Auckland Newbie in need of direction

[Fat-Albert]

Hi guys,

I’ve only been on this site for a few days (finding it by total fluke courtesy of Google) ait has already caused many late nights and unfocused eyeballs. The wealth of information along with the friendly and helpful people on here is amazing.

Firstly, just to point out I am a total newbie in the property market in general and am almost embarrassed to post on the forum due to my inexperience on the subject. I thought I’d give it a shot anyway as I’d prefer to be shot down than here than listen to the advice I’ve been receiving recently from others who all seem to have an opinion but can’t explain how they came up with it. So, all that said please excuse my questions as they may come across as very simple but bare with me if you will.

As a little background, I’m in my early 30’s (married) and we’re looking to buy for our 1st time. After having procrastinated for the past 2 years I have set some goals in this area and taking action to get started. I have recently been hammering the local library and internet to take in everything possible regarding the subject.

Our basic strategy is to invest in property with a long-term goal of it providing security for retirement. We are not specifically looking @ obtaining a living/income from rentals at this stage.

Here is a few basic’s about our position:

Married couple in early 30’s
Dependants: 0
Annual salaries combined: $95,000
Savings for deposit: $12,000 + $3,000 extra for lawyers fees, valuations etc
Outstanding debts: $20,000 (Student Loan)
$17,000 (combined personal loans)
Current rent: $210 per week

We recently contacted a mortgage broker with the intention of finding out whether we are in a position to apply for a mortgage to buy a home. I was adamant that I did not want to over-borrow and set a limit for $200,000. This was due to the fact that we will have to continue to pay for our personal debts additional to our mortgage re-payments as well. While speaking with the broker and discussing our options he mentioned that it maybe worth considering staying where we are currently renting due to the low rent and buying a unit as an IP then renting it out.

Is this a feasible option worth considering in our position????

Our initial thoughts were to buy a unit/flat in a good area (Mt Eden, Epsom, Onehunga etc) that is in need of a little work and do some basic improvements. Then in 6-12 months time revalue and re-borrow to purchase our 1st IP.

We also have the option of relocating to the South Island. This would possibly allow us to purchase a cheaper property 1st up and allow us to clear our personal debts quicker with the excess funds available.

Any feedback both positive and negative would be appreciated!

[RentMaster]

Hi Fat Albert.

If you have $200k to spend on a property, you wont get much in Auckland. Especially not Mt Eden or Epsom. It is either going to be very small or in very bad condition. Neither of which are good for finding tenants. If it is a do-up, then it might cost a lot more to do it up.

The South Island as you mentioned would probably find you a few more opportunities. Or if you want to stay in Auckland, look further south or west.

If you have 17k in personal loans, it might be best to pay off those first. I suspect the interest on those will probably be quite high. If the student loan is interest free then I wouldn't bother paying that back.

Good luck.

[[email protected]]

Hi Albert,
Given where property is likely to go in the next 2 to 3 years sticking to Auckland or another main centre is a good idea. Definitely a great idea to keep renting and buy an IP. Without knowing the specifics of your situation in terms of interest rates etc. getting rid of your own debt is always a good idea. If you could buy an IP that was largely self funding however then you could write down your own debt AND buy an IP.
With your income you could probably borrow 100% of purchae price and use the 12K to pay off other interest bearing debt.

[Fat-Albert]

I understand that 200k doesn’t go far at all in Auckland these days but due to our other outstanding debts as discussed we set this limit.

Having read the above posts we are now considering our options further with the possibility of looking at the Sth Auckland Market.

To note, we have just heard (after asking our land lord) that he is willing to sell via a private sale the unit that we are currently residing in, in Epsom. We have lived in it for a number of years and are very aware of what maintenance has been done to it since we have been there, which is basically nothing. We are also aware what needs doing to enhance it. We believe we will be able to complete most of the basic renovations ourselves as they mainly add up to visual aspects of the interior, ie painting, light switch covers, door/cabinet handles, light shades etc. For a couple of other things we have a relative who is a qualified builder who will be able to assist.

We have yet to start negotiations but we think a realistic price would be somewhere around the $185k-$200k. We are also yet to get a valuation to confirm whether we are accurate in our opinion. We are willing to stick to our guns at that and walk away if we can’t get it within this upper range.

I have a couple of additional questions to anyone who can offer any input.

We will be meeting up with the owner in a couple of days to discuss things and I am currently in the process of getting a list of questions together to ask regarding the unit etc. These will of course include inquiring about Bodycorp fees, Insurance, Rates, Water costs etc.

Is there anything I should specifically ask him or be wary of in his answering of certain questions?

When he initially called I asked him for a ballpark figure he wanted for the unit. He would not provide one and said he wasn’t sure and we would have to talk about that. I mentioned that I would be getting a valuation in any event. When he heard that he mumbled on about those being only one persons opinion etc and saying they didn’t indicate too much. We did have a call back later saying that he found some old valuation figures.

Can anyone offer any tips on negotiating (given that I believe he is a former real estate agent). He is aware that we are 1st time purchasers and very green on the subject.

Also, if he does come up with a figure that is in our lower price range should we indicate to him that we are keen but will await a valuation before deciding on any figures? This, given the possibility of the valuation coming in over that price and him changing his mind and wanting to up the price. Also, the valuation may come in lower and give us more bargaining power.

What should be our next step after finding out whether we are able to proceed given that his price range is within our limits.

