Dumb question but (property investment question)

[Edward Diego]

Something often mentioned in news discussion etc. about property investment is that once you own some property you can leverage it to obtain credit to buy more property.

Is that true? How does it work? I have more questions, but first I need to find out if it's even true.

[Subway]

Say you purchase a property worth $500k and contribute $100k (20%) as a deposit.

It goes up $50k in two years, now worth $550k, and you owe $380k ($20k in repayments after two years), but your equity in the property is now $170k, depending on your lender you maybe able to utilise some or all of that equity for another property, but that depends entirely on your lender...

[KiwiTT]

Generally you can borrow on increased equity in a rising value property market.

e.g. You buy a home for $500,000 with a $400,000 mortgage. A Few years later your property is $600,000. You now have $200,000 equity. You can now take a loan out on another property based on this increase equity. Rince repeat, and you will soon have a $1,000,000 equity.

All you need to do is make sure you can meet the interest payments.

[Fragluton]

Banks will require more of a deposit for investment properties generally too. If your income allows, you can borrow up until a point where the bank is happy with the amount you owe VS your assets. I'd look into how much as % a bank will require put down on a property when said property is an investment property.

Tends to change a bit depending on government policies too. Like there sort of recent one with requiring larger deposits and that sort of thing.

[Edward Diego]

Thanks all, okay, so it's a real thing then. So my partner has about $150K equity in her house, and we want to move in together and buy a house, but we were looking at renting together to sell her house to free up the equity to buy (I've got the income, she's got the capital), but then we'd have to a) find a rental that suits our circumstances and they're rare and/or expensive and b) move house twice.

Also, if we're able to keep her current house, we could rent it for a decent profit per week based on her outgoings on it compared to the market rents in the area.

Cool, just wanted to check it was actually a thing before I made an absolute tit of myself.

[KiwiTT]

A landlord I know, sold their freehold house and used the money to put deposits on 3-4 other houses and then rented themselves.

[dickytim]

Thanks all, okay, so it's a real thing then. So my partner has about $150K equity in her house, and we want to move in together and buy a house, but we were looking at renting together to sell her house to free up the equity to buy (I've got the income, she's got the capital), but then we'd have to a) find a rental that suits our circumstances and they're rare and/or expensive and b) move house twice.

Also, if we're able to keep her current house, we could rent it for a decent profit per week based on her outgoings on it compared to the market rents in the area.

Cool, just wanted to check it was actually a thing before I made an absolute tit of myself.

We did exactly this. And they way you have worded it, you'd only need a total of 20% deposit (not the 35% you need for an investment property.

You just need a really good broker, lawyer and potentially accountant to advise you.

If you are in Auckland I can recommend someone, PM me.

Without being insensitive, you should also spend some time working on a relationship agreement with the lawyer that outlines what happens if the relationship splits.

[Edward Diego]

Without being insensitive, you should also spend some time working on a relationship agreement with the lawyer that outlines what happens if the relationship splits.

For sure. I've already raised that with my fiancee.

[stacrafty]

have a look at crunching the numbers on renting vs buying, often you can rent in a nice place (with the pros and cons of renting of course) for way less than the cost of ownership

[TatonkaBill]

have a look at crunching the numbers on renting vs buying, often you can rent in a nice place (with the pros and cons of renting of course) for way less than the cost of ownership

Rents are historically high in most places, and interest rates are historically low .... owning is getting more and more cost effective, plus you're building capital that you otherwise wouldnt be if renting.

The only real extras for owning a property are rates, house insurance and some R&M depending on what you buy.

[Edward Diego]

have a look at crunching the numbers on renting vs buying, often you can rent in a nice place (with the pros and cons of renting of course) for way less than the cost of ownership

Will do mate, but tbh my new family circumstances when I move in with my partner of 6.5 kids (the 18 year old is teetering on going flatting) and 4 cats will make renting ****ing near impossible.

Well, cheers, guys. Now, can anyone recommend a good mortgage broker in ChCh?

[Fragluton]

I use Ricky Rhodes, (Mike Pero), based across the road from Bush Inn.
Helpful dude that makes things a breeze, I don't bother dealing with the bank direct anymore.

[BorgWarner]

Rents and capital gains are going nowhere in Christchurch (I'm a homeowner and landlord here). Don't expect any increase in leverage over the short term.

[Edward Diego]

Cheers guys. Not looking to make short term gains (the Ravenswood development has depressed prices in our area) just to get a house for my family while retaining the existing property as an extra source of income.

[trackers]

^ We've already discussed this, but just seen this thread. I'm doing exactly the same as what you're looking at - I'm upping the mortgage on my existing place to the maximum (i.e so there's 20% of GV in there as equity), then taking the cash top up and using it as 20% deposit on house #2. you should be able to get that done easy with that amount of equity (even just topping up 100k or whatever)

[dickytim]

Are you moving into the new place or staying and getting a rental? It makes a huge difference as the LVR for rentals is 35%

[Timmi]

^ We've already discussed this, but just seen this thread. I'm doing exactly the same as what you're looking at - I'm upping the mortgage on my existing place to the maximum (i.e so there's 20% of GV in there as equity), then taking the cash top up and using it as 20% deposit on house #2. you should be able to get that done easy with that amount of equity (even just topping up 100k or whatever)

I hope your greed pays off ^^

[Fragluton]

Yeah good luck buying an investment property with 20% deposit.

[swazi]

Are you moving into the new place or staying and getting a rental? It makes a huge difference as the LVR for rentals is 35%

Hes going to move into the new place as he needs to find somewhere big enough for his tribe.
You're referring to him being able to use his Kiwisaver, Home Start Grant and deposit requirement, Welcome Home loan/low equity mortgage, etc?
Its also 30% now for investors.

[Edward Diego]

Are you moving into the new place or staying and getting a rental? It makes a huge difference as the LVR for rentals is 35%

Moving into the new place.

[Edward Diego]

Hes going to move into the new place as he needs to find somewhere big enough for his tribe.
You're referring to him being able to use his Kiwisaver, Home Start Grant and deposit requirement, Welcome Home loan/low equity mortgage, etc?
Its also 30% now for investors.

Bingo. And tribe is precisely the correct word My wifi is called Ngati Clarke.

[dickytim]

Are you moving into the new place or staying and getting a rental? It makes a huge difference as the LVR for rentals is 35%

Should have been clearer, I meant this in relation to Trackers comments.

As for Timmi, you sound like a jealous little boy.

[stacrafty]

Should have been clearer, I meant this in relation to Trackers comments.

As for Timmi, you sound like a jealous little boy.

Timmi is just having a laugh, you could argue anyone posting in serious business is somewhat greedy cause we are all broadly here to better our financial positions

[dickytim]

I missed the sarcasm font!

[Fragluton]

Don't think there was sarcasm font, haters gonna potate.