Renter-landlords outsmart market
Many young tenants plan to become landlords by buying houses in a cheaper town, a survey finds. Rob Stock reports.
Nearly half of aspiring first-home buyers believe their best chance of getting on the property ladder is to become a ‘‘renter-landlord’’.
These are people who buy a property in a suburb, town or city where homes are still affordable, and then carry on renting near to their work in a town, city, or suburb that’s outside their budget.
A survey by Bank of New Zealand found 44 per cent of aspiring first-home buyers were ready to pay for a place they would never live in, many being Aucklanders and Wellingtonians unable to afford prices in the two cities.
BNZ’s Paul Carter said savvy firsthome buyers were becoming more creative in a bid to get on the property ladder.
‘‘We asked people what they were prepared to do to get on the property ladder and 44 per cent of first property buyers said they want to buy an investment property, either in a cheaper suburb of the city where they lived or elsewhere in the country,’’ Carter said.
The research challenged the traditional perception that property investment was only the domain of the wealthy few who can leverage equity in their home, Carter said.
As prices have risen, home ownership in populous urban areas now often requires wealthy family to gift or lend money to first-home seekers, or take an equity stake in a property.
‘‘Other trends our research showed were 30 per cent of buyers are considering joining up with family to make their property ownership ambitions come true and 14 per cent say they’d buy with friends,’’ Carter said.
But he urged those considering nontraditional routes into home ownership to seek advice.
Lending criteria can vary depending on circumstances. For example, people buying a house to let need 35 per cent deposits, as opposed to the 20 per cent for most first-time home buyers.
KiwiSaver HomeStart grants of up to $5000 per couple are also only available to people planning to live in the home they buy for at least six months after settlement.
Carter said anyone considering options such as buying an investment property or shared ownership had to do their research.
He cited the example of people setting aside enough money each year in order to keep their rental maintained to at least the minimum legal standard.
‘‘Potential investors need to understand the cashflow and return on investment after expenses from a rental property. As you adjust to the first year of property ownership, you need to ensure there’s a little income left over after paying the mortgage to cover the cost of the rates, repairs and maintenance.’’
Even with the higher deposits, homes in the regions, such as Manawatu, were much more affordable than main centres.
Carter said the median property price was approximately $289,0001 for a Manawatu home, and the 35 per cent deposit would be $101,150, about half of what buyers needed for a median house deposit in Auckland.
Other strategies aspiring buyers would be prepared to accept were:
❚ 35 per cent would buy an investment property in a cheaper suburb in the city they live in.
❚ 21 per cent would buy an investment property in a different town.
❚ 21 per cent would go ‘‘tiny’’ and buy an apartment or unit under 80sqm.
❚ 12 per cent would buy an apartment or unit under 80sqm in another town to rent it out.
❚ 14 per cent would buy a shared property with friends.
❚ 30 per cent would buy a shared property with family.
❚ 19 per cent would buy land outside of the city they lived in.