Ok, so 3 years ago, my husband suggested we purchase another house to get into the real estate market and hopefully make some money long term this way. The idea was we would buy a slightly better house than what we currently have (ours is very modest at the moment(90m2) and rent ours out. We have had offers accepted on a couple of houses, but each time I panic and freak out, and we pull out of the deal. It has been stressful, and I keep feeling I am failing, and my husband is sick of the whole thing. Meanwhile house prices are steadily increasing.
The problem is houses are very expensive here (New Zealand). We have a mortgage of 70K on a house worth 250. To get a better house, we would be looking at purchasing one for around 330, 350K (which is an average price). Our 'old' house which would be the rental would have a mortgage of 240K, and the rest on the new house, which we could pay of in 10 years.
However, by the time we pay rates, insurance, property manager, mortgage ( 5% interest only) etc, the rental house would be cash negative of around $150 a month. Let alone having any spare cash for any major issues.
Now presumably, rents will increase, capital value will increase, and 15 years down the line, we would be able to start decreasing the mortgage and eventually we would have 2 houses paid for, one producing an income, and that makes it sound attractive.
We are 37 and 42 years old, 2 kids, and I think this would be our best chance to get a large amount for retirement. But it has risks, which don't sit well with me (risking our home, tenants could be trouble, interest rates rise, and it's cash flow negative to begin with etc). I really want a different house, as we can't all fit at the dining table here, and that is very important to me. Yes, we could save more and be more frugal, but even if we did, I think it would be difficult to save as much as we could potentially make with real estate.
My husband thinks 'investing' in another house is the best way to get ahead, but I don't like the idea of owing 400K on a mortgage where the investment isn't even going to pay for itself. I can't see how any rentals pay for themselves in the current market. But if we don't buy now, things are only going to get more expensive, and then we won't have the option at all.
I guess I'm saying I see the benefits in real estate, but the risks make me uncomfortable. Plus I want a bigger house, which I know financially doesn't make sense. I feel I should at least try renting ours out if we buy another house.
Opinions?