Getting into investing
Question from tina updated on 7th November 2018:
For the past 16 years I have been a full time stay at home mum. Now that the children are less reliant on me, I am looking at returning to work on a part-time basis (25 hours per week) where I would earn approximately $50,000 or investing in property. The later holds much more appeal and, after years of thinking about it, I'm ready to put things in place and make it happen - providing that it stacks up financially.
We own a debt-free property in Auckland with a CV of $3.2 million. My husband works full time and plans to for the next 15 years at least. I'd like both cash flow and capital gains and was thinking of an apartment in central Auckland that I could rent or, to increase the return, run as an Airbnb. In terms of the capital gains objective, I may look at buying a property on a full site out of Auckland with a view to adding value, maybe subdividing. I'm overwhelmed with information and conflicting advice from friends/family! I would value your professional advice as a starting point.
Our expert Kris Pedersen responded:
Start with the end in mind here – ie: what is it you are wanting to achieve with your investments. Note that from a property funding point of view the two key considerations that the banks will want to look at are equity and the ability to meet their debt servicing requirements.
You clearly have the equity levels but haven't mentioned what your husband earns which may (or may not) have an effect on how you should look at proceeding. We are seeing some customers who can meet the equity / servicing requirements looking at subdividing as it is a good way to create equity and also, in the case of Auckland where the Unitary Plan may apply unlock underutilised potential, also for cash flow by building further.
Apartments are an option but I do have some concerns at the moment. I would also note that when comparing the cash flow to stand alone houses or units to work off a net yield as at face value the return can look better but body corps need to be taken into account.
If you would like to discuss this further please feel free to email us at firstname.lastname@example.org.
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz