year. Statistics New Zealand thinks it will be approaching 6000 per year in the next decade. About half that increase is new babies, and the rest is immigration. People just love our climate, our lifestyle and the opportunities for work, education and play. On average there are about 2.8 people living in each house on the North Shore, so every year we need another 1400 homes built to accommodate all those people.

These homes are NOT being built, the builders can’t get the land, the labour or consents quickly enough.

And thats why the price of your home is going up.

The number of building consents has declined steadily from a high of 1300 in 2004 to 950 in 2008. And then in 2009 only 508 homes were built….there is now a shortfall of about 1400 homes. It will take years to catch up. Already in Auckland the number of families without homes is growing, and the New Zealand Herald reports that on the North Shore there is a crisis as even high income families find they cannot afford to buy an average home.

Already, the Herald is reporting that the number of building consents is rising but the lead time for obtaining consent for subdivision, the development of the land, building consents and building is measured in years. It takes far too long to build a home in New Zealand, and most of the time is taken up by these consent processes.

The government, Reserve Bank and North Shore City council have a problem. Homes for families will keep rising in price. The price of a home will not be driven downward or slowed down by arbitrary manipulation of the Official Cash Rate. The price of a houses will only come down when the supply of homes exceeds the demand. And it is the governments red tape that is causing the problem.

The North Shore needs 2500 homes to be built this year. That’s a suburb or two. I don’t see where those suburbs are being built, so you?

In the meantime, if you are selling you can expect to get a great price. Call me and I’ll show you how you can be “overwhelmed” as my sellers said one Wednesday, when they sold for $20000 more than the asking price.

If you are buying, you are making a great investment, and can expect prices to rise in the next few years. Call me and get the inside running on those “hot” homes, before they get onto the market. Let’s see if we can get a great deal for you.