Arbitrage income from rental property

[ExPat]

Well my original question about establishing credit was answered by reading another post slight down from this post but perhaps my question is better served re-tweaked.

I have rental property in the US that will generate some income for me while I move to NZ - approximately $2000 USD/month. Does this income count towards establishing credit in NZ? If I have $100k held in US bank, will that suffice to get a NZ mortgage or will I be forced to transfer the funds over to NZ bank?

As for the arbitrage, since $2000 USD = $3100 NZD does this end up being counted as income and taxed in NZ too as well as the US?

Any feedback is appreciated.

ExPat

Hi,

If you are living and working in NZ, then all income is taxable. On the same line, you shouldn't be paying tax to the U.S. govt too.

For the income to be counted towards credit in NZ, I expect it will need to be paid into your NZ bank account. It's the only way they can see that the income is genuine. I guess this would also depend largely on the lender in question as to what evidence they require.

You've got two fairly unappealing options really... keep the money seperate and pay U.S. tax, meaning it can't be counted towards credit, or pay the money to an NZ account, pay 33% tax but get good credit!

[jadet]

We are planning to do the same (but not quite so much rental income!). I believe that the US govt does not tax the first 80K of your international income. But it will probably tax the entire amount of US income, as it always has, unless you have some deductions. Another question is state taxes on the income. We live in Washington where there is no state income tax, so this one was not an issue for us.
We are planning on finding a good tax accountant in NZ when we arrive. I believe that there is some sort of tax treaty, so there is a chance that both govts won't tax the same money. You probably know already that NZ taxes the first penny you earn right? There are very few deductions there. I think earning income off your house is one- so that's why the 1 bedroom rental unit attached to the house is so popular there.

I expect if you have the rental agreement to show the bank in NZ they would be more accepting of it as genuine income.

How long to you plan to hold onto the US property?

[ExPat]

As far as US Tax law, the rental property will probably be moved into a Limited Liability Company and income would be paid to the LLC, I need to check with a tax accountant but I believe there is an exclusion on the first $80,000 of foreign income as long as you live outside the US for 355 days out of the year. I am almost certain that rental property income will incur some type of US Federal Tax so it doesn't make sense to channel the money into NZ and pay another 33% tax on top of that. I don't have any state income tax but there is property tax in the state I live.

I'm not sure how long I will keep the US property. For now, I want to keep it as a safety net as something that keeps generating income until I find a good paying job in NZ. We have kids so if they decide to come back to the US to attend University we can also let them live in it while in school and then sell it. The house doesn't have a mortage on it.

In leiu of being able to receive adequate credit to buy a house, is it possible to pay for a home using a credit card (Visa/Mastercard/Amex)? Or at the very least, put a sizeable down payment ($50k) on a home with a credit card?

Buying a house with a credit card?! I wouldn't think that was possible here, unless one of the parties such as the vendor or solicitor have merchant accounts with a bank.

You could probably withdraw the cash against your credit card for a deposit, can't see any issue with that one! Might take you a long time at a cashpoint though, with a $600 limit per day!

[ExPat]

Well my thought process: go to a local bank and take a cash advance of $50k via credit card and deposit funds into local account then write check.

Banks here let you take cash advances from credit card - assuming it works the same way there but perhaps not?

the more I think about it though, it may not be such a good idea with a 1% surchage for currency conversion and there may be some sort of NZ bank charge on top of that.

Certainly sounds like an expensive way of going about it!