It is more difficult to make money from property today than in the 1980’s. You cannot really make money (apart from in certain selected areas) by just sitting on a property and hoping that one day it will increase. However, you can make money by: Buying right - ie. look long and hard before buying and don't buy purely on emotion. Add value to a home by landscaping, painting, etc. When looking at a profit, sell and buy again. Structure innovative repayment arrangements that will give you better cash flow.
IRD reviewing depreciation rates
The IRD/Treasury released a paper July 04 entitled "Repairs and maintenance to the tax depreciation rules". Their intention is to remove the anomalies and loopholes which encourage investment decisions based overly on tax considerations. “It is important to ensure, as far as possible, that investment decisions are not made for tax purposes,” Revenue Minister Michael Cullen commented in a statement announcing the paper’s release. Depreciation rates for residential investment property are likely to change. They are currently around 4%, and some commentators are reporting it could go as low as 2%. Other Property Types
There are other types of property than just residential rental property. These other property types include:- agricultural property;
- health care property;
- commercial property;
- industrial property;
- Retail property.
Many of these property types will give far better yields and potential capital gain than what could be obtained from residential rental property. In addition, the tenants often pay the bulk of the costs. Residential rental property is also very time intensive whereas commercial, retail and industrial has less time spent on it for the dollar value invested. When looking at buying many of these property types, you need to purchase buildings that meet the following criteria: have long term leases ie: six years or more; blue chip tenants preferably nationwide or international companies or government departments; buildings are located in growth locations ie: the main centres and not small provincial towns; low maintenance buildings ie: relatively new or have recently been refurbished particularly relating to air conditioning and roofs; can be multi purpose buildings so that if the existing tenant leaves, it is easy to find another tenant without doing major structural alterations to the building; is well managed ie: has a professional manager who is experienced in adding value to this sort of building; has strong yields ie: 8% or better.
For a different perspective on rental properties we recommend reading "STOP Do Not Invest in Residential Property", by Duncan Balmer, 2000.
Unless you can expect strong capital growth you should not consider rental properties a reasonable investment, unless the rental yield is above 8% before tax.
To calculate Rental Yield
Checklist for Buying and Selling Property
Check out some other forms of leveraged investment:
Futures & Hedge Funds [ Up ] | 
