First Home: Live in or rent out?

[Shay88]

Hi everyone

I am very much a newbie to this and am in the process of saving my but off for that first deposit then progressing into truckloads of rentals. What I was hoping to get some advice on is buying my first house - i'm 23 and single, so its either a matter of buying say a 3-4 bedroom house and having flatmates help to pay interest etc. Or buying a rental and staying in the flat I'm in.

A lot of people say do the rental thing because of tax benefits and claiming back expenses etc, but there is a lot of help around for getting into your first home i.e. welcome home loan, kiwisaver contributions and potentially getting a good enough deal so flatmates would actually be putting money in my pocket (maybe more suitable to where I'm at in life?). But then which option would banks prefer based on single income?

It would be great to hear from anyone who has been in a similar situation or someone who could explain the finance side of things.

thanks in advance

[Tan]

Are you eligible for welcome home loan & kiwisaver benefits?

[PC]

Having control over your own property can be a great benefit.
Pick & choose your flatmates.
But you also have to be the landlord to them.

[Shay88]

Yes to both, I am eligible for only 120k without deposit for welcome home loan (better than nothing!) and get $3k from kiwisaver at the end of this year as well as all my and employers contributions.

Are you eligible for welcome home loan & kiwisaver benefits?

[Tan]

Although I would normally suggest the problems associated with having flatmates in your own house, I would go for the free money, quick, before they take it away.

Check first if it is OK to have flatmates & still get the WH loan & kiwisaver amounts. What an opportunity, wish I'd had it!

[AMR]

With WH they will not take into account the income from flatmates for servicing...whereas with a normal loan and a rental they do.

[utopian201]

I'm in this situation; I've been looking (for about 7 months now!) for a house suitable for me to live in and plan to rent out the other rooms for a reasonable rate of return.

I'm not sure where you all find suitable houses which provide rental returns of 8%+ which aren't in the poorer areas; I've been to at least 90-100 open homes, only about 10% of those I've liked enough to put an offer on/bidded on at auction. But being constrained by my desired return (~6%*, which is a bit low, but the houses I'm looking at are ones I'm wanting to live in, not a dump ), all of my offers/bids have been too low.

So basically I'm looking for a house which is comfortable enough for me to live in, but when I pay it off and move out, rentable for a decent amount of return. Finding a property for this is difficult!

*Assuming I rent out the whole house. If I am living in one of the bedrooms, this drops to 4-5%.

[nintiger]

The problem to share with flatmates is that you will feel unhappy if you saw their bad habits. The feeling would be differ when you own the place than you rent a place. I prefer to move out and I did it as well.

[rueben]

Keep in mind that you should be buying to add value. This may be difficult with your first purchase - the fact that you are renovating around flatmates and you may not have the cash to do it straight away, but don't fall into the trap of many first home buyers I see who are aiming "too flash".

You may buy a house, but it might not be a pretty house, or a cool house. It will be your first house.

Buy a good, plain sound house that you can tart up with a paint, carpet, landscaping and general updating - change the handles in the kitchen maybe, and get a new benchtop in modern colours.

You didn't say what you liked about the houses you put offers in on - make sure you are not discounting the diamonds in the rough - a bit of imagination can go a long way. ;-)

[surfpunk]

What I was hoping to get some advice on is buying my first house - i'm 23 and single, so its either a matter of buying say a 3-4 bedroom house and having flatmates help to pay interest etc. Or buying a rental and staying in the flat I'm in.

I'd go for buying the rental and staying in the flat you're in. If you are buying a house for yourself to live in then it more likely to be an emotional purchase. If you are buying a rental you should be able to leave the emotion out of it and get yourself a good buy. You will also save yourself on the usual costs of buying furniture, appliances etc in setting up your own home and can put this towards building your property empire instead! The other thing to think about is although you are single now, you could meet someone, they move in and pretty quickly you don't want the other flatmates around. That could mean the end of getting an income from the property. Build a rental portfolio first while you are young and single, continue to rent yourself so you are free to take advantage of opportunities for work etc when they come up. Good luck!