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  1. #1

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

    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

  2. #2
    Join Date
    Feb 2018
    Posts
    126

    Default

    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.

  3. #3
    Join Date
    Apr 2009
    Posts
    942

    Default

    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.

  4. #4

    Default

    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.

  5. #5
    Join Date
    Jun 2013
    Posts
    2,102

    Default

    Quote Originally Posted by DaveW View Post
    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?

    Quote Originally Posted by DaveW View Post
    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.

    Quote Originally Posted by DaveW View Post
    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?

  6. #6
    Join Date
    Jun 2013
    Posts
    2,102

    Default

    Quote Originally Posted by Dynamic View Post
    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.

    Quote Originally Posted by Dynamic View Post
    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?

  7. #7

    Default

    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.

  8. #8
    Join Date
    Mar 2013
    Location
    Auckland
    Posts
    1,666

    Default

    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.
    My blog. From personal experience.
    http://statehousinginnz.wordpress.com/

  9. #9

    Default

    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?

  10. #10
    Join Date
    Mar 2013
    Location
    Auckland
    Posts
    1,666

    Default

    Quote Originally Posted by Dynamic View Post
    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.
    My blog. From personal experience.
    http://statehousinginnz.wordpress.com/


 

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