Step #4 – what properties and where?
Instead of asking: “How many extra properties do I need to achieve my goals?”, the couple had to consider: “Are our current properties the right ones to continue holding?”
For instance, their Auckland investment property was worth $1 million, but it’s deemed as an existing property, so it gets caught under the government’s new tax deductibility laws.
This will make the property heavily negatively geared, so Brian and Deidre will have to top it up.
In the end, the couple figured out if they sold this Auckland property they would have enough lending to purchase two $750,000 townhouses in Auckland.
For this sort of money, in today’s market, you could probably get a 2-bed townhouse in Glen Eden or Avondale.
That would mean instead of having $1 million of assets in Auckland, they’d have $1.5 million. The extra amount being the additional $500,000 of assets they needed.
On top of this, cashflow would be significantly improved since the newly-purchased properties would be New Builds and have special tax incentives.
From Opes Partners modelling, these new properties would also give a better return.
If Brian and Deidre held onto the existing Auckland property they would get a return of an extra $2.30 per dollar they invested.
But they would get $4.11 back for every dollar if they bought another 2 properties and sold the first one.
So, they were looking at 80% more value, simply by redistributing the money into another property.