First home buyer/investor?? need help/opinions. Auckland based

[Dynamic]

Hi Everyone,

First off, let me say this forum is awesome. There is a wealth of knowledge and experience available and I've learnt quite a bit just by reading older posts these last few weeks. I've had a search but there is nothing available in regards to first home buyers that are purchasing in 2019. I'm hoping some of the more experienced people on this forum can offer their opinion/advise on what i should do.

My wife and I have been living quite frugally the last few years to help save for a deposit to purchase our first house. We are basically there now with $120-$130k as a deposit but i'm now stuck on whether we should buy our first home or buy an investment property instead. We have a young family (two girls, ages 5 & 2) and the 5 year old is starting primary. We currently live in Botany Downs and have been for the last few years as we moved back in with my parents to help save for the deposit (Currently pay their mortgage). Problem is with our current deposit we only have a purchase price of $600-650k and that cannot purchase any property in Botany/East Auckland. We need to stay in the area of east Auckland as my parents and in laws help with dropping/picking kids to primary and daycare.

We eventually would like to invest our way to a decent portfolio and achieve some passive income so my wife and I can leave our day jobs, focus more on raising our kids and actually live life.

I've been to a couple of seminars like Ronovations and have considered purchasing a centrally located unit or even invest outside of Auckland as that's more within my budget but getting into the second or third property will be hard due to serviceability.

I suppose what i'm trying to ask is, If you guys were in my position, what would you do?
-Buy a first home in south Auckland where it's more in my price range
-Invest in a unit located in central auckland, rent out and hope for cap gains
-Find one or two cash flow positive properties/units outside of Auckland and slowly build from there
-Save for another year to have a bigger deposit
-or just buy something, anything with land in Auckland as prices always increase and i'm just overthinking things lol (Sarcasm here)

Main reason for wanting to purchase now is the market is flat and interest rates are low. Looks to be speculation around that market and rates will drop more next year but who really knows...

Would also be interested in knowing how you all started your portfolios. Whether you purchased your first home and then leveraged of that or went the investment route first and just rented a home.

I understand the first purchase is the most important one as it can set you up or set you back for the next purchase and the fear of doing something wrong keeps me up some nights, so any info/help/opinions will be appreciated!

Thanks in Advance

[GLin]

First home 10-20% deposit, and you can withdraw your kiwisaver.

Investment, 30% deposit.

So that will affect your budget and what you can buy significantly.

I would be leaning towards buying a first home, well under value, with a view that it will be a rental in a few years when you upgrade. So stick to the numbers and don't buy emotionally.

[DaveW]

Are you handy to a bit of DIY? because I would buy undervalue in an older suburb of east auckland with a property with add value. One of the most cost effective add value is by adding rooms or a granny flat.
I would tell the bank you're going to rent the other bedrooms out, this will help with loan approval.
You could turn the property around in time for summer and sell. That should at least double your capital so that you can then step up to 2 houses or a commercial.
You will talk to your property accountant about setting up two companies one for buy and holds, and another for buy and sell.

[richierich]

If im you, i will buy a smaller first home in east auckland that is within your budget. Your kids are very young. To get into major and extensive property investments takes time and effort. You should take it one step at a time so as not to neglect spending time with your young family. Life is not just about making money. Do not underestimate the value and comfort of having your own home for you and your young family.

[elguapo]

I would tell the bank you're going to rent the other bedrooms out, this will help with loan approval.

Are you recommending him to rent rooms out to increase income, or just to tell the bank that is what he is doing?

You could turn the property around in time for summer and sell. That should at least double your capital so that you can then step up to 2 houses or a commercial.

Let's get this straight, your recommendation is that he can purchase now in the $600-650k range and sell in 6 months time for a profit of $120-130k (double capital in your words).

Can you show us all how you would be going about this? Please show how much work, capital is needed, and account for the transaction costs as well.

You will talk to your property accountant about setting up two companies one for buy and holds, and another for buy and sell.

A first home buyer now needs not just one, but two dedicated accounting structures? How much of his capital gets spent on setting all that up?

