Buy and hold strategy on 60k income

[Purple Property]

I live in Auckland and have one rental property.

My equity isn't a restraint but my serviceability is. I'm to the point where buying at 4-5% yields in Auckland isn't going to work for me.

I'm very much a buy and hold investor so don't like the idea of trading properties.

So what are my options? Buy out of town in higher yielding cities seems like my only option.

[PTILoveYou]

I live in Auckland and have one rental property.

My equity isn't a restraint but my serviceability is. I'm to the point where buying at 4-5% yields in Auckland isn't going to work for me.

I'm very much a buy and hold investor so don't like the idea of trading properties.

So what are my options? Buy out of town in higher yielding cities seems like my only option.

Well it is a tough choice.

Do you buy in Auckland say 4% yield, but potentially another 100-200k equity gain in the next two years. Maybe more, maybe less, depends which area in Auckland you invest. (home owner % area is better). Rents increase about 50% in the past 10 years or so, so your rental might be negatively gearing for the first 5 years or so, but after that things become easier and easier. Also cashflow properties will emerge in the coming downturn.

Or

Do you buy outside of Auckland, say Nelson where you get 7.5% net yield (not so good area)? How much 'cashflow' do you get? Do these actually increase in value? What if you budget a reno every 10 years? Would the 'cashflow' cover that in the long term? what about a new roof? Do rents increase and by how much?

How would each option achieve your long term goal?

[Micholas]

Is there anything you can do to your rental to squeeze some more cashflow out of it?

Have you considered teaming up with someone else for a JV to purchase another property?

[Don't believe the Hype]

Well it is a tough choice.

Do you buy in Auckland say 4% yield, but potentially another 100-200k equity gain in the next two years. Maybe more, maybe less, depends which area in Auckland you invest. (home owner % area is better). Rents increase about 50% in the past 10 years or so, so your rental might be negatively gearing for the first 5 years or so, but after that things become easier and easier. Also cashflow properties will emerge in the coming downturn.

How would each option achieve your long term goal?

I think it prudent to also cover the fact that the 'maybe less' could also result in a reduction in value - I'm not here to argue about which direction Auckland prices are going but there is also a chance they will retreat.

Purple property - how would you be with a rental at 4% yield and a negative equity position?

If you're a buy and hold with cash flow as the goal given serviceability then future 'market value' of your cash flow asset is irrelevant Auckland or elsewhere. Auckland has the potential Gary talks of but also had risks the capital gain strategy guys try to forget. You can get a solid positive cash flow still in some areas and if you use this cash flow to establish a reasonable size portfolio you will be well placed to cover the occasional high ticket prices repair (i.e. New roof)

[Anthonyacat]

All the property-related advice I could provide has already been mentioned. But so far they're all missing another option.

Increase your income.

Whether this is new job, a second job, a side-business, taking in boarders in your private home, or renting your car/boat/driveway/stilts/chainsaw to other people when you're not using them - there are a lot of ways to make more than you're currently making.

More income equals more servicability.

[PC]

Now might be a great time to repay debt.
If the market is nuts and you can't buy on your terms - maybe it's time to go fishing instead.

[Micholas]

More income equals more servicability.

Another great option. I bought my first house with 32k salary, since then salary has increased wildly and when combined with increases in rents and capital gains and paying student loan off, has allowed for purchases of more properties.

Maybe look for a similar job that has higher pay with another company? Or ask your boss for a raise (if you deserve it) it all adds up.