Getting serious on speculation

Our Experts Answer:

There is a lot of money that can be made with property speculation but it also carries a lot of risks like if the market changes you can be caught with a property that doesn't necessarily meet your rules in regards to holding. I often see traders get their numbers slightly wrong which eventuates in them doing a lot of work for nothing or potentially incurring a loss. Having said that depending on where you are in New Zealand, the market does have more heat in it than it has for several years so there is some potential there. You do need to get some good tax advice in regards to going down this track and understand that you are likely to be giving the IRD 43% out of every dollar in profit you earn (28% company tax + 15% GST). With the fact that risk is attached to this type of activity you should seek advice on what the best way is to structure yourself as well. I do see quite a few people who get into property trading who are already earning a large amount out of their businesses. Remember that this activity is effectively like a job as you are swapping hours for money and compare that with the return you get from the effort you get from your current business activities.