seeking advice- aspiring young investor

[Grace266]

Hi,

I'm Grace, I'm seeking technical and general advice about property investment.
I'm 20, I have a 50k deposit, live in welly and have two goals; get out of paying rent and start investing. I have considered a range of options, including container homes (unfortunately its v difficult financially to do this as the bank wont lend out on container homes as they would on conventional builds).

Plan A) At the moment my idea is to buy a 'doer upper' 20 mins out of the city (ie porirua or lower hutt) with a lot of potential to add value- ie it has a crap kitchen and bathroom (my dad is a joiner-lucky me), throw on some paint etc. Kiwi saver would require me to live in it for 6 months, in this time I would renovate. I would then like to build a second alternative dwelling on the property, perhaps a container home. I would live in this rent free and rent out the house. This would probably be a 5 ish year commitment. from there I will either sell on to buy a better property, use equity to do the same thing or just sit on it.

Plan 2) I have seen a house for sale at the moment in porirua that has an unfinished downstairs part. I was thinking, maybe I could finish it and make a 'grannie flat' style self contained unit which I could live in and rent the upper level out which is a 3BR house.

Plan 3) my least favourite plan- sign another one year lease, save, realistically a max of 250 per week (12k PA) and start next year. the cons are 1. I'm basically saving the same amount in a year that I would pay to rent out a shit student flat anyway. I could be paying off my mortgage. 2. I feel like wellington is only going to get more and more difficult to buy in. 3. i'm eager to get going!
so my questions are:
- is it even possible to buy something (that's not in a gang ridden town) for 250 atm? pretty much everything listed is by negotiation so I'm clueless
- is it legal (ish haha) to do plan B- to have a self contained flat downstairs?
- are there any brokers/banks/lawyers that you would recommend?
- do you have any other smarter ideas or options considering my current resources?
- I know that I am young and stupid (and I'm proud), am I being the right kind of ambitious with a slight optimistic bias or am I completely insane?
- should I just move to Invercargill, build a 10m2 hut on my 8 k section and chill? haha kidding

Thank you. I appreciate any advice given!
man what a great resource!

[Nick G]

Hi Grace

Good questions, I like option 1 or 2, since they're essentially the same thing. Buy something run-down, increase the value of it and build from there. I agree with #3, the market will go up faster than you can save for another year.

If I was in your situation I would look for a single house with a section big enough to do something with in the future, ie build, subdivide, etc. That gives you choices, ie you can sell as-is to a FHB or an investor, or you can do the project, sell one, sell both, keep both etc.

If you want to build a second dwelling you could look in a few years doing a full home relocation. Say your property value has gone up by $50K and you have saved another $30 that could be enough to finance it. Or maybe you and some family could do that part as a joint venture, where you supply the subdivided land, they do the build and you split the profit. Again, choices.

Try to get into a "good" crappy area. So you want to be somewhere you think will improve first. Somewhere other FHBs are starting to creep into is a good hint.

- is it even possible to buy something (that's not in a gang ridden town) for 250 atm? pretty much everything listed is by negotiation so I'm clueless
>> It'll be a real project but sure. Now is a good time actually, the higher deposit for investors has driven some people away for a bit and FHB's generally wont want to do a renovated property. A colleague just bought a property in Porirua for $207K, he's planning to spend 70K doing it up and will sell mid 300's. Is that your target buy?

- is it legal (ish haha) to do plan B- to have a self contained flat downstairs?
>> Absolutely.

- are there any brokers/banks/lawyers that you would recommend?
>> I think there's a Wellington Broker on here, Andrew. Will let him put his hand up.

- do you have any other smarter ideas or options considering my current resources?
>> Realistically you're going to be working on this property for 5 years so you want to get the most potential house/area you can. If you can borrow a bit to stretch to a winner you'll pay that back easily and you will get a better return. Have a chat with your father and see if you can get a $10K loan for a bit so you have more buying power. Just in case you spot a good property. You may not need it but it's good to have the option.

- I know that I am young and stupid (and I'm proud), am I being the right kind of ambitious with a slight optimistic bias or am I completely insane?
>> Be a cautious optimist. Look for upside and do thorough due diligence (building and meth tests before going unco) because your risk is inexperience. Do you know someone who has already done what you're trying to do and can coach you or challenge your thinking? I can possibly introduce you otherwise.

- should I just move to Invercargill, build a 10m2 hut on my 8 k section and chill? haha kidding
>> There are some things we do not joke about.

[jack2016]

Good advice

[Don't believe the Hype]

Hi Grace -

your plan to buy in poriru for around $250k is achievable. The good news is that at 20 you have time on your side. If the plan is to use Kiwisaver and meet these requirement by living in for the min required period or even as a short term stepping stone into a better place you must look at this as a long term rental and not get caught up in buying something that you want as a home.

The by negotiation listings take a little longer to work through than properties with a listed price but the reality is all properties are sold by negotiation... Even with a listed price there will be a negotiation so while it is presented differently In the ad it is really no different at all.


As you consider smaller towns you need to consider the demand in these locations -
> why are people interested in living in this town?
> Can the people in these towns afford the rent?
> Is there a liquid market? I.e when you want to sell, will there be buyers - don't be fooled by current sales rates in a boom market, could you get out in a slow market without dropping your price dramatically?
> where is the employment? If it is just one (or 2) larger employers what happens if they move/go broke/downsize?

I'm a full time property investor active in the Wellington market, in particular in Porirua if you want more guidance I will PM you so you can shoot me a PM back for more info.

[Nick G]

My next comment was going to be "pm Hype he knows what he's doing" lol