Buying first home to live in - South Auckland

[Andrewm]

Hi there i have been reading the site for some time but now i have signed up looking for some direct advice regarding purchasing a first home in South Auckland.

Heres the numbers,

early 20's, combined income 110k and rising.
25k deposit so far, going up 800 per week, access to 20k interest free.
No credit card or personal loan debt.
Student loan combined 40k
No dependants.

Id like to hear what you would do in my situation, I am thinking wait till 30k+ deposit and take the 20k loan to make a 50k+ deposit on a low 300k 3 bedroom (with high 300k asking price) house. I have been looking in conifer grove, manukau gardens, totara heights, wattle downs etc but would you suggest a cheaper house for a first? Or some potentially better areas for tenants?

How does a property finder work? do I pay on purchase or in advance for listings or do they negotiate price aswell? I am living in it so a nice yield isnt the be all and end all ie must have a double garage or room for me to build one.

I am more than happy to have a do up, and can build decks, garages, lay carpet and concrete etc.

If you managed to get through all that, cheers.

[ENP]

What are your plans with the house?

Live there and get flatmates in, live in and do it up then rent out, live in do it up then sell?

What are you waiting for? You have 10% deposit. If you buy undervalue enough you can get it re-valued to have 20% equity.

[Andrewm]

Looking to take on a flatmate or two, do it up and sell on later when incomes are higher to support a nice 5 bedroom family home. Should I try get a preapproval, then make offers to return around an 8% gross yield, is that a good strategy?

[freezinhot]

Depends on your goals and situation. I would say because you would be living in it yield would be of lesser concern and it would come down mostly to where you want to live.

There is no doubt you could get an 8% yield in Clendon/Manurewa but would you want to live there? (You said you were looking at the gardens/wattle downs) Why not look for an average area where schools are good, mostly owner occupied and something you could add value to, buy at a good discount and create EQUITY. As you are living in it paying most of the mortgage you just need to make sure your outgoings do not limit your lifestyle.

I think you need to wear 2 hats in this situation, an investor one and a first home buyer one. If I look at a PPOR I care no one bit about the yield but more about location, future growth, and good schools/infrustructure.

This is my way of thinking, others may have other ideas.

FH

[Andrewm]

I quite agree freezin hot, I was just unsure how to value the houses to put offers in and wondering if 8% return was a good way to estimate a bargain or is this too much for the nicer areas? Obviously start with the low ball and wait for the counter offer before settling.

[graemeh]

Who do you plan to sell it to?

If it is investors then yes buy on yield but you'll probably get a better resale price if you sell to a homeowner. In selling to a home owner you are not concerned about yield at all, you want the place to be attractive to them so they pay top dollar.

[mortgage broker]

Andrew when looking for an approval, especially with a 10% deposit. Make sure that you compare the costs of each lender in depth. I have seen thousands of dollars worth of difference between lenders.

Some lenders will charge a one off upfront fee and some an ongoing margin on the interest rate.

[NovInvestor]

What about your partner?

You know buying your home is more emotional than $$$.

If you find a dog house but very cheap in a nice area, but your partner says no, how are you gonna solve the issue?

If I were you, I would save more, and wait till next winter before buying (start putting low offers at end of April or early May when the rain arrives).

House prices are lower at winter, but you have to think through the rain with your brain rather than looking through your eyes...

The up coming LAQC changes will put off more amateur investors in the market, and will drive prices flat or down, so save up your 50k first.

But first of all, you and your partner need to agree what type of property you BOTH will accept.

If your partner likes flash things and hates rain, good luck!

[Andrewm]

Cheers everyone, to mortgage broker yes I will look at the costs, ASB estimated me 2k on the end of my home loan for a 10% deposit 300k loan. Will make sure to check around.

To Novinvestor, yes I hear what your saying but my partner is a business rather than relationship partner, we've finished uni and dont want to rent, I probably should have made this clear initially. If its do up then i dont think we'll live there long just a couple of years till our incomes rise and we can (hopefully) rent with reasonable return or sell for profit. I realise there will be legal issues to sort out with this kind of arrangement so i'll be off to see some experts at some point.

[mortgage broker]

I will save you the trouble, if ASB can do it, they will probably be the cheapest for that type of lending.

[Andrewm]

With no credit problems, no hire purchases no dependants and our good level of income they were more than happy to lend me the money. On another note my partner is a police officer, I have read they are getting upto 0.5% discount on mortgage rates, I assume for full deposit buyers, should I expect to be able to bargain for a discount with only a 10% deposit or am I pushing my luck? I probably will try anyway haha.

[mortgage broker]

You might be able to get some contributions towards your legal fees. Also note that some banks will drop to a lower LEP fee should you have 10.1% deposit.

One of my clients have saved $1,000 on the LEP by paying an extra $500 towards his deposit this week.