Working out next move
Question from theus updated on 12th August 2020:
I purchased a two-bedroom home in Masterton in 2013 for $130,000 .The mortgage is still $130,000. It is rented for $200 a week, which is cheap but the tenant is fantastic. I had a valuation done in 2017 which came up at $170,000.
The valuation said that with an updated bathroom, interior paint, tidy up, and a new roof it would value at $220,000. It meets the new regulations, but it is a bit rough. A new roof is happening this winter, and I put in a heat pump and insulation a few years ago.
My tenant is moving on in about a year so I thought it wise to plan my next moves. I was planning to add a garage/sleepout for $40,000 and spend around $15,000 on a cheap kit set bathroom. I was also planning to refresh the interior with new lights and paint. If all goes to plan I’m hoping I’ll have $150,000 equity on a new valuation after that.
I misspent my 20s having fun, but I want to get serious now that I’m 30. What’s your advice on how to make a great leap from my point now and improve my position? I’m a beekeeper on $60,000 and I get three months off in winter.
Our expert Kris Pedersen responded:
If your mortgage stays at $130,000 and you end up with the $150,000 equity you mention without further debt funding you'll have a property worth $280,000. With the LVR change back to 80% for investment this may mean you have circa $94,000 of unutilised equity.
From an equity point of view again if 80% funding is available this means you have purchasing power of $470,000. The affordability issue which you will also have to satisfy to get reasonably priced funding I can't answer here as more detail is required in regards to your position.
I would recommend gaining understanding on how banks or near bank funders will assess your position from this side. Then you can understand what your purchasing options are and make some plans and set some goals to move forward from there.
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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