A dollar tomorrow is worth more than a dollar today; it's a basic economic principle and an invitation to the world of investing.
We're major in the idea of building homes that last. It's in the fibre of everything we do and every service we offer here at Build7. For many of our amazing clients, the process of building is also a step towards building their financial future.
The secret is out; investment properties can be a great way to grow your asset column, increase your cash flow and enjoy the benefits of passive income through rentals & equity, not to mention the potential tax benefits. We'd be remiss to say that getting into the market is always comfortable or without its hurdles, pitfalls and challenges. There's certainly a wealth of information, legislation and conversation to explore around this topic; today, we're only scratching the surface of a particular facet of it. We're excited to share some caveats to the current Loan to Value Ratio legislation that might be a window of opportunity for some people eager to add to their portfolio.
As we touch on some key points to ponder when considering an investment property, please keep in mind that this is general commentary. If you're keen to invest in property in any form, seek qualified advice from a professional you can trust.
Potential Adjusted LVR's for Investors
The Reserve Bank is the referee on what goes when it comes to lending in New Zealand. They call the shots on what percentages other banks are allowed to accept when financing the purchase of a new home. You can read about the current guidelines here. While, in some cases, they'll blow the whistle on low deposits against higher-value projects, investors can also take advantage of specific nuances and provisions. The caveat that we're touching on allows investors in new construction or land and home packages to initiate with only a 20% deposit. This amendment was made to stimulate the market and increase the amount of housing on the market. This is a significant difference from the norm of a 40% deposit for other investment situations.
What could this opportunity look like for some investors?
There are multiple avenues that aspiring investors can take here.
For those working towards or nearing the 40% benchmark, this exemption can move the finish line far closer. Some may even find themselves positioned to enter the market. Others might find that their deposit would now be sufficient to invest in multiple properties at once, spreading their savings further and potentially increasing the potency and the equity generating power of their investment. We think that the opportunity here is exciting!
What to consider about a new investment build:
As we just mentioned, building an investment property from scratch can qualify you for unique benefits and exemptions when securing finance. You should seek professional advice to navigate the intricacies of the banking world and loans.
New builds offer the appeal of modern building techniques, finishes and practices. That fact often means that they are more desirable to potential tenants, rent for more, and cost less to maintain.
The government checklist for healthy homes, now passed into law, stipulates the minimum standards that a dwelling must meet. Landlords are responsible for updating and maintenance to their property to ensure compliance.
Depending on the area where a build takes place, shortages of stock in the housing market can inject instant equity into a new home's value. It's always a great feeling to know your money is working for you.
Bank account interest rates have sunken to new lows, offering negligible returns; investing money puts it to work, and real estate in New Zealand is a tried and tested asset.
How we can help you:
Our combined years of expertise, experience and passion for building dream homes allows us the know-how to come alongside you in your journey
We are a full-service custom builder, working tirelessly to deliver a warm, inclusive and enjoyable experience
We have contacts in every relevant sphere to the industry, so no matter what stage you're in, we can put you in touch with people we trust to help you along
We offer complimentary consultations to get the ball rolling; we've taken away the pressure so you can focus on the things that matter most
Remember, this article is not advice tailored to your situation; seek out financial advice from qualified professionals when considering a home purchase. This is only one opportunity in the market; there's so many more out there. If you're considering taking the leap and becoming a property owner or investor, we're here to help and always just a call or an email away.