Welcome to Cheques and Balances. I’m Michael Vincent, this is James Blair and this week, getting some more cashflow from those investment properties.
So it’s no surprise that owning a rental property has become significantly more expensive these days, soaring interest rates, inflation spikes and the new interest limitations issues certainly haven’t helped.
So this podcast is all about what you could be doing to increase more cashflow in your rental property, we’ve got 5 tips you might not have thought of:
Increase the rent
So this is very basic, but really, really important and something that a lot of landlords don’t do for a variety of reasons. This might be a good opportunity to review the market rent for your property and adjusting it accordingly. Remember you can only increase your rent once every 12 months, so make sure you’re comfortable with the new rental rate for the following year.
Re-invest into property
Consider reinvesting into the property, by adding another dwelling or adding another room you’ll be creating more rentable space on your land, this will increase the demand for your property and in turn, increase the rent you can charge.
Move to interest-only
Now, generally speaking, with an investment property, if you have owner occupied debt, we will advise you to have your investment property debt on interest only so you can focus on paying down your owner occupied debt first. If you don’t have your rental property on interest only, now will be perfect time to switch it over, this will decrease your minimum repayments on the mortgage and increase your cashflow in the property. Now it’s important to have a plan in place for when you come off the interest-only period as you won’t be paying off the principal on your mortgage during this time. Chat to our mortgage team if you’d like further advice on this.
Extend the loan term
Moving the loan term back to a 30 year loan term can decrease the immediate repayments because you’ve got more time to pay off the loan. This could be a solution if you can’t move to an interest-only period or have already increased your rent and still need more cashflow. If you’re going to extend the loan term, you may want to look at switching banks; banks will offer cash backs for moving a loan to them and this often offsets any legal fees associated with the switching, which means more cash in your hand.
Rent to social housing
If you have an existing property, you will likely be getting phased out of interest deductibility, this means you’ll have to find a significant amount of cash come tax time. One exemption from this new rule is to rent your property out to social housing, this can be through Kāinga Ora or other social housing organisations. Usually they will offer guaranteed income (whether the property is tenanted or not) and the added security that your property will returned in the same state as you initially letted it out.
So those are our 5 cashflow tips, if you’d like more in depth info on your personal situation, talk to our mortgage team!
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