End of Financial Year Tips for NZ Landlords

Published on: 20 Feb, 2024

As the end of a financial year approaches, landlords have an opportunity to assess their property investments and make strategic changes to optimise returns. Proactively reviewing finances, scrutinising deductible expenses, reviewing and adjusting rent, and assessing insurance cover, can help landlords to maximise return and get the most out of their property investment.

Conduct a comprehensive financial review

Before diving into the new financial year, landlords need to conduct a thorough review of their property’s financial performance. Analysing financial metrics, including rental income, expenses, maintenance costs, and any outstanding debts, can help landlords identify areas for improvement and set realistic goals for the coming year.

Scrutinise income and expenditure statements, ensuring all rental income and expenses are accurately documented.
Create a budget and financial plan to provide clarity and guidance for the year ahead.
Consult with a Mortgage Express financial adviser or accountant to identify potential tax deductions and improve financial position
Use this opportunity to set realistic financial goals for the upcoming year

Claim depreciation and rental property expenses

Owning an investment property offers landlords an opportunity to claim certain expenses at tax return time. Deductible expenses relating to the cost of generating rental income, not including costs for private use, can be offset to significantly reduce taxable income and boost overall return on investment.

Since 1 April 2011, landlords can no longer claim depreciation on buildings with an estimated life of 50 years or more, essentially all residential properties.
Landlords can claim depreciation on any item that is separate to the building and considered a chattel.
Depreciation is an allowance for the reduction in the value of an asset over its lifetime. Each chattel has its own economic life and can be depreciated separately.
The IRD provides depreciation rates to use for each chattel type.
Check what rental property expenses can be deducted, and ensure receipts, and documents relating to any items bought for the rental property are in order.

Review and adjust rent

Market conditions and economic factors influence rental demand and property values, so it’s important for landlords to periodically review and adjust rental rates to reflect current market trends. Conducting a comparative market analysis provides insights into rental rates in the local area and allows landlords to check that their rents remain competitive.

Annual rent reviews help landlords keep up with market rents and optimise cash flow to assist with maintenance costs.
Adjusting rent appropriately not only maximises rental income but also helps attract and retain quality tenants, ultimately improving the property’s long-term profitability.
Evaluate the current rental market in the area and compare against similar properties. Work with a Harcourts property manager who can help determine a realistic rent
If justified, consider adjusting the rent to align with current market rates.
Be mindful of the Residential Tenancies Act, which governs rent increases and sets out the rules for providing notice to tenants.

Check insurance cover

Insurance is a critical part of property management, ensuring landlords are adequately protected against tenant-related losses. Conducting an annual insurance review helps landlords check that their insurance policies cover essential risks such as property damage, liability, and loss of rental income. Factors such as changes in property value, renovations, or additions could also require adjustments to insurance coverage levels.

Review the property insurance policy to ensure it aligns with current needs.
Check that the policy adequately covers potential risks, including natural disasters, vandalism, and liability issues.
Consult with an insurance adviser to assess coverage and explore any available discounts or improvements.

Getting the most out of property investment is about planning ahead, making well-informed decisions, and working with experts – such as Harcourts property managers and Mortgage Express financial advisers – who can help pave the way for ongoing success in New Zealand’s property market.

Source: mortgage-express.co.nz