We all know that New Zealand investors have had a love affair with owning and investing in property for many years. There are whole industries that have evolved around property investing with numerous seminars, management companies, and property clubs around, some of these costing thousands of dollars a year.
However some investors may start to question whether being a landlord in today’s increasing regulatory climate is the best investment strategy for them. The new Healthy Homes minimum standards became mandatory on 1 July 2019.
Plus significant reforms to the Residential Tenancy Act came into effect on 11 February 2021, which key changes around ending a tenancy, rent bidding, and allowing tenants to make minor changes to rental properties
According to the Ministry of Business, Innovation and Employment, landlords will be obligated to keep records that can indicate compliance with any healthy home standards that apply (or will apply) during the tenancy.
Also, where the installation is possible, rental homes will also be required to insulate ceiling and underfloor.
Feb 2021: Multiple changes to tenancy laws, which include ending tenancies: Landlords and property managers can no longer end a periodic tenancy without reason just by giving 90 days’ notice.
1 July 2021: Private landlords to ensure that their rental property complies with the HHS (Healthy Homes Standard) within 90 days of tenancy - whether new or renewed. Also, all boarding houses are required to comply with the HHS by this date (this doesn't apply to Housing New Zealand and Community Housing Provider boarding house tenancies).
1 July 2023: Unlike other boarding houses, Housing New Zealand houses and Community Housing providers get two more years, but by this date, they need to comply with the HHS as well.
1 July 2024: Every rental home is required to comply with the HHS.
One word - expenses!
There will be financial pressure on residential landlords to make sure their houses are compliant with the set minimum requirements of heating, insulation, ventilation, moisture and drainage, and drought stopping.
Landlords may or may not be able to pass this on to their tenants through increased rents, but they are required to meet the new requirements to avoid any potential repercussions.
Will these new changes result in investors exiting the market? And if so, how will they be able to still use property as an investment tool without being a landlord?
Property backed peer-to-peer investing has risen in popularity since Southern Cross Partners gained its license from the FMA in December 2016.
There are property investors that still want to be involved in property but don’t want to have the hassles of bad tenants, ongoing maintenance, paying management fees or the inevitable call about the plumbing at 2am in the morning.
Many of our investors have had extensive investment portfolios but are now at a stage in their life where they are thinking more about travel and lifestyle rather than maintenance and tenants. They understand that a bricks and mortar approach to investing - having something solid supporting the investment- could give them peace of mind.
Traditional ownership of an investment property can give access to possible capital gains but could also result in capital losses. Property backed peer-to-peer investments, whilst not enjoying capital gains, can provide a regular monthly income which most investors tell us is important to them.
Every investment has risks and peer to peer is no different so it’s important to understand the risks associated with any investment product.
In short, peer-to-peer lending, supported by a first mortgage, can offer you fee-free monthly payments without the traditional investment property ownership hassle of maintenance or compliance - sounds like a good deal.
1. Can I still choose the type of property I am investing with?
Yes, our online website provides a live list of investments supported by a first mortgage over an individual property and investor funds are invested with that specific property that is chosen.
2. When do I get my returns and what fees will I pay?
There are no application, ongoing management or account fees. Exiting an investment early via our Secondary Market may incur a fee, see our website for more details. Most of our investments are paid monthly. On occasion there may be a compounding investment available to choose with interest paid when the mortgage is repaid.
3. Do I have to manage the loan I am investing in?
As loan managers our role is to manage all aspects of the loan including collecting and distributing interest, chasing any arrears through to enforcement action. There is nothing you need to do but enjoy the returns.
Disclaimer: Southern Cross Partners is a licenced peer to peer lender under the Financial Markets Conduct Act 2013. To learn more about the risks associated with this type of investment visit our website www.southerncrosspartners.co.nz. This article is general in nature only and has not taken into account any particular person’s objectives or circumstances. We recommend you speak with a financial adviser before making any investment decisions.