What would you do?

[sBoff]

Hi all,

To invest in a couple of rentals (Tauranga/Hamilton (other?)) or to purchase a home.. I'm finding myself having sleepless nights at the moment going over and over the same situations. Some outsider insight would be appreciated.

I have 450k cash and own no property (house recently sold). I'm a single father who is tied to the North Shore in Auckland due to work and daughter commitments. I am currently looking at some homes around the $750 mark and have come very close to pulling the trigger but can't help wondering if I'm making the best long term decision. At $750k I would have nothing left for an investment property of any sort.

I believe I could afford 2, perhaps 3?, cheaper investment properties in Hamilton for example however, I would then end up renting myself ($250pw currently). I would need properties that were neutral-ish so would realistically be chasing cash flow rather than capital gains.

I feel I am at a cross roads. In my situation, would you get a home, or invest elsewhere?

Cheers

[orion]

If it was me, I would rent and use some of the $450k as deposits to buy rentals, but not in Hamilton.
Have a read of the articles at top of this part.
We are all different and want different things out of investing, so when you have a clear plan as to what you are wanting and a safe strategy to get there, the rest will hopefully fall into place.

[chonynz]

Hi all,

To invest in a couple of rentals (Tauranga/Hamilton (other?)) or to purchase a home.. I'm finding myself having sleepless nights at the moment going over and over the same situations. Some outsider insight would be appreciated.

I have 450k cash and own no property (house recently sold). I'm a single father who is tied to the North Shore in Auckland due to work and daughter commitments. I am currently looking at some homes around the $750 mark and have come very close to pulling the trigger but can't help wondering if I'm making the best long term decision. At $750k I would have nothing left for an investment property of any sort.

I believe I could afford 2, perhaps 3?, cheaper investment properties in Hamilton for example however, I would then end up renting myself ($250pw currently). I would need properties that were neutral-ish so would realistically be chasing cash flow rather than capital gains.

I feel I am at a cross roads. In my situation, would you get a home, or invest elsewhere?

Cheers

Iv'e been there, so I know what decision you face. Hubby and I ended up buying a home to live in and now we wish we hadn't, but it's a personal decision. Do you want to grow your wealth by living a little harder now to have a good pay off in the future? or is life too short and you wish to live in the moment?
If it was me I would also invest the money, create a nice cashflow and then decide if you want to buy yourself a home.

Take your time don't rush, go and view a few Ip's do some numbers and then decide if it is worth it for you and your daughter.

Best of luck!

[sBoff]

Thanks for the replies Interesting to know that others have regretted not taking the plunge. Like you say Chonynz, a little harder now, but long term benefit. I really don't see myself doing a u-turn and going from owning a house to renting + investments either so I feel it's a now or never (or at least not for a long time) sort of deal. I was forced to sell the last place hence my current predicament.

Orion, are you referring to the links about Apartments in Auckland?

[orion]

Thanks for the replies Interesting to know that others have regretted not taking the plunge. Like you say Chonynz, a little harder now, but long term benefit. I really don't see myself doing a u-turn and going from owning a house to renting + investments either so I feel it's a now or never (or at least not for a long time) sort of deal. I was forced to sell the last place hence my current predicament.

Orion, are you referring to the links about Apartments in Auckland?

No, the 'Articles' section at the top of the page

[AlFa]

Why not buy home and income? You live in small unit and rent a bigger one? You might end up in paying less for mortgage in "out-of-pocket" money than you currently pay for rent

[sBoff]

Thanks Orion, I've read a couple of articles. I will need to read the rest at home rather than on lunch work breaks. Very interesting. It confirms some of what I have naively suspected. Why do you suggest not Hamilton for yourself?

Alfa, the home and incomes I could afford are very substandard compared to where I am living at the moment. If it wasn't for my daughters sake this wouldn't be an issue but it is something I need to consider carefully (she's under 3 year old).

[orion]

Thanks Orion, I've read a couple of articles. I will need to read the rest at home rather than on lunch work breaks. Very interesting. It confirms some of what I have naively suspected. Why do you suggest not Hamilton for yourself?

Hamilton yields are too low, unless you are putting about 30% deposit into each one and do P & I mortgages over 25 years.
You can get better yields in other parts of NZ (better than 5 - 6%) and so use less deposit and pay your loans off faster.

[Wayne]

I'd agree mostly with Orion.
Rent and buy investment.
Hamilton yields are probably too low unless you can add value somewhere (more rooms, subdivide etc) which could be hard from a distance.

There is a saying
Rent where you want to live and invest where the return is.
Particularly in Auckland the rent is cheap compared to capital cost.

[Damap]

sBoff given your parenting responsibilities don't over leverage. Buy a home and income and get the best of both worlds for now. Less stress, good income and as it increases in value you can use equity to buy more down the road. Wait for the next downturn and go mad then.

Definitely don't rent in Auckland it's just madness you burn money every single week for nothing. You live in the best growth market in the country with lowest interest rates on record.

[orion]

sBoff given your parenting responsibilities don't over leverage. Buy a home and income and get the best of both worlds for now. Less stress, good income and as it increases in value you can use equity to buy more down the road. Wait for the next downturn and go mad then.

Definitely don't rent in Auckland it's just madness you burn money every single week for nothing. You live in the best growth market in the country with lowest interest rates on record.

sBoff, read the posts from this several times bankrupt person (Dean Letfus) and do the opposite and you will probably do okay.
He still hasn't learnt anything from his previous dealings in property.

[artemis]

IMO, a stable, secure home for you and your girl trumps everything else for now. Before you can turn round they are 18 and off to work or uni.

If you buy a home to live in you have the opportunity to build equity by paying down the mortgage, possibly making improvements as well. That will stand you in good stead if you decide to invest later.

[Damap]

IMO, a stable, secure home for you and your girl trumps everything else for now. Before you can turn round they are 18 and off to work or uni.

If you buy a home to live in you have the opportunity to build equity by paying down the mortgage, possibly making improvements as well. That will stand you in good stead if you decide to invest later.

That's why a home and income is such a good idea. You get both!

Find a nice one you can live in the MDU and get higher rent off the main house!

[ScottSI]

You didn't say how old your daughter is so how long till she flies the coop?

If she is early teens on then I would start to look at where you plan to end up in the long term and forget about the short term as your focus.

450K would buy you 2 rentals at least with $ 500pw income in a region in an OK type of property mortgage free.

450k + 450 k would buy you 5 rentals and $ 1250 pw income less mortgage costs (about $ 600pw on P & I).

Pay down debt fast over 5 years eg when you leave Auckland as daughter goes to uni or something so you have maximum income then.

Build a second dwelling on one and have a base and then go travelling / fishing / tramping / etc for the rest of your life?

Just my thoughts, life is finite and the sooner you get off the treadmill, the sooner your time becomes all yours to do with as you please.

[donna]

No, the 'Articles' section at the top of the page

here is the link to the articles


cheers,

Donna