Advice from pros required

[mlkmnz]

I'm at a bit of a crossroads as to what to do with my current property. My family are possibly looking at making a dramatic lifestyle change in the next year or so moving overseas and would require some passive income to finance a lifestyle offshore. The details of our current property:
Mortgage: $420k IO
Market Value: $800k (approx)
Rental income: $44200 p/a

Now, obviously the property is cashflow positive, but at the same time there is quite a lot of equity tied up there. So, am I better:
A) Hanging on to this property
B) Selling it and buying something cheaper to rent
C) Refinancing and buying other property

Option B seems to make the most sense to me, but I'm not overly adept at this whole property investing thing having only made some gains by smart buying and a bit of beginners luck.

Any input would be appreciated.

[spurner]

I'd hold onto it. 5.5% isn't a ridiculously low return. Obviously there'd be expenses involved in selling and then repurchasing, and you'd presumably want the new purchase to show a higher return, so the new property (or two) wouldn't be as good quality as your existing one. And if/when you return to NZ you still have your lovely house waiting for you, which will be worth alot more, and which you can use to finance other purchases.

[Dean@Massiveaction]

Hi MLK. Your best action depends entirely on your goals. If you are serious about cashflow and will be going overseas thent here is a good argument for selling your existing house and buying 400K worth of property debt free, having all the rental income as passive income and renting.
Keeping your house is also a good strategy depending on
A: HOw long overseas
B: Will you ned to buy a house overseas
C: Are you going to a country with stable currency where you could risk borrowing against equity in NEw Zealand to fund a property purchase over there.
D: What entity holds the property now and what are the tax implications.

You need to work through all those issues and get some professional advice. Well meaning and even well informed opinion here is all based on far too little information about your overall situation.
If you're in Auckland I'd be happy to have a coffee somewhere and try and give you my opinion but I need to talk to you to get your situation clear.

[xris]

Hello mlkmnz,

Remembering please that this is just my opinion, I would be wary of selling what you have. I think you'll regret it later. People often seem to get grandiose ideas after owning their current rental for a while. This usually revolves around wanting a higher, even more exciting, return. They take the easy option of selling what they have, almost on a whim, a then fail to do anything with the realised capital. You must remember that property investment is a long term game and that you make your money with the property's steady increase in value. You will not become rich with the rental income the propty provides. If you like the idea of a large source of passive income from your property /-ies then you need to become a property trader and/or developer, but if you are going overseas that seems an impossibility.

If you want to aquire higher returning property then you already have $380k locked in to the current propoerty to play with. Why not use it to buy other properties in the manner some people on this site do. This may then provide a little more cash in your hand (note the word 'little'.)

My opinion is that you may want to consider leaving the current property as is, seeing as it appears to be self funding, and when you return have a smile at the $400,000 it has made you in probable capital growth, (somewhat easier although less interesting than your implied preference for wheeling and dealing.)

Then, once you have manged to put your current property neatly into the back of your mind, find something exciting and rewarding to do in your new home wherever that might be.

Just my opinion of course.

xris

People ofte

[mlkmnz]

Thanks a lot for the replies guys (and quick too). I was expecting a gung-ho approach but they're all very level-headed comments.

It seems real tempting to try and make the most of the increase in value my property has experienced over the last 16 months but a cool head is probably best especially if the place covers itself for the meantime.

I've recently had this epiphany of retiring 30 years earlier and utlising my growth in equity here to fund a more relaxed lifestyle elsewhere for a fraction of the cost it would take in NZ. Originally I thought of cashing up altogether which would probably give me enough to buy property where I'm looking at as well as support us for decades but logic says to give myself a backup here.

Great site too, I'm slowly working my way through it to get a better insite as I'm sure there are some things I could be doing more efficiently.

[Captain Leverage]

stop the world let me off !

Hi MLK

Where is this country where you could survive for decades on $380k (the equity you would earn if you sold your place at MV)?

It sounds too good to be true!....I'm tempted to throw in the towel as well .....ditching painful tax returns/tenants/tradesmen/etate agents/LAQCs behind and retire 20yrs earlier than anticipated!

seeya
Sean

[mlkmnz]

Hi MLK

Where is this country where you could survive for decades on $380k (the equity you would earn if you sold your place at MV)?

I'm thinking about Thailand at present. Has pretty much all the trappings of NZ at a fraction of the price (healthcare, technology, beaches, etc). Around 100k will get you beach frontage western style housing and then you're looking at living costs of $100 or so a week for a family of four - again this is living a western lifestyle, you could live like a local for much less. So basic maths (without even working out interest bearing on about $250k) says I could live there for quite some time.

I'm going over in the middle of the year to give it a trial run for 3 months to see if it sounds like me or not. My current lifestyle in NZ is ok but I'm at the point where I'd rather live out my life to the fullest every day than just trudge away trying to build equity up only to be too old to enjoy my trappings later in life.

