Author Topic: Should I buy an investment property?  (Read 3393 times)

Strawberrykiwi75

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Should I buy an investment property?
« on: December 03, 2013, 06:07:23 PM »
I'm about to come into some money, about a $130k worth from a sale of a property currently occupied by my father. The house is on the market, and there's a lot of interest so we are certain it'll sell.

I've always wanted to buy a little house or a nice unit for myself to live in, and I expect to get one using about 110k, and a mortgage for approximately 110k- leaving me with good equity to look at getting an investment property for around 190k. The one I'm looking at has a yield of about 7%, and I can afford to easily cover the rates and insurance etc. it's already tenanted so I don't have to find any, and that would cover the mortgage on it, and I'll fix the loan to make sure interest rate fluctuations won't effect me.

The question is, should I? I would need to reduce my personal loan repayments a little to do so- but it would still be above the minimum repayments easily, and I'm expecting to receive a few bonuses next year which I can use to pay down my own loan.
And if I should, should I set up a trust or a company to do it, reducing my taxes etc?

I'm in Christchurch, New Zealand. Thanks :-)

Edit: alternatively, I could wait and have high repayments on my home loan. OR I could use less deposit, higher borrowing, and just sink that money into my managed fund currently earning more than interest rates (rates around 6% but soon to rise to about 7% expected) at about 8.92%
« Last Edit: December 03, 2013, 06:52:20 PM by Strawberrykiwi75 »

nz

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Re: Should I buy an investment property?
« Reply #1 on: December 03, 2013, 09:03:15 PM »
A nice situation to be in. Whilst I can't give you a definitive answer I can ask you a few questions that might help.

What is your primary motive? Make money? Park your money where you can physically see it? Start a portfolio?

What are your skills? Are you thick skinned and hard nosed when dealing with tenants who aren't always honourable? Can you paint, clean etc. at short notice in order to attract new tenants?

Do you sleep easily if you have any hiccups? eg damage, vacancies

What do you feel about your local market? inflated? Set to soar?

What time frame are you looking at? 2 years, 5,10,20 ? And how does that fit in with your stage of life? Eg are you about to have children, are the children leaving home, job situation

If interest rates bump up a couple of per cent will you still be comfortable?

Over the years I've done all right out of rentals, but I didn't always enjoy the process. Ups and downs.
And only you will know how you deal with the down moments. Good luck!

jamccain

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Re: Should I buy an investment property?
« Reply #2 on: December 04, 2013, 01:42:08 AM »
First you need to figure out what your goals are...then how you are most comfortable accomplishing them...then determine if a rental fits into that.  Simply put. 

Strawberrykiwi75

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Re: Should I buy an investment property?
« Reply #3 on: December 04, 2013, 03:35:04 AM »
A nice situation to be in. Whilst I can't give you a definitive answer I can ask you a few questions that might help.

What is your primary motive? Make money? Park your money where you can physically see it? Start a portfolio?

What are your skills? Are you thick skinned and hard nosed when dealing with tenants who aren't always honourable? Can you paint, clean etc. at short notice in order to attract new tenants?

Do you sleep easily if you have any hiccups? eg damage, vacancies

What do you feel about your local market? inflated? Set to soar?

What time frame are you looking at? 2 years, 5,10,20 ? And how does that fit in with your stage of life? Eg are you about to have children, are the children leaving home, job situation

If interest rates bump up a couple of per cent will you still be comfortable?

Over the years I've done all right out of rentals, but I didn't always enjoy the process. Ups and downs.
And only you will know how you deal with the down moments. Good luck!

Good questions, I need to think about these!

Motivation: make money long term, diversification if my portfolio are probably to two main factors here. A not so good reason would be that I'm a banking advisor- I give people home loans. And this seems to be something all banking advisors do! I guess we have access to home loans pretty easily and we get discounted home loan rates (albeit small). It's also something we understand and can work to our advantage.

I can be thick-skinned when needed, and have access to lots of skilled people who can paint etc and/or teach me for the price of a bottle of wine

I do think the current market is inflated, however for the investment properties I'm looking at, not drastically so. I wouldn't rule out getting the investment elsewhere too if I knew it was a good one- however Christchurch I'm very familiar with, and I could manage it myself.

I'm not sure about time frame to be honest- I was kind of thinking mid to long term, just get someone to pay off another asset for me, and then if I still had it long term, an income stream. I'm only 24 so I don't have a lot of the specifics figured out, but no plans to have children, works very stable in a good job, and someone pointed out to me recently that I should be getting a good inheritance in the next ten years!! :-/


Strawberrykiwi75

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Re: Should I buy an investment property?
« Reply #4 on: December 04, 2013, 03:36:44 AM »
God I just read that, and it's terribly written! Sorry! My only poor excuse is that I'm on my phone writing as I don't have a laptop

Strawberrykiwi75

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Re: Should I buy an investment property?
« Reply #5 on: December 04, 2013, 03:41:50 AM »
First you need to figure out what your goals are...then how you are most comfortable accomplishing them...then determine if a rental fits into that.  Simply put.

My goals are simply to be FI and build wealth. I don't ever want to be someone that's stuck in a job they hate because they need the income. I also want to be free to do what I want without finances restricting me drastically.

ColtCeverz

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Re: Should I buy an investment property?
« Reply #6 on: December 23, 2013, 01:13:22 PM »
Im in the same boat. I just posted an Article on Should I buy or take a loan. I have $195 Cash and was thinking of just getting a house outright. Then theres no paying the mortgage. Then maybe after the bonus, you can put a little down on a rental if you choose.