[elguapo]

Problem is with our current deposit we only have a purchase price of $600-650k and that cannot purchase any property in Botany/East Auckland.

$650k will just get you a two bed unit in that general area.

We eventually would like to invest our way to a decent portfolio and achieve some passive income so my wife and I can leave our day jobs, focus more on raising our kids and actually live life.

That is very challenging objective. Have you calculated how much capital you need to create the income you want without working? This will need to be well over a couple of million, how do you plan to create this?

[Dynamic]

Thanks for the reply. Been thinking about it more the last couple of days and have posted on another page for advise. Quite a few have told me to purchase outside of Auckland as investments and slowly build from there. No problem with renting a home and build an investment portfolio that can pay for a home later down the track. Only issue i see with that is, if i'm looking to buy a property i can add value to it means i will need to do renos, I barely have any free time atm so how will I have time to drive to another city for renovations.

Like you guys have said, trying to find a home and income of sorts will probably be the best move.

[sidinz]

Just remember that if you buy property out of Auckland that you can buy more than one or two.
If you buy cashflow positive property, the rents will also be used to determine serviceability and the income will help you into expanding.
If you go through a second tier lender, you can still get by with a 20% deposit, but you might need to pay a slightly higher interest rate.
If you do that, buy under value and increase it, you could get three properties with your current deposit in one of the regions.

[Dynamic]

Yes, that's what a lot of others recommended as well. Buy well in the regions, add value, make sure they are cash flow positive, use them to buy more and eventually buy my own home. How would one go about renos/maintenance etc though? Does everyone use contractors?

[sidinz]

How would one go about renos/maintenance etc though? Does everyone use contractors?

That's usually a function of your skill set and where you are on your journey. I am still in the small stage and have the skills and time, so I do my own, as do other people like me. Other people hire tradies because that suite their circumstances better.

[DaveW]

Original poster said they are at the beginning of their journey, thats why it is well advised to buy local and cut their teeth with a bit of hands on DIY management. Not much has been said by the OP if they are game to this or not, but often the first step will set the path going forward. A place to live in will be tax exempt because it is their own home plus its a lower deposit.

[DaveW]

Are you recommending him to rent rooms out to increase income, or just to tell the bank that is what he is doing?



Let's get this straight, your recommendation is that he can purchase now in the $600-650k range and sell in 6 months time for a profit of $120-130k (double capital in your words).

Can you show us all how you would be going about this? Please show how much work, capital is needed, and account for the transaction costs as well.



A first home buyer now needs not just one, but two dedicated accounting structures? How much of his capital gets spent on setting all that up?

1) It depends how the project pans out as to weather its feasible to rent a room.

2) Know your market like the back of your hand. Befriend agents. Act fast. In other words buy the right property.

3). Companies can be created online for around $40. You will need to show your intentions whether you are going to keep the house or sell it. This makes a big difference for tax to pay.

[elguapo]

1) It depends how the project pans out as to weather its feasible to rent a room.

2) Know your market like the back of your hand. Befriend agents. Act fast. In other words buy the right property.

3). Companies can be created online for around $40. You will need to show your intentions whether you are going to keep the house or sell it. This makes a big difference for tax to pay.

1. It would be good if you made that clear to the bank that it is dependent on the 'project'.
2. If you repeat meaningless t property investment tropes often enough, you will buy 'under valued' and it will be the 'right' property.
3. Last time I checked property accountants didn't work for $40.

[DaveW]

1. It would be good if you made that clear to the bank that it is dependent on the 'project'.
2. If you repeat meaningless t property investment tropes often enough, you will buy 'under valued' and it will be the 'right' property.
3. Last time I checked property accountants didn't work for $40.

1. It's no difference if you are buying a rental property you intend to find a tenant but its rarely the case from day one right? you may not have decided to change the carpet until you own the property. Are you suggesting we update the bank on this?
2. That's not true, it takes hard work. You need to be willing to put in the hours.
3. You can create a company online for around $40. You can consult with a property accountant for $200.