[rmjb]

You are aware that loads of westerners are leaving Thailand due to changes in the law with regards to foreigners buying property over there. Dont ask me what the changes or restrictions are but you should do some serious research on that before heading over there.

[rmjb]

Here is some discussion on the subject that I quickly found:

http://britishexpats.com/forum/showthread.php?t=384290

http://britishexpats.com/forum/showthread.php?t=392702

There are some other sites and discussions but dont have the time to search for it, sorry

[mlkmnz]

Cheers rmjb. I've already done a bit of reading about purchasing property there, the consensus seems to be to avoid until such time as you get a good handle for the market. I'd read that only Thai entities can purchase land but that apparently foreigners can start a Thai company in order to do this. Its interesting to see that theyre clamping down on this.

In the meantime rents pretty cheap (maybe even more so with falling condo prices).

[spurner]

I just got back from a year in Thailand. If you have money then all the trappings are waaaay better than in NZ! To be honest though, you need alot more $ than you think.

Thailand is not the kinda place you want to be broke in, so plan for the future now, like what you'll do when your money runs out. It's nice to have real estate and equity and NZ to come back to.

I could write a book on the topic so better stop before I get going...

P.S. My avater is taken on Pranburee beach, just south of Hua Hin...

I'm thinking about Thailand at present. Has pretty much all the trappings of NZ at a fraction of the price (healthcare, technology, beaches, etc). Around 100k will get you beach frontage western style housing and then you're looking at living costs of $100 or so a week for a family of four - again this is living a western lifestyle, you could live like a local for much less. So basic maths (without even working out interest bearing on about $250k) says I could live there for quite some time.

[mlkmnz]

I just got back from a year in Thailand. If you have money then all the trappings are waaaay better than in NZ! To be honest though, you need alot more $ than you think.

Thailand is not the kinda place you want to be broke in, so plan for the future now, like what you'll do when your money runs out. It's nice to have real estate and equity and NZ to come back to.

I could write a book on the topic so better stop before I get going...

P.S. My avater is taken on Pranburee beach, just south of Hua Hin...

What do you think of Hua Hin? I've been looking at Chiang Mai and the less touristy side of Koh Samui but I've heard some good things about Cha Am but info seems a little light out there.

We're planning on living pretty basically over there, we don't intend to have a vehicle or any cleaners etc. From reading around the net it seems people can live off 15KTHB a month right up to 100KTHB, the 100K per month example involved private education, 3 staff, etc which is not what we're wanting.

Like you I've got a couple of young uns and would rather spend the time bringing them up than working ungodly hours here for long term rewards. Sounds a bit crazy and short sighted but you'll never get today back. I'll be playing it pretty safe to begin with anyway.

[spurner]

Hua Hin is 'nice' but I wouldn't want to base myself there, I really prefer the big city. The hospitals and international schools there don't have such a good reputation. That's why most people end up in Chonburi (Pattaya).

I spent less there than in NZ, but was still more than 100,000baht/month, and we didn't have to rent either. But it is possible to live very cheap without luxuries, the standard wage there is only 6,000/month.

You only live once, so you might as well try something different, good on you!

What do you think of Hua Hin? I've been looking at Chiang Mai and the less touristy side of Koh Samui but I've heard some good things about Cha Am but info seems a little light out there.

We're planning on living pretty basically over there, we don't intend to have a vehicle or any cleaners etc. From reading around the net it seems people can live off 15KTHB a month right up to 100KTHB, the 100K per month example involved private education, 3 staff, etc which is not what we're wanting.

Like you I've got a couple of young uns and would rather spend the time bringing them up than working ungodly hours here for long term rewards. Sounds a bit crazy and short sighted but you'll never get today back. I'll be playing it pretty safe to begin with anyway.

[mlkmnz]

Yeah at present I'm over the big cities and would like to slow things down a bit.

100k a month? Jesus man, what were you spending it all on?

[lissie]

Hi Milky
We are off to Oz doing something similar - have just signed up tenants for our home for nearly 2 years so we know our income yeah! I would suggest that you do any maintenance that needs doing now rather than later to reduce hassel and maximise rent. I would tend to B - you are making a major change - you dont know what the results of that change will be so dont burn any bridges (selling) and I agree 5.5% is pretty good for a nice house. The main problem you will have is renting at that price (about $800pw?) You really should be renting the house now at the time of a peak demand and getting at least a year fixed term - middle of the year might be hard. Talk to local property managers. If this is going to be a major problem you may well be better to sell - buy something cheaper with a low/no mortgage and rent that. You could always rent yourself before you go - but I would DEFINITLY look at renting out the property now not later. My experience in Wgtn was that it took abouit 3 weeks and we got 1 suitable tenant - who loved it and took it - but at the same time at $400pw we would have had 20 odd to choose from.