Downsizing and the realities of investment properties.

 You may have read that economists are predicting another year of rising house prices.

I can hear you all saying, “How can that be”.

As long as mortgage interest rates are low and bank fixed term interest rates are also low, why would you put money in the bank when property investment looks to be a much better option.

In March, the Loan to Value ratio is changing in the hope that this will slow the market. However, despite this, many economists are still forecasting double digit growth in the housing market with a handful forecasting 5-6% growth, all this on the back of forecasted negative interest rates.

So, what does this all mean for you?

Many home-owners whom I work with are looking at downsizing and taking advantage of the high house prices. Downsizing of course has the expectation that you will be left with some surplus cash and so the question then begs what to do with the cash.

Many of these home-owners logically consider buying an investment property, however, it’s not until they purchase a property that they come to realise that an investment property requires the following:

1. Council Rate costs.

2. Insurance costs.

3. Maintenance costs.

4. Tenancy costs including obligations to new Tenancy regulations.

5. If sold before 5 years – under the Bright-line, tax costs.

Maintenance and Tenancy costs vary depending on what type of property you buy. Many of the clients I work with want to invest $500,000 into a secondary property. The housing stock at this level across Hastings and Havelock North is few and far between, and typically requires upfront maintenance costs in order to bring in a solid rent. Also keep in mind that Tradesmen are in short supply and can command ridiculous prices; all adding to the headache that you unexpectedly acquired.

It’s not all doom and gloom, there are ways to mitigate this headache. As a Real Estate Guardian, this means that I provide you with more than a service to sell or buy property, my role is to offer you robust and valid information by those in authority.

So, If you are interested in downsizing and investing, give me a call and you can rely on me to point you in the right direction to obtain sage advice.

 

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