9 INVESTMENT STRATEGIES

9 investment strategies we think are worth exploring, beyond simply buying a standard existing rental property. Each has its own genuine advantages today. That includes different LVR and DTI treatment, different bright-line exposure, different yield potential, or simply diversification away from the standard model.

30-Second Read

• Since 1 April 2025, interest deductibility is fully restored for all residential rental property — new build or existing. That’s no longer a reason to favour one over the other.
• New builds still carry real advantages. They’re exempt from standard LVR and DTI restrictions, which matters more now than the old interest deductibility angle ever did.
• The bright-line test is now a uniform 2 years for every property type. That’s a change from the two-tier system that used to apply.
• Several strategies here remain genuinely worth considering on their own merits, independent of interest deductibility at all — boarding houses, short-stay accommodation, overseas property.

1. New Builds

New build homes are exempt from standard LVR restrictions. That means a smaller deposit than an equivalent existing property typically requires. They’re treated more favourably under DTI restrictions too.

The bright-line test is now a uniform 2 years for every property type. New builds no longer carry the shorter bright-line advantage they once did, in other words. The financing advantage alone still makes them worth genuine consideration, though.

2. Commercial Property

Commercial property was never subject to the residential interest limitation rules. It isn’t subject to residential LVR or DTI restrictions either. It’s a genuinely different asset class, with its own risk profile, tenancy dynamics, and yield characteristics. Worth considering for diversification on its own merits, not as a workaround for anything residential-specific.

3. Mixed Commercial

A property combining commercial space with residential accommodation — a shop with a flat above it, for example — can be worth investigating. The specific tax and finance treatment differs between the commercial and residential portions. This genuinely needs the numbers run properly before you can tell whether it works for your situation.

4. Short-Stay Accommodation

Short-stay accommodation comes with its own distinct GST and mixed-use asset rules, quite separate from standard long-term rental. It can still be a strong option for the right property and location. Talk to us about how the GST and mixed-use asset rules would apply to your specific property before committing.

5. Boarding House Accommodation

Boarding house accommodation is worth a look — near major hospitals or universities, where genuine demand exists. These typically consist of several mostly self-contained units, sharing major cooking and laundry facilities. They can offer a different yield and demand profile from standard rental.

6. Relocatable Homes

Moving an existing home onto a new section generally qualifies it as a “new build” for LVR and DTI purposes. That carries the same financing advantages covered in point 1. Worth confirming with your lender and accountant that your specific situation qualifies before assuming it does.

7. Adding a Dwelling to Your Property

Adding a second dwelling to an existing property, where it requires a new Code of Compliance Certificate (CCC), can also qualify as a “new build” for financing purposes. This is a genuinely different proposition from splitting an existing house (see point 8). You’re adding to what’s there, rather than dividing it.

8. Splitting One House into Two

Converting a single dwelling into two separate, self-contained units is a different process from adding a new dwelling. It generally involves its own consent and Code of Compliance requirements. The resulting units may or may not qualify for new-build treatment, depending on the specifics of the work — genuinely worth confirming with a professional before you assume either way, since adding and splitting aren’t treated identically.

9. Buy a Rental Property Overseas

Overseas rental property sits outside NZ’s residential LVR, DTI, and bright-line rules entirely. It comes with its own considerations, though — foreign tax obligations, currency risk, and NRWT or AIL if you’re borrowing from overseas. There are genuine complexities here, so talk to us before committing.

Checklist

• ✅ Don’t choose a strategy based on outdated interest deductibility assumptions — that’s no longer a differentiator between new and existing property
• ✅ Check current LVR and DTI settings for whichever property type you’re considering, since this is where new builds now carry their real advantage
• ✅ Confirm the current bright-line period applies uniformly, rather than assuming an old two-tier system still exists
• ✅ Run the actual numbers for any mixed-use or non-standard property before committing, rather than assuming it works
• ✅ Get advice specific to your situation for boarding house, short-stay, or overseas strategies, given how much detail varies case by case

Common Questions

Do new builds still have a tax advantage over existing property? Not on interest deductibility anymore. That’s fully restored for both. New builds still carry a genuine financing advantage through LVR and DTI exemptions, though.

Is the bright-line test different for new builds now? No. It’s a uniform 2 years for every residential property type, regardless of whether it’s new or existing.

What’s the difference between adding a dwelling and splitting a house? Adding a dwelling means building something new alongside what’s there. Splitting a house means dividing an existing dwelling into separate units. They involve different consent processes, and aren’t automatically treated the same way for new-build purposes.

Summary

These 9 strategies remain worth exploring, but the reasoning behind several of them has shifted. Interest deductibility is no longer a reason to prefer a new build over an existing property — that’s fully restored for both since April 2025. What still matters is LVR and DTI treatment, where new builds retain a genuine edge. Beyond that, each strategy stands or falls on its own terms: yield, diversification, or a genuinely different risk profile from standard rental property.

Talk to EpsomTax.com About Your Strategy

Not sure which of these fits your situation? That’s exactly the kind of question worth talking through properly. Contact EpsomTax.com or call 0800 890 132, line 2. We work with New Zealand property investors every day. We can help you work out which strategy, if any of these, actually makes sense for you.