Getting on the ladder in Auckland..

Hi Guys,

I've spent the couple weeks trawling through these forums. I've been trying to learn more about property for a long time and this is by far the best resource I have come across. Great to see how generous people are with their time and knowledge.

I just though I would post my situation to see whether anyone had any advice for someone in my position.

I'm in my first job (started this year in Auckland) and have a salary of around 75k at the moment.
I've been putting money aside for a deposit and so far have 10k, plus around 5k in shares which I will be looking to cash up soon. I may also be able for around 5 k from kiwisaver if I'm buying my first home.

I'm currently renting and not sure whether I am better off buying my first home to live in or getting my foot in the door with an investment rental property.
Any advice on areas and types of property would be amazing too.

Cheers in advance

[jimO]

first job and your on 75k? are you a P cook?

[AMR]

Good on you Jamie. What are your other goals? Do you want a large portfolio or just a place to live?

Hah not quite that desperate yet Jim.

Thanks for the reply AMR would love to one day have a big portfolio, just unsure on how I'm best to start. I figure at this point in my life I could easily be wasting my disposable income on other things so have decided that I would like to get into the market and learn as much as I can while I can still afford to make mistakes. It would be great to continue to live comfortably but not extravagantly while I'm doing this.

I've heard differing views on whether your first house should be your own home or whether you are better to keep renting and buy an investment property. I'm trying to figure out which is the smarter long term decision. If I were to buy my own home I don't think I'd be to keen on having boarders, don't really like the idea of being a live-in landlord.

[Shane D]

JamieC,

Good on you for thinking about getting started. Are you single? Are you looking in Auckland?

$20k deposit is probably too little to get you on the ladder so you will need to frantically save over the next year. Cut out the luxuries, down-size as many fixed costs as possible such as rent and transport costs.

You'll be up to $40k deposit in no time :-)

Shane

Hi Shane,

Great to hear from you, I've been reading many of your posts lately and you seem to give really down to earth advice. I am single, and my costs are very low: no transport costs (work car), flatting with friends, no hugely expensive hobbies. What sort of price range/area would you suggest if I were able to save 40k?
Obviously I'm excited and itching to get started but realise that it may not be smart to enter the market yet

[speights boy]

Do you have any type of income protection insurance?

IE: A month after you settle you find that you are unable to work for six months.
Could you manage?

G'day speights boy (Otago lad?)

No I don't have income protection insurance yet but am starting to look into that type of thing.

[speights boy]

That's good.
It is an important and sometimes complicated insurance; one that is often neglected I find.

You certainly do want to study the different providers / products out there to find the best for your circumstance.
Ask around at work and friends.

Having a good one already in place before applying for a mortgage should give the bank extra confidence; and you won't then be subject to the "would you like insurance with that" hard sell from the bank salesperson......oops I mean lending specialist.
The policy type being pushed may not be the one best suited for you.

[Shane D]

Hi Shane,

Great to hear from you, I've been reading many of your posts lately and you seem to give really down to earth advice. I am single, and my costs are very low: no transport costs (work car), flatting with friends, no hugely expensive hobbies. What sort of price range/area would you suggest if I were able to save 40k?
Obviously I'm excited and itching to get started but realise that it may not be smart to enter the market yet

Jamie,

Wow..you are in a great position to sock the money away over the next year.

I would talk to a mortgage broker as soon as possible. A good one knows all the latest lending trends and will be able to tell you how much deposit you need for say a $400k house. For example, my broker just told me last week, ASB is starting to loan to investors at much lower LVR than has been possible for many years.

Banks defintely look more favorably on first home owners than investors. So it could be a good plan to buy as a home owner as you may need less deposit. You could then move out shortly after and rent it out.

I use a gentleman called Greg Lockhart from Ezy Finance. His email is greg at ezyfinance dot co dot nz.

Shane

Your strategy will play a huge part in what you buy as you need to know what you want out of your property investment before you go buy a house. As you have a small deposit you may be able to team up with a more experienced investor in your area, this is a good way to build a bigger deposit quicker and allows you to build up your knowledge base too.

Cheers SB not something I would have thought to look into too much, great advice.

Thanks Shane, exactly the kind of tips I've been looking for. In your opinion would you suggest saving more of a deposit even if I may be able borrow the same amount now? I.e if a bank offers a low LVR but wouldn't necessarily lend much more with a slightly larger deposit based on my fixed ability to service the loan (fixed salary).
Out of interest would you buy a 400k house if you were looking at the moment?
Would love to find out more about your experiences starting out, have you written them up the forum like some of the other experienced guys have?

Thanks again

[Shane D]

Jamie,

I would pull the trigger now if the bank approved you. I see prices in Auckland continuing to rise over the next 12 - 18 months. I think the Auckland price rises will outpace your savings hence the reason I would pull the trigger and buy asap.

That being said, I would not rush in. Learn a small area (neighourbood) well, get to know the hard working RE Agents in your selected area and wait around for a good deal.

Regarding what to buy, that depends on your property investment strategy. KyronGosse (posted above) has posted some VERY good stuff over the past few days. Go and read his posts.

I personally focus on legal Home and Income properties and I get to buy big sections (800sqm - 1050sqm) that produce 2 cashflow positive incomes per property. These big sections also give me property development options in the future if the government/councils changes regulations and higher density properties become in vogue when the Auckland population grows.

One strategy could be to focus on an up-and-coming area that are still reasonably cheap. I like Avondale. Near the train station would be ideal.

It would be interested in hearing what your property investment strategy looks like.

Shane