| 1 | Hypothetical situation just toying with ideas. If I purchase a property and live in it for say 3 months and then rent it out after 3 months how does that work with the mortgage?Would I need to increase existing equity to 40%? Obviously being owner occupied 20% deposit is required whereas if purchased purely for investment from day 1 40 % would be required as it is an existing property |
| 2 | If the bank asks - then tell them.
With no deductibility for interest - rent will have to be very high to bother. pcle - 2021-08-05 17:32:00 |
| 3 | pcle wrote:
If the bank asks - then tell them.
With no deductibility for interest - rent will have to be very high to bother. So in other words no ask no problem. But yes you are right I need to do other sums first before even considering it |
| 4 | The member deleted this message. andrew697 - 2021-08-06 06:35:00 |
| 5 | Yes no problem if you can afford it, keep it to yourself, yes insurance and you will have to pay tax on income, other than that the bank would not know what day it is. This was how it was done in the old days. msigg - 2021-08-06 07:19:00 |
| 6 | Could I please piggy back this thread?
A widowed friend owns her home freehold. She would like to go away for a while and rent her house out for 3 months, possibly more.
I’m confused about a few things...
1. Can she even do that these days?
2. If she can, does it then stop being treated as her family home?
3. If she can’t is there a way around e.g “flatmate”?
3. If, after her time away she decides she wants to move, does her house have that new “bright line” tax? Thanks for your thoughts, (sorry to highjack your thread familiadude) |
| 7 | lovelurking wrote:
1. Can she even do that these days?
Yes she can but there are costs (potentially a lot) and risks. Fewer if rented to family members.
lovelurking wrote:
2. If she can, does it then stop being treated as her family home?
Do you mean in relation to the brightline tax? If so depends on the purchase date.
lovelurking wrote:
3. If she can’t is there a way around e.g “flatmate”?
Possibly flatmate but there is a risk the person could apply to the Tenancy Tribunal to be treated as a tenant, and could easily win. Maybe a house sitter or leave empty?
lovelurking wrote:
3. If, after her time away she decides she wants to move, does her house have that new “bright line” tax?
No, depending on purchase date. Rentals are seriously complex these days, many and large fines and tenants are increasingly savvy about their considerable rights. artemis - 2021-08-06 09:15:00 |
| 8 | Non-disclosure to your bank. Do you think that is wise? amasser - 2021-08-06 10:44:00 |
| 9 | familiadude1 wrote:
Hypothetic-
al situation just toying with ideas. If I purchase a property and live in it for say 3 months and then rent it out after 3 months how does that work with the mortgage?Would I need to increase existing equity to 40%? Obviously being owner occupied 20% deposit is required whereas if purchased purely for investment from day 1 40 % would be required as it is an existing property This is all around intent and banks and RBNZ all over this. As a rule minimum period for owner occupation is 6 months and then it's a change of circumstance and the bank and insurer must be informed. Non disclosure can prove costly. Hope that helps. jeffqv - 2021-08-06 10:59:00 |
| 10 | jeffqv wrote:
This is all around intent and banks and RBNZ all over this. As a rule minimum period for owner occupation is 6 months and then it's a change of circumstance and the bank and insurer must be informed. Non disclosure can prove costly. Hope that helps. Costly how? I didn't have any idea this was a thing when I was overseas not living in my place for a few years. |
| 11 | loose.unit8 wrote:
Costly how? I didn't have any idea this was a thing when I was overseas not living in my place for a few years. Changes to the treatment of times when a property is not the owner's
main home
The government is making the rules fairer around the change of use of a main home with respect to the operation of
the bright-line test.
Any residential property that has been used as the owner's main home for the entire time they owned it will continue
to be exempt from any bright-line test.
For residential properties acquired on or after 27 March 2021, including new builds, the Government intends to
introduce a 'change-of-use' rule. This will affect the way tax is calculated if the property was not used as the owner's
main home for more than 12 months at a time within the applicable bright-line period.
If a property switches to or from being the owner's main home and the period when it is not their main home is 12
months or less, they do not need to count that as a change-of-use – those non-main home days are 'treated as' main
home days. For example, if an owner takes a few months to move into a property, or owns it for a few months after
moving out, this does not trigger the bright-line test.
The owner of a property subject to the change-of-use rule will be required to pay income tax on a proportion of the
profit made through the property increasing in value, calculated as follows:
• subtract the purchase price from the sale price
• subtract the cost of capital improvements the owner has made
• subtract the costs to buy and sell the property, and
• multiply the result by the proportion of time the property was not being used as the owner's main home.
