With interest rates at record lows, a lot of property investors are waking to find that their investment properties are now becoming positively geared i.e. the rental income now outweighs the home loan interest repayments on the property, rates, home insurance and other costs. What this means is that come next year, a lot of property investors will be looking at paying tax on the rental income from the investment property. For some this scenario will happen after a very long time depending on when you bought the property and for others it will be first time. This begs the question what can you do to turn this equation around in your favour.
First, with low rates it may be a good time to look at upgrading your investment property and getting the major repairs sorted. If you have been neglecting your property for a while or have been trying to keep the looming repairs on hold now may be a good time as the cost of borrowing to upgrade the property may not be too overwhelming. This will allow you to claim the repair costs in annual expenses of the property.
The new Healthy Homes Standards announced by the Labour government require all landlords to ensure their investment properties comply with heating, insulation, ventilation, moisture and drainage standards by next year. A large number of properties at the moment do not meet these standards. It may be a good time as a landlord to check whether your property meets the Healthy Homes Standards and what will be the cost of bringing the property up to the standard. Again, you will be able to claim the cost of upgradation in annual expenses of your property. Further as time passes and the landlords wake up to realise the date of getting the properties upgraded is looming close, the tradies in the building sector who can help in upgrading the properties will get busier than ever. This means you may either miss the deadline or may have to wait for few weeks before anyone in the industry will be able to take on your job.
It always pays to do your homework before embarking on the exercise. So make sure you confirm the numbers such as total cost of upgrading the property, whether you will qualify for the home loan should you need to borrow from the bank, the cost of the borrowing, and your own affordability of the lending.
Another advantage of upgrading the property at this time may be that it may improve the overall value of your property and in turn beat the downward trend of 10-15% in property values that the newspapers are predicting these days in the coming months and years.
Banks are now once again open for lending and while COVID-19 has forced them to look at a lending application with a whole new perspective, a good mortgage broker can help you traverse through the maze of new lending framework the banks have set up. Global Finance can help you assess your loan eligibility for a top-up loan to upgrade your property and tell you which bank will be able to meet your lending needs.
Call Global Finance today and find out your options.