Yup, we've managed to confuse ourselves...

[AucklandNZGuy]

We've had a good look around the forum - it's fantastic reading... but looking for some help or feedback from the 'experts' on suggested steps for us.

About us, as a couple - we're on a combined income of around $140k annually. Give or take $5k. We're in our 20's (29 and 26) and own a home, probably worth around $550/$570k, 6 rooms. There are 4 rooms rented out to flatties/boarders - total income of around $500 ($26k - no tax/boarders). Our mortgage is $230k, giving us around $320 in equity.

Now, it was all simple once - the plan, buy a 2nd house, rent it out for a year or two, shift in to it, rent out the current larger place. The reason - ideally a little closer to town than where we are (western heights), and to look after our future (investment property).

The plan, let's look towards Te Atatu peninsula. Buy a 3/4 room house, aim for around $450k- full mortgage, rent it out.

That's where it got messy. Over thinking it maybe, maybe not thinking it at all... but now we are in a little pickle and uncertain what's best.. our options:
- Do we sell our house and buy a large house in Te Atatu peninsula and keep up the boarders... (low capital growth, wasted $$$ in house)
- Do we buy a 3/4 room house in Te Atatu peninsula (looking around $450k - may get $450 rental return)
- Do we buy a unit/apartment in a Eastern Suburb (Equity growth/good rental)
- And after the forum, do we look at a house in Pt Chev or Avondale (I like the Avondale idea).

Does anyone have any feedback? Is there a rule - eg: $300k house ideally generates a $300 return in rent etc etc. Any guidance, advice or direction here would be appreciated? Any thoughts on Pt Chev/Avondale/Te Atatu peninsula? Or a unit in a Eastern Suburb?

Sorry bout the 20 questions...

[PatMat]

I can't answer it all as it's up to you to decide whether you're after a capital gain or cashflow. Not often you'll get both in one property so decide on that first and then choose the suburb accordingly.

Don't buy it with "I wanna live there one day" as that will make you decide based on emotions not on numbers which is what you need for a good investment. Just buy a good performing rental property.

I wouldn't sell the current house to buy a new one - that's not expanding the portfolio, that's moving places. With your equity and incomes you don't need to sell it to buy the IP so don't.

Anyway first decide on what you want (capital vs cashflow) and take it from there.

[TheLiberalLeft]

It's "peninsula" not "pen1sula"

[Maccachic]

Good spotting I was wondering why it had been starred out LOL

[TheLiberalLeft]

It's the site protecting our sensibilities, you see. The shock of seeing a word that is medically correct and indeed taught to children the English-speaking world over to ensure they use the correct term is obviously far too delicate & upsetting for thick-skinned landlords, EVEN WHEN IT APPEARS INSIDE A SERIES OF OTHER LETTERS.

If I'm giving the impression I think it's utterly ridiculous you'd be right. Who sets this stupid censorship? *****.

[Re@der]

Back to the basics of the original question
1. The question seems to be really around when and how to get into their own personal house without boarders in it in about two years time.
2. There seems to be a suggestion that buy a house and rent it out for two years first then live in it may be the way to do- I agree with Pat Mat that confusing a rental home with a personal home probably means sub optimal decision.
My suggestion is to look at the costs of buying the personal home where you want it. Now devise a way that you can meet the cashflow requirements and timing of buying it.

It may be that in two years time you can finance it using the boarding house as security. In this case I would sell the house to a new company so that you can finance it but have most of the debt as tax deductible against the income earning property. ie You borrow against both houses as security with your
current equity in the boarding house as your "deposit.
If you bought the house now, your company borrows 320,000 to buy you out of the boarding house and takes over your debt. You have the 320,000 personally to buy a personal house. This is unlikely to be enough so you should wait or take other actions to ensure that you have enough equity to be equivalent to the cost of a personal house.

[Maccachic]

Is this situation actually exempt from tax?

[Re@der]

Yes the purpose of the company borrowing the money is to buy the boarding house which is income earning. So the interest on the loan to the company is tax deductible. What the vendor does with the proceeds of the sale like any other vendor is completely irrelevant.
The business purpose of setting up this company and this transaction is to ensure that this and future rentals purchased are in a limited liability company to protect the shareholders.
All of this is quite normal for a start up business.

[Maccachic]

Sorry I mean the income currently being recieved from the boarders / flatmates?

[PatMat]

Sorry I mean the income currently being recieved from the boarders / flatmates?

Anyting is exempt from tax until you tell IRD

[NovInvestor]

We've had a good look around the forum - it's fantastic reading... but looking for some help or feedback from the 'experts' on suggested steps for us.

About us, as a couple - we're on a combined income of around $140k annually. Give or take $5k. We're in our 20's (29 and 26) and own a home, probably worth around $550/$570k, 6 rooms. There are 4 rooms rented out to flatties/boarders - total income of around $500 ($26k - no tax/boarders). Our mortgage is $230k, giving us around $320 in equity.


Now, it was all simple once - the plan, buy a 2nd house, rent it out for a year or two, shift in to it, rent out the current larger place. The reason - ideally a little closer to town than where we are (western heights), and to look after our future (investment property).

The plan, let's look towards Te Atatu *****ula. Buy a 3/4 room house, aim for around $450k- full mortgage, rent it out.

That's where it got messy. Over thinking it maybe, maybe not thinking it at all... but now we are in a little pickle and uncertain what's best.. our options:
- Do we sell our house and buy a large house in Te Atatu *****ular and keep up the boarders... (low capital growth, wasted $$$ in house)
- Do we buy a 3/4 room house in Te Atatu *****ular (looking around $450k - may get $450 rental return)
- Do we buy a unit/apartment in a Eastern Suburb (Equity growth/good rental)
- And after the forum, do we look at a house in Pt Chev or Avondale (I like the Avondale idea).

Does anyone have any feedback? Is there a rule - eg: $300k house ideally generates a $300 return in rent etc etc. Any guidance, advice or direction here would be appreicated? Any thoughts on Pt Chev/Avondale/Te Atatu *****ular? Or a unit in a Eastern Suburb?

Sorry bout the 20 questions...

Go to the next APIA Seminar where Ron Hoy Fong is speaking, and get a free consultation.

Ron will probably point you in a better direction.

Alternatively call him on 021 888 298

[JABlog]

Is this situation actually exempt from tax?

Well Is it

[hawkeye]

I would check out the tax situation if I was you. I think you can only have 1 or 2 boarders before being taxed. Also I don't think you can claim any expenses if you don't declare the income so you may be better off declaring the income and claiming the expenses even if there is only 1 boarder. (But I'm not a tax expert!).

[Hec]

dont forget - land portion is where the real value lies.
Not much you get of that with an apartment ...

[jimO]

Anyting is exempt from tax until you tell IRD

after 3 audits i say tell them nothin