If a residential property was acquired on or after 29 March 2018 and before 27 March 2021, the existing main home
exclusion rules will continue to apply. These can be found at ird.govt.nz/property. In short, the main home
exclusion from the existing 5-year test applies on an all or nothing basis, depending on whether the property was
used for most of the bright-line period as the main home. Changes-of-use do not need to be accounted for. https://www.interest.co.nz/sites/default/files/embedded_imag
es/IR%20FACTSHEET%20Bright-line%20test_0.pdf |
| 12 | Rental interval
Jermain buys a property in 2023 for $600,000. It is not a new build. The property is used as his main home until
2026 when he rents it out. He spent $40,000 adding a bedroom. Jermain moves back into the property in 2028,
before selling it in 2031 for $800,000.
Jermain owned the property for 8 years. Because it was not a new build the applicable bright-line period is 10
years. Because he sold it within 10 years of buying it, the bright-line test applies.
Jermain used the property as his main home for the 6 years he lived in it (2023 to 2026 and 2028 to 2031), so he
will pay tax for the remaining 2 of the 8 years he owned the property. His additional taxable income in the year he
sells the property is $40,000 – being 2/8ths of the $160,000 ($800,000 - $600,000 - $40,000) profit. Jermain will
need to add this to his income in his tax return, and pay tax on it accordingly. |
| 13 | So the new 39% tax on houses is going to make them cheaper?
Awesome. pcle - 2021-08-06 12:47:00 |
| 14 | rayonline_tm wrote:
Rental interval
Jermain buys a property in 2023 for $600,000. It is not a new build. The property is used as his main home until
2026 when he rents it out. He spent $40,000 adding a bedroom. Jermain moves back into the property in 2028,
before selling it in 2031 for $800,000.
Jermain owned the property for 8 years. Because it was not a new build the applicable bright-line period is 10
years. Because he sold it within 10 years of buying it, the bright-line test applies.
Jermain used the property as his main home for the 6 years he lived in it (2023 to 2026 and 2028 to 2031), so he
will pay tax for the remaining 2 of the 8 years he owned the property. His additional taxable income in the year he
sells the property is $40,000 – being 2/8ths of the $160,000 ($800,000 - $600,000 - $40,000) profit. Jermain will
need to add this to his income in his tax return, and pay tax on it accordingly. How utterly f**ked. I would have been much better off to leave it empty. That's even without factoring in the risk of bad tenants withholding rent or doing damage. Edited by loose.unit8 at 1:58 pm, Fri 6 Aug |
| 15 | loose.unit8 wrote:
How utterly f**ked. I would have been much better off to leave it empty. That's even without factoring in the risk of bad tenants withholding rent or doing damage. Clearly the aim of the Government is to destroy the private rental industry. One of the few things Labour have been successful at so far. If you need a rental - the Government will soon be your only option. Communism by stealth. pcle - 2021-08-06 15:33:00 |
| 16 | Thanks artemis.
It is very complicated nowadays. |
| 17 | loose.unit8 wrote:
How utterly f**ked. I would have been much better off to leave it empty. That's even without factoring in the risk of bad tenants withholding rent or doing damage. Even if you leave it empty, you still have to pay tax on it under the 10yrs and you get no rental income. If it is over 10yrs, accountants tend to paint a different view. Some advise that tax is still payable because it is not your own home and capital gains were still one of the intended goals. Some have suggested not the 39% rate but a rate at the person's nominal tax rate. |
| 18 | loose.unit8 wrote:
Costly how? I didn't have any idea this was a thing when I was overseas not living in my place for a few years. If you buy an o/occ property with 20% deposit with the intention of renting it out you put the bank in breach of RBNZ. Both ASB and ANZ have called in loans over this as their exposure (fines) is huge and they do check post settlement for rental ads for recently settled property. Hope that answers jeffqv - 2021-08-06 17:07:00 |
| 19 | lovelurking wrote:
Could I please piggy back this thread?
A widowed friend owns her home freehold. She would like to go away for a while and rent her house out for 3 months, possibly more.
I’m confused about a few things...
1. Can she even do that these days?
2. If she can, does it then stop being treated as her family home?
3. If she can’t is there a way around e.g “flatmate”?
3. If, after her time away she decides she wants to move, does her house have that new “bright line” tax? Thanks for your thoughts, (sorry to highjack your thread familiadude) She can do a short term rental, I did 3 months when I was stuck overseas due to Covid and my tenant was happy with that.
Having said that I think she is better to get in a house sitter. |
