Keeping a foot in the Auckland Market

[Purple Property]

My wife and I are looking to move out of Auckland for a better lifestyle and slower pace of life. We are early 30's, with a family in the pipeline over the next few years.

We own one rental in Auckland and one in Tauranga.

To free up equity, lower debt and perhaps purchase our own home to live in outside of Auckland, we have considered selling the Auckland rental (300k ish) equity.

However, friends and family we have talked to are saying "you need to keep a foot in the Auckland market, or else you will never afford to get back in if you decide to move back in the future".

Do you think there is any truth to that statement?

[BigDreamer]

What are your plans after leaving Auckland?

Are you planning to buy a lifestyle block or a house in the provinces? Also, will you and your partner continue to work and earn the same amount as if you were still in Auckland? Or does slowing down mean reducing working hours and if so will the work be guaranteed?

[BigDreamer]

Also, yes, there is some truth to that statement but it really depends on your circumstances after leaving Auckland as the Auckland rental could be a great investment to hold on.

Another factor which I believe is relevant is whether or not the current Auckland and Tauranga rentals are producing positive, neutral, or negative cashflow.

If positive, I would not recommend you sell the Auckland rental.

[Don't believe the Hype]

This is a question of opportunity cost.

There is no guarantee that Auckland will continue to rise, you might well be at the top of the market, selling now might give you the opportunity to buy back in in 12-24 months time at a much lower level... or maybe the market could be 20% above the level today where by you will have to down grade your future Auckland home to buy for the same price you sold at or stump up more cash to buy the same quality of home as you sold.

Buying something outside Auckland depending on what you buy, where and how good you are at negotiating the purchase price could also provide you with a % growth rate that outpaces Auckland which we have seen from many regions in the past 3 months as Auckland has to cycle huge levels of growth and the wave of growth continues to ripple out around the country.

There is no wrong or right answer to your question... all there is is a series of trade offs that you and your wife need to agree upon the right plan for you both and then take action.

[Purple Property]

What are your plans after leaving Auckland?

Are you planning to buy a lifestyle block or a house in the provinces? Also, will you and your partner continue to work and earn the same amount as if you were still in Auckland? Or does slowing down mean reducing working hours and if so will the work be guaranteed?

House in a city, Tauranga, Napier, New Plymouth for example. Are planning to do road trips over the winter/spring to decide.

I will work full time, she would ideally be a stay at home mother.

[Purple Property]

Another factor which I believe is relevant is whether or not the current Auckland and Tauranga rentals are producing positive, neutral, or negative cashflow.

If positive, I would not recommend you sell the Auckland rental.

Neutral/slightly negative on Auckland. Neutral on Tauranga.

[BigDreamer]

It wasn't clear if your wife is currently working and the plan is for her to leave work in the near future or not. If so, will that mean you can continue to afford paying for your neutral to slightly negative rentals plus renting in the new location plus potential baby expenses?

It is, as DBTH mentioned, a question of trade-off. Personally, I would stay working in the new location and rent until both of you are comfortable with staying in the new location before you go ahead and purchase a property there. This means, leaving your neutral to negative rentals as they are in case you decide to come back to Auckland or move to Tauranga.

Good luck with your decision!

[Bobsyouruncle]

Do you think there is any truth to that statement?

Yes it's 100% true. HAs happened in every similar city as it explodes. However if you have zero intention of ever darkening Auckland's door again then there is no reason other than investment to keep the house. You can do nearly as well in many cities. but if you want to be in Auckland one day don't sell.

[Anthonyacat]

You can do nearly as well in many cities. but if you want to be in Auckland one day don't sell.

Given the high valuations in Auckland at the moment, if you apply just about any economic model you'd expect below average returns in the coming years, so you can likely do better in many other cities.

As Bob's said, though, if you want to own in Auckland one day, don't sell it. Consider it like insurance. If you're happy to rent in Auckland on your eventual return, matters less.

[Nick G]

I would hold onto both and rent in your new location until you are happy with the lifestyle there.

However you are heading into a rising interest rate environment with properties that are barely neutral based on historically low rates with a plan to go to one income. Can you sustain your portfolio if interest rates go back to 7% and you're on one income with mouths to feed? If not, perhaps sell one of your properties in the current high market to reduce your exposure and increase flexibility for future moves, which could include buying a home if you love your new location, buying a cashflow positive property or simply having much less debt for a while.

Without knowing much about your properties I would sell the Tauranga one and keep the Auckland one, however the devil is in the details.

[Grads]

I would definitely be keeping Auckland property.

If you have to sell one to achieve your desired outcome sell Tauranga property. (I live in TGA) Tauranga has experienced great gains over last 18 months and you would be selling at all time high!

Ideally, you want to keep both properties as Tauranga won't be going backwards anytime soon. Rent in new location for a while if you have to.