In these difficult and troubled times creativity is needed in order to get into a property, especially if the market you’re buying in is Auckland. So why not buy an investment property in the provinces?

They’re cheap (well, cheaper than Auckland) and you get a tenant who pays the bulk of the mortgage, therefore making it easier on you. Brilliant!

It may seem so, but I’ve read several articles suggesting this tactic over the last 12 months and while great in theory, there are some practical implications that the writers never mention.

One post used Whangarei as an example where the average house price is about $410,000 apparently. Clearly that’s quite a difference to the Auckland average, which should make it a fairly easy step to take, right?

1.Firstly, let’s consider the idea in terms of deposit: You need a 40% deposit on an investment property.

Using the average Whangarei home as our example and the power of my very average Casio calculator you’ll discover that the deposit required to fund this investment purchase is $164,000. I haven’t come across many first home buyers with that kind of cash in the bank. Most come through my door with no more than $100,000, more like $70,000 actually, so the idea of buying a rental is, in most cases, just a nice idea.

No, it’d make more sense to use your $164,000 (if you had it!) to get into a place in Auckland because that allows you to live in the same town as you work and get out of the rent trap too. Yes, the corresponding loan is tonnes bigger, but most first timers would rather ‘invest’ that kind of money in a house to live in first.

The alternative would be to move to Whangarei and actually live in that house and have a much smaller mortgage than you would in the Big Smoke. Could you get a job in your proposed new town? Not as simple as you thought, is it?

2.The other point the articles fail to cover off is that you can’t use your KiwiSaver withdrawal to buy an investment property either.

Again, most of the people who come through my door have KiwiSaver as a very large component of their deposit and that makes getting to the 40% mark in Whangarei (or wherever else) with cold hard cash savings even more difficult.

Overall the idea of buying a rental as your first house is great, but for the majority of first time buyers it’s about as practical as tits on a bull.

So if you want solid, workable advice on how to buy your first home, make sure you’re getting the right advice – don’t waste your time on delusional fluff!

We’re Auckland mortgage market experts, and know just how to get your deposit working as hard as it can – so give us a call.


About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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