Can I get out of the Lease?
No. The lease is for 10 years with HNZC having a 5 year right of renewal. You cannot cancel this lease. You can however sell the property at any stage with the lease in place.
Can we buy this investment on a dual income? How does the taxation work in this case?
Buying this investment on the basis of two individuals earning $60,000 will give you less tax benefits than buying it based on 1 person earning $60,000.
For example:
If a couple earns $60,000, with the husband earning $30,000 and wife earning $30,000, they can buy the property on a 5O/5O basis or any other split.
For the above example of 5O/5O both husband and wife will get an equal allowance of the tax benefits. Given they are both at the lower earning scale the tax saving will be at a lower taxation rate so it is less advantageous than if one person is earning $60,000.
Tax is at 19.5% upto $38,000 then at 33% for the next $22,000 (up to $60,000). Then at 39%.
For the above example they would only have a tax benefit at the 19.5% rate as individually they earn under $38,000. Alternatively, an individual earning $55,OOO will get the benefit of $23,000 at the higher rate of 33%.
Where one partner earns higher than the other, say $45,000 and $l5,OOO we would normally recommend that all is done in the name of the higher earning partner.
We recommend you seek independent financial advise to see what is best in your situation.
How can I be sure the HNZC Lease is in place?
Before Home Investments puts an Investment Property + HNZC Lease on the market, HNZC has confirmed in writing that the property will be leased, for a certain period of time and at a certain rent per week. The rent period is usually: 10 years, plus 1 x 5 years Right of Renewal in HNZC's favour.
How is the rent guaranteed for ten years?
With the signed Lease Agreement Housing New Zealand Corp (HNZC), or the New Zealand Government, confirms that a 10-year lease will be in place against the title of the house. This lease means that HNZC will lease that house from the registered owner, for 10 years, guaranteeing the rent will be paid 52 weeks per year, for 10 years. The Lease will be registered against the title as soon as the construction of the house is completed and all consents are in place.
How many HNZC homes are in my subdivision?
The policy of HNZC is to limit the number of houses they buy in anyone development. As a general rule they will not exceed 35% in anyone development.
How much money do I need?
There is no hard and fast rule about the money you need as this depends on a number of factors
- Your Salary
- The equity you have in your own home - Any cash you have availableYour Salary - One of the factors that makes any property investment attractive is the ability to deduct the depreciation costs of the rental property from your salary. The higher your salary the higher the tax you pay and the greater the savings on offer.
- We estimate that a minimum salary of $55,000 is required in most cases.
- The equity you have in your home - This is the value of your home less any debt (mortgage) that you may have. If you home is worth $350,000 and you have a mortgage of $100,000 then you have equity of $250,000.
- Most banks require that 20% of the purchase price of a new house is your equity. So for every $100,000 you borrow they want to know that you have $20,000 of equity.
- A typical home average $350,000 with an equity requirement of 20% this equates to $70,000.
- The actual percentage of equity required will vary according to a number of factors the banks consider. Cash funds - If you have a lower salary than $55,000 or too little equity in you own home an rental property may still be for you if you have other cash funds you can invest.
Is the HNZC Lease Agreement registered in the name of the owner (of the property)?
No, the "Memorandum of Lease" is registered against the title of the house. With this agreement, HNZC confirms it will lease this property for 10 years.
The signatures on the Lease are from HNZC and the very first owner of the property that negotiated the lease with HNZC. This can be Home Investments Ltd or sometimes even the developer of the property. When there is a change of ownership of the house, there is no need to sign a new lease. The lease stays in place.
Instead, HNZC only needs to receive a "Owner Lease Detail form" with the name and contact details for the new owner. This way the HNZC database can be updated and the rent can be paid to the right (new) owner. The new owner's solicitor must make sure this form is sent to HNZC.
Who pays for what the landlord or HNZC?
Any damage is down to the tenant as is unreasonable wear and tear. Normal wear and tear is the responsibility of the landlord (you).
Who pays the water rates?
The owner of the property pays full water rates, inclusive of waste water. However, if the yearly water rates exceed the figure described in the lease contract currently $520 per year for a 4-bedroom house - HNZC will reimburse anything over and above this figure.
