New to this - some questions about what to do next

[Jafa]

At a cross roads and seeking some ideas from the wise.

We have a small owner occupied property in New Windsor, Auckland (the nice part of New Windsor I should add) with estimated equity of between $40 - 55k - purchased a year ago.

We need a bigger house. We could refinance and add a bedroom and lincrease the living area (house is currently only 2BR). This may put the value up to the early $400's (at present it is valued between $350 - 370k). Or we could move to a bigger house. I want to keep this house as a rental but realise rental income may not cover the mortgage over it.

Does anyone have any insight into the market and New Windsor's potential?

Any tips for the uninitiated? It took us a long time to get into the property market and I dont want to blow it with the next step.

TIA!

[xris]

Hello jafa,

I hope these comments help.
I don’t want to talk specifically about your situation or New Windsor, but rather just keep to general points. Of course this is my opinion only based on my experience, and others will have different views.

I believe that when it comes to a family home, emotional attachment plays a much larger role than with rentals, and this needs to be taken into account. You can analyse the figures as much as you like but at the end of the day if you don’t like the idea of tenants messing up your lovingly cared for home then you are stuck. You cannot put a price on piece of mind and worry.

This may not be a problem for you but it is for me.

With my last three homes I a/ sold and re-bought. Financially perhaps not the smartest move because the market was just beginning to rise and if I had kept my own home for one more year I would have realised a considerable capital gain. But, I wasn’t to know that, and more importantly I just wanted to put that home behind me and move on, which I did. B/ Home two was one of those ‘living in your own rental situations’. It was done ‘properly’ and that property is still a good investment even though I no longer live there. (The property was a rental from day one so the emotional attachment to 'my own home' did not exist to any great extent.) C/ Current home. I think I would have a lot of trouble seeing tenants live in it when eventually I move on. At the same time though I do not want to sell it. I have a few ideas about what to do, one of which is the rather drastic step of bowling it and land banking the section.

My opinion from what you say about your situation is that you should sell and move on. If you buy and sell in the same market it is difficult to go far wrong.

A quick note on your possible plan to keep it as a rental. At the risk of once again being told I am repeating myself, please refer to the current thread…

http://www.propertytalk.com/forum/showthread.php?t=8919

xris

[Dean@Massiveaction]

Hi Jafa. I agree pretty much with Xris. If you want to become a property investor then you have to decide whether your current PPOR is a good property as a rental. If not then sell it between now and daylight saving in April, which will give you the best chance of getting top dollar, then buy a new property next winter, which will give you the best chance of a bargain.

From a straight investment point of view 320K sunk into a 2 beddie in New Windsor is probably a marginal call, especially when you aren't rolling in equity. If you sold and bought again say 50K below RV you would be starting to build a reasonable equity base to invest with.

[Glenn]

I think Xris has it well sorted.

Clearly you want a bigger house though.
Like the rest I have no clues on your area.
Generally adding a room to an existing house in a good area can be a great way to get more room but it is not always the most ecconomic way.
There is a saying in the valuation business that is not often quoted today.

Expenditure does not equate to increase in value.

Perhaps the best advice might be to ask a valuer if in YOUR CASE it is a wise investment to add that bedroom or extension to the lounge or what ever.
Even paying a valuer to do this is a real cheap way forward. Cheap advice from the likes of us is just that. Cheap and not really bankable.