Getting Started - when you are self employed from day 1

[Bluekiwi]

When people find out you are a property investor they always ask a few questions, and I have one budding young person really enthused to get started.
But after listening to her and finding out her current situation, it is going to be a bit tricky.
So just seeing if anyone has some advice on how to get started.

The key of course initialy, is to get that first step on the ladder.
Buy a cheap house and do it up, and create a decent chunk of equity.
But it is difficult in her situation.

Self Employed.
Young.
Smart and keen to get going.
Working on pulling a deposit together.

How can you go about getting finance from the bank to purchase house number 1 ??????????

[Maccachic]

Non bank lender are apprently still doing 90%.

What about a sibling or similar and going halves?

[speights boy]

Welcome Home Loan.

https://www.welcomehomeloan.co.nz

[PTILoveYou]

-Go to a good mortgage broker
-demonstrate that she has stable & sound income
-ask for a loan to buy first home
-chip in kiwi saver if any
-borrow the deposit if not enough

No point looking at what to buy if he/she doesn't know how much she can buy.

[speights boy]

-ask for a loan to buy first home
-chip in kiwi saver if any
-

Remembering of course she has to buy it as an owner occupier.
Not simply ask for that and then go rent it out.

[PTILoveYou]

Remembering of course she has to buy it as an owner occupier.
Not simply ask for that and then go rent it out.

After settlement, the banks don't really ask questions about this.

I know a lot of people have done that and got 95% lending for their first rental.

Now might be a little tricky, but if you don't try, you don't gain.

[Bluekiwi]

Remembering of course she has to buy it as an owner occupier.
Not simply ask for that and then go rent it out.

Yep that is what I have said is best to do.
When you are young, best to buy your own house as soon as you can, and do the pain.
First house if you dont have the funds, probably best to live in yourself, get flat mates in to share the cost - effectively rent by the room.

Then renovate yourself, and live in while value goes up.

She was thinking of saving for 3 years to get a 20% deposit to buy.
I just think that is really bad timing, in todays market you want to get in now, and have 3 years capital growth up your sleeve.
Auckland market could be peaking in 2016.

[PTILoveYou]

I just think that is really bad timing, in todays market you want to get in now, and have 3 years capital growth up your sleeve.
Auckland market could be peaking in 2016.

Agree .

[TheLibrary]

Loan from folks?......assuming she understand its a loan like any other

[elguapo]

She was thinking of saving for 3 years to get a 20% deposit to buy.
I just think that is really bad timing, in todays market you want to get in now, and have 3 years capital growth up your sleeve.
Auckland market could be peaking in 2016.

If the market is to peak in 2016, would she not be better off saving until 2017/2018/2019 and buy on the downside with a significant amount of savings?

[donthatetheplayer]

If the market is to peak in 2016, would she not be better off saving until 2017/2018/2019 and buy on the downside with a significant amount of savings?

Even when prices come down they aren't going to be as low as they are today.

I really feel for your friend bluekiwi. Previously I would have said scrape together a 5% deposit and get a little unit or whatever you can to get in. I don't know how a young person saves $60k / $80k / $100k just to get a foot on the property ladder. I'd recommend she have a look at Gary Lin's thread and (sorry to create competition for you Gary!) see if she can get into something in the $200k's - a little unit somewhere like Avondale will have to be a winner. Buy something really run down but with potential (best location possible, privacy). Beg family for help with a deposit but she'll need some skin in the game for sure. Press go. It kind of feels like the clock is ticking though if you are starting from scratch with no deposit.

If she can't demonstrate serviceability she's damned. The banks will want to see at least three years proof of income, 5 years in some cases! Go to a good broker. Mortgage brokers like real estate agents are many and varied. Find yourself a good one and you will never regret it.

[elguapo]

Even when prices come down they aren't going to be as low as they are today.

Maybe, maybe not, but if your in a better position deposit and income wise, then the affordability might be much better. For example, house prices are much higher now than they where 20 years ago, but my ability to afford those higher prices is much greater than it was to afford the lower prices twenty years ago. It is a relative question.

if she can get into something in the $200k's - a little unit somewhere like Avondale will have to be a winner.

Good luck with that!

It kind of feels like the clock is ticking though if you are starting from scratch with no deposit.

In all seriousness, this is a sign of an overheated market. This is how people get panicked into the market and it's usually a mistake. If it's someone looking to start as an investor and not an owner, with limited funds, then why are they even looking at Auckland? Outside Auckland the clock is not ticking at all in most places.

[donthatetheplayer]

elguapo. I love this game. I don't gamble (much) so lets say you and bluekiwi's friend play a game. You sit on the sidelines and wait 5 years squirreling your kiwi pesos into your bank account. BK's friend can buy this place TM Listing #: 604489739 (not Avondale ok, but it'll do). Who do you think will be in the better position in 2018?

I think you are reading too much interest.co.nz comments.

[elguapo]

You sit on the sidelines and wait 5 years squirreling your kiwi pesos into your bank account. BK's friend can buy this place TM Listing #: 604489739 (not Avondale ok, but it'll do). Who do you think will be in the better position in 2018?

Alas, that's a question that can only be fully answered in 2018. It's also a loaded game, I can squirrel away pesos much more quickly than BK's friend can make in capital gains. The fair question would be to compare how fast his friend can save to how much of a price increase you might use in your projections.

I think Auckland property is 'fully' priced at the moment, I'd be looking elsewhere for investment.

I think you are reading too much interest.co.nz comments.

Not really, it's just logic. There is better value on the cards elsewhere. Looking at an overpriced, reno'ed leaky on the edge of Auckland should have anyone looking long and hard at what the potential upside is.

[speights boy]

How can you go about getting finance from the bank to purchase house number 1

Let's approach it from the other side.

Assume she had a 15% deposit available to her.
Based on serviceability criteria around her income / expenditure, what dollar figure would the bank lend up to?