NZ Herald 19 June 2010

AYou know what they say about sleeping dogs. I reckon the same applies to home ownership in your circumstances. Keep the house.

This is not without risks. For one thing, as you acknowledge, perfect tenants are hard to find.

However, it sounds as if you will be elsewhere in New Zealand, better placed to keep an eye on the property than overseas landlords. You might, for instance, meet the tenants at the house — after giving them advance warning — when you are on a trip back to Auckland.

Given that you have no mortgage payments, it might be wise to charge a low rent. That should give you more tenants to choose from, and they’re likely to stay longer.

Even so, if you move back into the house later you’ve got to expect the odd carpet stain, damage to woodwork and so on — which is harder to accept in your own home than in a rental. You might want to set aside some of the proceeds from renting to redecorate before your return.

On the question of whether you would be better off selling and investing the money in a managed fund, the answer is, “maybe”. These days, rental income after expenses usually amounts to a pretty low return on the money invested in a property — and I’m even suggesting you make your rent lower!

Many landlords have made up for the low yields by making big gains when they sell. But such gains look less likely in the near future. In any case, you may not sell the house, but move back in.

In short, you’ll be lucky to get a high return on your $330,000. But where else would you park the money? In high-quality fixed interest — such as bank deposits or good corporate bonds — the return is also unlikely to be high. In a share fund it might be high, but it also might be low — especially if your investment ends up being for just a few years.

Over all, I think you’re wise to stay in the housing market, so that you’ll always have a home regardless of whether prices plummet or soar. You also avoid the thousands you would pay in real estate and lawyer’s fees if you sold and then bought later.

What about hassle? Selling may be more hassle upfront, but renting could be worse over the long term. However, if you get a rental agent with good recommendations from others, and keep track of their work, things should go smoothly most of the time.

AShe certainly doesn’t get nothing. The government matches whatever she contributes to KiwiSaver in each July-June year, up to a maximum of $1043 — or strictly speaking, $1042.86.

That means your wife will get a tax credit of $960. If she can manage to deposit an extra $83 by the end of June, she will get the full $1043.

The same goes for everyone else. Whether or not you are an employee, if by June 30 you will have contributed less than $1043, try to make up the difference by depositing directly to your provider. With the government’s matching, you double the money going in, which means you withdraw double the amount at the other end. Not bad.

I’m guessing that your wife came up with $80 a month because she was told she would get the full tax credit by depositing $20 a week. Thinking there are four weeks in a month, she multiplied $20 by four. But, of course, there are four and a bit weeks in every month except February. So the correct monthly contribution to get the full tax credit comes to $87. She may want to switch to that from July onwards.

AIt depends whether she expects to make a bigger return in her KiwiSaver account or elsewhere.

I’m assuming your wife is a non-employee. That means the maximum extra she can get from KiwiSaver — over and above other similar investments — is the $1000 kick-start and the annual $1043 tax credit. And she’s already at that maximum.

There’s no advantage, then, in putting more into KiwiSaver, and there’s one disadvantage: the money is tied up until she reaches the later of NZ Super age or five years after she joined.

However, at her age, the tie-up is probably not a problem. She should simply weigh up the risks and returns in the different options. Keep in mind two things:

• Practically all KiwiSaver funds are PIEs, so the tax is lower than on, say, an ordinary term deposit.
• Many KiwiSaver providers also offer similar PIE funds outside KiwiSaver. So if she wants much the same investment as her KiwiSaver fund, but with easier access to the money, she should ask if her provider can accommodate her. Make sure, though, that the fees are no higher.

Footnote: If my assumption is wrong, and your wife is an employee on a contributions holiday — the other circumstance under which she might contribute $1043 a year — she should go off the holiday and contribute 2 per cent of her pay. Then she will get the 2 per cent employer contribution.

If she feels she can’t afford that, she should supplement her income with her term deposit money. It’s clearly worth eating into savings to get the maximum in KiwiSaver benefits.

AThat would be true of most of us. But I’m afraid I know a few people who might have been only too happy to learn that their parents had put the lot into Blue Chip or Bridgecorp. Not every parent is wonderful.

In any case, we need a description that embraces all generations.

AOuch! That’s not only mean, but not wide-ranging enough. We want to also include the many thousands who have made good investments.

ANot bad. But it sounds as though they invest in themselves. That’s the sort of thing people running those dreadful “get rich quick” — but actually “get rich never” — seminars say: “Invest just $1000 in yourself by attending our seminar, and we’ll show you how to turn it into $1 million.”

AAnd when we greet them, we could say, “Hi HIs”. And if we suspect they have been smoking something interesting we could say, “Hi high HIs”. Hmm.

Thanks for your responses, everyone, but I don’t think we’re quite there yet. Other ideas?

AI’m wondering if you read the column, or just looked at the picture. Fair enough to do the latter, but I think it’s led you to the wrong conclusion. The picture illustrates the first Q&A. And that reader’s letter refers to “my wife”, making it clear that it is written by a man.

Oops! If we’re going to be absolutely PC, perhaps I should say, “written by a man or a partner in a lesbian relationship who chooses to refer to her partner as her wife.” I must say, though, that none of the lesbians I know uses that nomenclature. And given that the correspondent had a male name — oops again, a male-sounding name — I think I’m safe to assume his gender.

I say “I”, but actually somebody else wrote the caption. That’s not the point, though. The subeditor and I both plead “not guilty” to your charge.

If you find other examples of a “gender exclusive approach” in my column in future, feel free to point them out. But as someone who has been fighting feminist battles for more decades than I care to admit, I doubt if you’ll find too many “sexist oversights”. Peace, sister!