Question from Miriam updated on 17th April 2019:
We are looking to purchase a property in Auckland. But we want to buy with a view to investment and we aren't sure of what strategy to take. Should we buy a more expensive, inner suburb family home and leverage off it as its value rises down the track? Or should we buy a cheaper family home further out and then buy a rental as well? What do you think would be the better strategy in the long term?
Our expert Kris Pedersen responded:
There are a number of factors to take into account. If your household income is strong then you may get better capital gain with the first option. However, if you are looking to build up a portfolio then the second option may work better as you will also obviously be receiving rental income.
From a leverage point of view (excluding Reserve Bank exemptions such as new builds and non-bank solutions) you will be able to gear yourself up higher by just buying a personal residence. That is rather than splitting leverage across a home and a rental property - unless you look potentially at a home and income type of set-up where you should be able to obtain 80% finance.
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz