Advice Appreciated.

[DrDM]

Hi All



Given the current economic and financial situation :credit crunch , tightening of lending criteria and housing market slump , is this any good time for a new investor to enter the market?Salary $40-45K a year(Full doc),$100-150 a week disposable income, ready to invest anywhere in NZ .


Many thanks.

[spurner]

Depends who you ask, but IMO now is a great time, so long as you get the right type of property (freehold freestanding property in a decent location, not too far from the city) at a very reasonable price. Prices may drop marginally before they start rising again, but you should be getting a very competitive deal anyway.

Your ability to borrow may also be determined by what kind of cash deposit or existing equity you currently have too.

[mjmarketing]

Now is always a good time to buy property - or you may repent at leisure later on. Yes it is difficult for a single - have you though about buying with a friend? But if you do this you must have a legal agreement between you.

Or if you can swing a mortgage for a 3bedroom house - you can take in flatmates/boarders - this can help a lot with the mortgage.
Interest only mortgage will have lower weekly repayments too.

I wish you well.

Makaela

[Jalice888]

This depends on how much you look at all the parts of selling houses to you, it's a buyer market now for sure so you are in a powerful side and time is on your side rather than sellers. I insist on CAUTION all the way as without any other property ownership your credit is solely on what worthy posessions you own and remember your credit worthyness also depends on the lower credit card limit you have. Beware that now you have made your position public don't let estate agents or others realise this when arranging a deal so the buyer isn't aware of your ability to buy.
Flatmates is a good idea to help finance but if you live in the property aswell then your tax recovery is very limited.
Deposits are your best asset so the more the better and make sure you keep a positive purchase and no way in todays market get caught with an interest only mortgage regardless of your repayment ability so the more positive you stay the better positioned for the future you will be. Those that buy interest only and then suffer a property devaluation loose a lot of equity for futre purchases but by paying the mortgage off you can actually increase your buying ability.
In todays market a two or three bedroom house is probably the best way to begin and a positive market you can make good return where as a negative market at least you will eventually have a home to live in regardless of how bad it gets as long as you continually reduce how much you owe.

As you can understand this is my impression without forcing any traps or any way to benefit from my reply so take time to think it in comparison to other comments and remember every single person behaves different and from here it's up to you!
Good Luck.

[tpr2]

Hi All



Given the current economic and financial situation :credit crunch , tightening of lending criteria and housing market slump , is this any good time for a new investor to enter the market?Salary $40-45K a year(Full doc),$100-150 a week disposable income, ready to invest anywhere in NZ .


Many thanks.

Hi DrDM.

In a nutshell. It couldn't be better.

As a caveat to that though I need to say this. We don't know enough about your situation to really know if it's the right thing for you at the moment.

There are a heap of other factors that would determine if buying a property right now was a good idea for you.

Things I would ask about are your factors such a your risk profile, you time horizon, your current financial situation, if you have any non deductible debt, if you have other investments, are you married, do you have kids and many more factors.

Based on all of that information not only would someone be able to let you know if its a good idea but also what type and style of invesment property you should be looking for.

But getting back to the simple answer and without all of the required information I believe right now is the best time you will ever have at getting an investment property as a salaried employee.

[outspoken]

Jalice888
and no way in todays market get caught with an interest only mortgage regardless of your repayment ability

This is not true, talk to a qualified Financial Planner (like Terry) and ask him how having a portion of your PPOR mortgage on interest only can help save you thousands in interest and years in time!

but by paying the mortgage off you can actually increase your buying ability.

This I think everyone will agree on.

In todays market a two or three bedroom house is probably the best way to begin

Another unqualified comment, it depends entirely on what you want to achieve as to what type/s of Property suit your investing style.

as long as you continually reduce how much you owe.

2 right, 2 wrong

[Jalice888]

Well I hope I never get caught buying property from outspoken as to me his 2 rights are right and his 2 wrongs are so wrong.
To each there own and especially to a new investor, just remember there are a lot of sellers in todays market and many are on this forum but then some good info is in the daily newsletter aswell like;
Plenty of property for sale in north east of Hamilton
Plenty of property for sale in north east of Hamilton By NIKKI PRESTON - Waikato Times | Saturday, 01 November 2008 Almost a quarter of houses for sale in Hamilton are in the north east. Of the some 1350 houses in Hamilton for sale, 23 per cent, about 270, of those houses are in Flagstaff and Rototuna. These areas include St James and Huntington. Real estate firm Lodge has 135 listing on its books alone. But while Lodge director Jeremy O'Rourke said prices in the new areas had dropped by 20 to 25 per cent, the average house price in Rototuna was still relatively high at $496,000 and
Read more...

Also going to the Herald you see how overseas thinks we are still foolish buyers as I read this mornings Herald but can't find it online
and more help here; http://www.nzherald.co.nz/business/n...ectid=10540731
and factor this in aswell;http://www.nzherald.co.nz/business/n...ectid=10540732

[outspoken]

Well I hope I never get caught buying property from outspoken as to me his 2 rights are right and his 2 wrongs are so wrong.

I think you've got your wires crossed there ah Jalice. It's alright everybody makes mistakes, or did you mean to disagree with yourself?

[spurner]

So Jalice, you think it's better to wait and buy when there's not much property available on the market? Wait until there is high demand from many buyers, and sellers aren't really motivated to sell at a good/reasonable price?

[roseneath_rat]

With an income of $40-50K, unless you have substantial deposit funds I'd be thinking carefully about jumping into property right now. Its a little like catching a falling knife... the risk is still for further falls in pricing at the moment. Ask yourself how your financial position would be affected if prices were to ease another 10% in the next year.

With your level of earnings I'm guessing that deposit funds will come from family gift, inheritence or marital separation. In any case it will take a long time for you to save a $30K deposit for an average house if you lose it the first time around.

Give is a bit more of an idea about your position & what your goals are & you'll find a great deal of advice that is more relevant for your circumstances.

[DrDM]

Thanks everyone for your great replies , much appreciated.


Overall sounds like what I want/wanted to hear.

At the moment may be another pressing question would be about how much downward movement are the prices still to have …
In other words if you purchased a property today how far would you expect it to decrease in value ,estimate for the near future, before it starts going up again?

Being away of the net most of the time I ll give my comments about some of the points conveyed in the replies hopefully by next week.


Cheers.

[k1w1]

Oh God, that question is a red rag to exnzpat :-)

No one knows. If they say they know, they're telling fibs and/or have a vested interest in the way they think it's going (up or down).

[drelly]

DrDm,

What will happen next is purely speculation.

I personally think that we will see a brief moment of recovery this summer followed by another downturn next autumn. The reason I say that is that I think the sun and lower interest rates will get everyone excited, spending and feeling good but after a party there is always a hangover and this post-Xmas period is likely to be worse than usual.

We've had years of "3 years interest free no payment" offers which must be mounting up to an enormous wave of debt that is about to burst at the worst possible time. Mounting job losses and unemployment, coupled with rising prices will mean that much of this debt will not be recovered and some areas of the retail sector will be devastated.

I don't know how much more property values can drop, as the cost of building just isn't going to go down and the over-supply will be mopped up in time creating a new equilibrium. What we will see is a continuing slow property market with very picky buyers and good opportunities for buyers with decent deposits and strong cashflow.

If I were you;
- Don't rely on your disposable income to make a property deal work
- Buy or create quality: cheap rubbish is still rubbish
- Buy property within 30 mins drive
- Budget for ongoing maintenance ($2k a year is not too much for an average house)
- Don't buy in the worst neighbourhoods - there will be good deals in average streets
- Look for ways to improve your properties
- Don't spend your tax refund - depreciation is unrealised maintenance costs!

Good luck!

[robbyp.]

Thanks everyone for your great replies , much appreciated.


Overall sounds like what I want/wanted to hear.

At the moment may be another pressing question would be about how much downward movement are the prices still to have …
In other words if you purchased a property today how far would you expect it to decrease in value ,estimate for the near future, before it starts going up again?

Being away of the net most of the time I ll give my comments about some of the points conveyed in the replies hopefully by next week.


Cheers.

It depends on who answers. Agents will tell you that prices may start to go up again soon, but they have a conflict of interest as selling houses is how they make their money. They don't like to be negaitive towards property prices.
However personally I think that it could be another decade before house prices reach 2007 levels again, and prices could drop 30-40% from 2007 levels. They have already dropped about 8%. The reserve bank is also picking property prices to drop 20-30% after inflation, and Bernard Hickey is picking prices to drop around that 30% mark. The problem is if you buy now, in 2 years is that house going to be worth less, the same or more than you paid for it. If you get a loan to buy it, if it is worth less or the same, then you will have lost money if you were to sell it in a few years, and would have been better to keep you money in the bank. Also on on 45k, you will need a 20% deposit, and banks maybe less likely to lend to a single person and a smallish income. Remember that house prices have increased over the last 8 years at an unsustainable level (some properties have litrally doubled in price), and everyone was waiting for the bubble to burst. We have already had finance company collapses, a sharemarket collapse, and the next thing is going to be a house market collapse, it is just part of the cycle. With every boom you get a bust.
I am a cashed up buyer, but unless I see a house I love, and at a good price, I wouldn't buy atm. Then again I would not be buying for property investment, but for a house to live in.

[67910241]

I am a cashed up buyer, but unless I see a house I love, and at a good price, I wouldn't buy atm.

Robby, does that mean you've sold the property you spoke about last month?

If so, well, good job!