Changing property use
Question from Phil updated on 5th July 2017:
I am looking to turn our current house into a rental property and to purchase a new house for me and my family.
Our current house's value according to homes.co.nz is $550,000 - $570,000. We owe $225,000 so we have about 60% equity. I want to look at purchasing another house at around $550,000. That would leave us with one house with 40% equity and one with 20% equity.
I believe we can rent out our current house as two dwellings: upstairs as a three bedroom and single internal garage and downstairs as a two bedroom unit. I estimate that the upstairs dwelling could be rented out for $370 a week and the downstairs unit could be rented out for $220 a week - which would give us rental income of $590 a week.
Is this a good move? And do you have any advice on what should be considered? I'd like to know where to next.
Our expert Kris Pedersen responded:
Based on the numbers that you have stated that all stacks up and makes sense.
But get in contact with a good property accountant as it could be advisable with the change in use of your current property to look to put it into a LTC.
And you may want to restructure the mortgage on the existing property by putting this onto a interest only basis and then concentrate principal reductions on the new property as well.
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz