RSS Feed

John Paynter: Some thoughts on ring-fencing rental losses from the landlord's perspective

Tuesday, May 29, 2018

There is the widespread belief that residential landlords make large profits with minimal effort and negligible risk.

This is quite untrue.

My gross income from investments is probably about the same I would get if I was once again employed in the corporate world. I typically work more than a forty hour week but, unlike corporate employment, I get no paid holidays or other benefits. There is no such thing as a free anything when you are a landlord.

The major contrast though is the Risk. As you so often preach, there is always a trade-off between risk and reward. A landlord risks a lot. Much of my own capital is risked when tenanting a property. For this, I reasonably expect to get a reward of both income and growth. This is not dissimilar to most other forms of investment, yet some commentators seem to think my landlording business should not be treated the same way as any other business. They stridently advocate for special and unique tax treatment of any capital gains and the ring-fencing of any specific losses. Such tax laws do not and will not apply to any other business, only those like mine.

For instance, I have a forest block. It takes about 28 years for the trees to mature to harvest. Unlike other investments, all outgoings, including what would otherwise be capital costs (excluding the land) are expensed each year. No ring-fencing here, nor should there be, otherwise no one would invest in such an enterprise.

A similar scenario can play out in residential renting. It may take years before the rent, which normally escalates at close to the inflation rate, outpaces the holding costs such as rates, insurance, water and maintenance, which typically increase at above the inflation rate. Once the property is profitable, this is akin to any other long-term businesses, where annual income is taxed, any annual losses may be offset against other income, but asset growth (capital gains) is not. Fair reward I would say for the Risk.

This is something not faced by employees, who face minimal if any risk of capital loss and who generally have a certainty of a positive annual income.

This is a guest blog submission from APIA member John Paynter with minimal edits by Peter Lewis. Guest submissions are a way for APIA members to share their views and experiences with each other and do not necessarily reflect the views and position of the APIA. 


John Paynter

John has been an active property investor for over 30 years. His portfolio consists of residential rentals in Auckland, Waikato and Northland, as well as commercial (Industrial) properties and farm/forest investments. He is a regular contributor to various investment forums.




Recent Posts


scotney williams parry v inglis Investment tip Investor story finance development house prices Kris Pedersen Mortgages and Insurance mortgage property cycle short-term rental property maintenance Must knows HHGA letting fee principal and interest interest only watercare rta Q&A How to airbnb trust education investor unitary plan water bill inspection cash-flow sublease property value ask an expert robert kiyosaki investment strategy auckland council property management buyer's agent wealth creation Standards New Zealand Must know financial advisers act holiday house television first home buying bad tenant Question and answer banking gluckman report capital gain relationship LIM structure government tenancy tribunal initio letting insulation equity minor dwelling rental wof anz Holler interest rates Market report renovation auckland Guest blog buying rules reserve bank TCIT ring-fencing warren buffett ocr advice housing affordability Sponsored post heating HSWA Jeff Bezos business bond form off the plan partners rta reform beginner investor management CCC privacy income rental market productivity warm up new zealand election 2017 sale and purchas Editor's Choice property meth contamination DTI speculator tax ird tenant legal asbestos insurance worksafe p lab market CoreLogic lvr building tenancy services buying debt enforcement nzpif boarding house personal growth trespass rent arrears return market rent trademe subdivision Landlording housing bubble bond sale and purchase negotiation landlord rent tenancy issues maintenance Property (Relationships) Act positive cash flow


Introducing Our Partners
Principal Sponsor - Kris Pedersen Mortgages & Insurance logo Gold Sponsor - Barfoot & Thompson logo Gold Sponsor - CoreLogic logo Keith Hay Homes logo Maintain To Profit logo The Insulation Warehouse logo The New Zealand Property Investors' Federation logo
09 360 2376

The Tenancy Practice Service and TPS Credit Control work closely with the Auckland Property Investors' Association. Our vision of bringing helpful resources, documents and high quality services to Auckland Property Investors and Property Managers is shared by APIA, so its a partnership that works well. 

The Auckland Property Investors' Association is a great organisation for those who want access to advice and information from a range of industry experts and partners. 

Mathieu Holt- Managing Director, The Tenancy Practice Service & TPS Credit Control
Through the Association I found the channels and methods to fund the purchase of property I never dreamed about. Grant Brown

All round it has been one of those things Neil and I felt was really worthwhile belonging to. We have learned so much it has just built our confidence in what we are doing.

Janice Bieleski
I read two articles in the monthly magazine that saved me over $5,000. That is my membership fee for the next 26 years and I am sure I will learn a whole lot more! John Duncan
Fantastic organisation. The networking opportunities are brilliant and provide us with information and opportunities that cannot be obtained anywhere else. We learn something new at every meeting and we've been in this game for nearly 20 years. Pauline and Gyanen Kumar

I find the information obtained from various APIA meetings very useful in guiding my own property investment and rental management.  I also enjoy the networking opportunities with like-minded investors.  I am inspired by other investors’ success and find the more experiences and knowledge that I share with others, the more confident I become.  

Thanks to all APIA event organizers and administrators for your brilliant work. 

Stella Shao

I like talking to people and learning from their experience because it gives me the confidence to invest well. I think it is a knowledge thing. I now know I am doing things the right way.

Stephen Weatherall

My APIA membership has become a total success.

Every time I attend a monthly or regional meeting I come away with so many useful and positive tips that have added value to my property investments and management.

Not only that, the website is a great place for practical advice and useful information. It has now evolved into an important resource for my business.

Talk about value for money! The discounts I have been getting at Bunnings when I present my APIA membership card have more than paid for my annual subscription!

Tim Duffett, Plan A Investments Limited