23, immigrating to NZ and need a reality check before I buy in Christchurch.

[mrSilkie]

So I'm moving back to NZ to study. It's a complicated situation but I'll give it my best shot. I will have over $30,000 when i immigrate to NZ from AUS, I'm a NZ citizen by the way. My girlfriend will have a bit too but i doubt any more than 5k. I won't have access to a student allowance with the amount of money i have so what I'm considering is buying a house and renting out the rooms. It seems to me like I've got the money to make this happen but will it be worth it? Am I delusional and overlooking things? there are just so many things to factor in.

So I've tried to do a bit of research so far.
Rates should be around $40 a week
Mortgage repayments should be around $400 a week
I'm not sure about insurance in christchurch, I haven't even been able to find guesstimates and averages.
somewhere around $130-$150 seems like a fair price per room, if we get a 3 bedroom house we're looking at a maximum of $300 income a week with the rooms rented out. Air BnB for when we have vacancies.

So I'm guessing we should be up for around $250 a week as opposed to $150 a week if we rented out our own place. So this will be, without a doubt, more expensive than just renting out a room. There are more risks but the way i see it there is also a bigger reward. After 4 years we should have already paid off 20k of the loan as opposed to renting for a somewhat similar price where we'll have nothing. Also, when it comes time to sell there is the potential to profit off of the house, you don't get this with renting.

So I'm pretty biased towards buying a house but I don't know the full picture yet. for example, I just don't know the housing market in Christchurch, I'm not sure how easy it would be to fill the rooms an I'm not sure what I'd do if I ended up with a bad tenant. If anybody with some more knowledge on the subject can give be a bit of advice about the situation that would be great.

[Dunning]

I looked into purchasing in Christchurch ~2 years ago as this was my girlfriends home town prior to the quakes. I quickly learnt that there is a lot more to learn about the Christchurch market than the rest of NZ
Things that may be applicable are:
EQC / insurance state of the house
can you get insurance
land category type and rating
Require repairs
repairs that have been carried out - independent verification of these repairs
engineering/structural report

This on top of the normal things and it being in a different island all stacked up to put me off.

As to purchasing a place, 30k with no income will put you in a difficult place with the banks. Most banks like 20% for owner occupied which would give you a total of $150k. You might be able to get by with a 10% deposit with a low equity margin placed on you loan, something like an additional 0.5% to 1% added to the mortgage rate. This would give you up to $300k. Even then you will struggle with no income to meet the banks serviceability criteria.

[MikeO]

My advice would be save yourself a lot of stress by putting your $ into whatever you see as a safe investment, go flatting and focus on your study. Reasons include:
1. rents and property prices in Christchurch aren't really likely to go anywhere fast in the near future in my opinion
2. finance is likely to be a problem as you won't be working and have a smallish deposit
3. half of the $50k equity in the property will be your girlfriends after 3 years under property relations act
4. if you are flatting and things go wrong you can move out much more easily than if you own
5. you are going to get a much better return by putting all of your energy and focus into your studies rather than dealing with owning a house

Good luck and congrats on choosing our awesome city and university

[donna]

Agree with replies so far. I like your thinking and it will take you far. Keep your focus on learning about property investment. There are diff strategies you can use and there's lots of experienced people here keen to answer your questions. There will be takers out there keen to grab your savings too so protect it. Maybe for now use a high interest savings account. Most importantly don't link to your cash card. A few party nights and it could be all gone!

cheers,

Donna

[hawkeye]

Get into KiwiSaver so after 3 years you will be eligible for the first home owners grant. You can't get this if you are renting house out. Not sure if having a boarder or 2 means you wouldnt be eligible. If you buy now you will miss out on that free money.

Also in KiwiSaver if you put in the minimum per year you get more free money from the government each year.

LAJ

[Anthonyacat]

I don't deal with the Student Allowance much, but last I recall it was income tested, not asset tested. Didn't matter how much money you have, just how much you earn. Look into it further, you may be eligible.

[datacraft]

I know a lot of first home buyers are sitting on the sidelines waiting for a crash and a lot of people are advising for them to do so. The problem is the banks may not lend during a slump and finance might be really hard to get. Apparently ANZ right now are a nightmare to get money off - if things get worse they will all be like that especially if you are marginal. I reckon if your buying a house for yourself to live in and you can handle a mortgage why wait? My 2c

[Nzdan]

In reply to Datacraft:
I agree, even now banks are hard going when it comes to lending. I recently purchased in Masterton, had a decent deposit and earn reasonable coin but ANZ who i banked with for years were silent after a personal enquiry and 2 broker enquiries. Mortgage outgoings including rates and insurance are 30% of my take home pay so not an issue of affordability, maybe the fact my wife is staying home to look after baby didn't help the cause despite her having great prior work history in a qualified field with no issue finding work.

[Nick G]

I wish I'd bought a property and started chipping away at it while in college. You'll want another 10k in the bank in case things go wrong but if you can get the funding I say go for it.

[Bob Kane]

Get into KiwiSaver so after 3 years you will be eligible for the first home owners grant. You can't get this if you are renting house out. Not sure if having a boarder or 2 means you wouldnt be eligible. If you buy now you will miss out on that free money.

Also in KiwiSaver if you put in the minimum per year you get more free money from the government each year.

LAJ

Ignore kiwisaver.
The returns from your property will be more than kiwisaver - even with all the 'free' money.