The first step on the ladder

February 20, 2013 at 10:26 AM

Home ownership seems a far-fetched dream for many Aucklanders, as prices continue to rise and competition between first homebuyers is fierce.  At an auction a couple of weeks ago, 7 keen bidders fought for an Avondale bungalow which sailed comfortably in to the $600s and sold above expectation (and well above CV). This story is not rare, but rather the norm. And when did a $600,000 house become first homebuyer territory? It seems the kiwi dream of owning our own bit of dirt is becoming a luxury many can’t afford.

Despite the doom and gloom, this cloud has a silver lining. A growing number of Aucklanders are approaching the property market with the view to buy a home and rent it out to pay down the mortgage. These investors then stay living at home with parents & family or rent a room in a flat with friends, allowing them to split the costs of rent, water, electricity, gas, internet, phone and sky. 

While the home is a rental property, maintenance, insurance, rates, accounting and legal fees are all tax deductable.  

A new property owner (that we have just begun working with) bought their first home for $400,000. We rented it for $450 per week. With a top up of approx $150 per week (from the owners surplus monies), the mortgage will be reduced by 10% in 2 years. The owner lives in a flat, paying $200 a week (bills included) and puts surplus monies and savings into the revolving credit (saving further interest on the mortgage). The ultimate goal is to move into the house in 3-5 years time, when the mortgage is at a manageable level and allows this owner to still enjoy a high quality of life. Seems like a smart move and certainly goes some way to assisting Auckland with the deficit of homes for our growing population. 

How did you afford your first home?

Category: Buying an investment property