Multi-income property
Question from Anne updated on 6th January 2014:
Hi, I am looking at purchasing a totally renovated house in Mt Albert, Auckland. It has been converted into two flats of three bedrooms each. There is also a self-contained sleepout on site rented to two students. I would live in one half of the house and rent the other half and the sleepout for a total $850 per week. I have a deposit of about $420,000 and would purchase the property for about $1,150,000 so would need a $730,000 mortgage. I also work full-time earning approx $60,000 per annum. There would also be tax deductible interest on the loan of approx $30,000 per annum and other expenses I can claim. Your comments would be appreciated. Thanks.
Our expert Kris Pedersen responded:
Hi Anne, I've run quick numbers and have taken into account some assumptions (you don't own any other property, have no other income sources and are using your total cash savings). Be aware that you don't have a huge amount of spare serviceability through the banks eyes. You are passing the criteria currently but keep in mind that if you need to borrow to fund work on the property or if costs rise then you may struggle. Also think long and hard if you are happy to live on site for the long-term with your tenants. You need to ask yourself whether you are investing for cashflow or capital growth. If capital growth then this area will have good long-term prospects but if it is for cashflow then there may be better options elsewhere. Regards, Kris Pedersen
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz
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