In what order do we……………..

Get the valuation done?
Get our lawyer involved?
Get a Building Inspection completed. (How many people do this and how much is it likely to cost?)

Get a copy of the Sale and Purchase agreement?
(Do we have to place an offer 1st , conditional of course with clauses subject to a suitable the LIM, Valuation, Finance and maybe a building Report. Then once we have this copy forward it to our lawyer to check over?………(probably a stupid question for you experienced guys I know)


Thanks for your help guys!!

[Gerrard]

He who speaks first loses. Make the current owner name their price first. Look shocked, horified and point out all the work that needs doing. Negotiate as hard as you can to save every dollar you can to renovate the property.

Once you have agreed on a value, get him to sign up to a sale and purchase agreement. Have it all ready (get a lawyer to do it if you asre unsure) with the details and your clauses so you can add the price in and sign it on the spot with him.

Get that commitment in writing as soon as you can, subject to completing your conditions. Then you have time to get the valuation done and if it comes in high the owner can't back out.

Good luck
Gerrard

[cube]

Welcome.

Try and get an agent round as soon as possible to do a quick appraisal - tell them exactly what's going on when they get there (not on the phone, otherwise you might have a hard time getting one to come round).

Don't tell them what figures you have in mind.

Definitely get the landlord to name his price first, and, even if its $150,000, act shocked, shake your head, look sadly at you partner (as though the opportunity has passed by).

Good luck

Let us know how you get on!

cube

[sarahk]

Welcome to PropertyTalk. Good to see that Google is doing it's job!

As a side note, have you been along to any of the Auckland Property Investors' Association meetings?

Sarah

[DreamsofDeco]

Hi, Fat-Albert. I was green when I purchased earlier this year and thought I was doing a good thing by getting a building report. About a month after purchase we had a week of drizzle and lo and behold the roof leaked. This happened twice within three months. The building report said that the roof appeared fine. It turns out there were holes that should have been obvious and also the inspector failed to mentioned the pitched roof was constructed over the old flat roof. I don't think he looked at the ceiling or roof or he might have noticed evidence of other leaks and the holes. The point is: get recommendations before getting a building report.

[Fat-Albert]

Welcome to PropertyTalk. Good to see that Google is doing it's job!

As a side note, have you been along to any of the Auckland Property Investors' Association meetings?

Sarah

No not as yet, but I plan on it!! I almost feel I am to inexperienced to go along to the meetings at this point as we are still yet to purchase our 1st property and most of the figures and jargon would have me dazed and confused and looking like an idiot.....lol

[tamara]

Hi Fat Albert

I dont believe that it is ever too soon to go the meeting such as APIA. You will get to meet like minded people and learn heaps along the way.

Tamara

[muppet]

Hi Fat-Albert

You said:

No not as yet, but I plan on it!! I almost feel I am to inexperienced to go along to the meetings at this point as we are still yet to purchase our 1st property and most of the figures and jargon would have me dazed and confused and looking like an idiot.....lol

I went on the Rotorua PIA bus trip around Rotorua on Tuesday.

After the trip a young person came up to me and started asking me questions about property investing.
He hasn't bought any investment property yet but did have prior approval.

We spent about an hour in the car park discussing various things about property investing. Great stuff.

Soooo, the moral of the story, do your research and study and that includes going along to Investor Association meetings.

Good luck.

Regards

[Fat-Albert]

Update: Thanks to those who assisted me. We went and spoke to my landlord and we found out that he is wanting more than we are prepared to pay. We learnt a lot with this experience, and after reading through this site I made a list of questions that I wanted to ask and even though it was our 1st time I structured them well caught him out a few times. The great thing was that we went into the meeting knowing we could walk away from the deal if we didn’t get what we wanted and that’s exactly what happened. It’s funny how things happen as the next day we heard from a family member that they need to sell a property to clear some debt and are willing to let it go below market valuation for us. We will of course check it out thoughly but since we have got our bums into gear and taken action things are starting to happen and doors opening for us.

[revdev]

Great to see you are learning so quickly Fat-Albert! Look at the numbers not the emotion and you will see the oppportunities.
Knowing when to walk away from a deal, if it doesn't meet YOUR criteria, is an important skill to have.

All the best and work the numbers on the next one (and the next one..!)

G

[Fat-Albert]

UPDATE:

The landlord came back with a lower price, dropping $15,000 off the price bringing it back within our price range. We're still crunching the figures as it's still slightly more than we wanted to pay but we are differnately considering it!!

[essence]

Keep negotiating

Sounds like the landlord is keen to sell privately (ie not paying Real Estate agents fees).

Why not suggest you will buy it at $'s less what he would have paid in REA fees, seeing as its a private sale. Generally speaking (very generally of course), its 3.95% of sale price + $500 + GST. That will give you an indicator of what the vendor would have to pay to the agent on sale.

Getting a valuation done - great idea!! As you have paid for the valuation, you don't have to disclose to the vendor what the figure is. If the figure the vendor comes back with is higher than the valuation, act shocked (see cub'es post) and if he comes in under the valuation, act shocked any way! You can state "That's not what the valuation came in as" (true} and if you're very clever he may DROP his price again. Try your luck, you never know.

Just remember (as you've stated) its only a property and there are thousands out there. Finding one at the start of your journey is hard. Property is an addiction, ask any of the forumites here.

Good luck and keep posting.