Smart thinking can still let you buy in the City of Sails, real estate insiders tell Susan Edmund

Find a home-and-income

Don't just buy a house, look for a property that earns money, too.

You can usually borrow more to buy a home-and-income property. Squirrel mortgage broker John Bolton has clients who bought a big North Shore house with a granny flat.

The couple rented out the main house and lived in the flat. They paid off half their mortgage in two years.

Bolton said a bank would take rental income into consideration when deciding whether to approve a loan.

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"It is a way of getting into a better suburb. It may give a first-home buyer the opportunity to find something closer to the city," he said.

Buy out of Auckland

In most other parts of the country, price rises have been slow over recent years and rental returns are much better than in Auckland.

You may find a property where the tenant's rent will cover your mortgage. If you can add value to the property or pay off a chunk of your loan quickly, you could borrow against the equity in that property to buy a house to live in.

Buy with friends

Pooling your resources gives you a bigger deposit and more income to service a home loan.

Friends can set up a company to buy a house and hold shares, or buy a house as "tenants in common" and split the mortgage so each buyer is responsible for a portion.

Bolton said that could prevent disagreements. "They can make lump-sum payments without having to worry about cross-subsidising each other."

Joshua Aird, general manager of property firm Slate Management, said group buying was becoming more common.

But he had seen it go wrong. The bank will still hold all buyers responsible for the loan, so get good legal advice and make sure you trust those whom you go into a deal with.

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Ask mum and dad

Bolton said it was rare for a first-time Auckland buyer not to have parents acting as a guarantor or contributing some cash.

Guarantees were used even when a borrower could get a loan on their own, because the interest rates are better for buyers with more than 20 per cent equity.

The guarantee should be structured to reduce the parents' risk. Banking Ombudsman Deborah Battell warns it should be specific to the amount of the loan being guaranteed, otherwise the guarantor could be liable for all debt the borrower has with the bank.

Buy a home off the plans

You may get a bargain buying an unbuilt house. Developers often offer a discount when they sell "off the plans" because they need to get the project off the ground.

Bolton sold a development of 35 new Avondale townhouses for an average $572,000 each. They are not finished but are now estimated to be worth $650,000 each. Two-thirds went to first-home buyers.

If you meet the criteria, you may be able to get a $10,000 KiwiSaver subsidy for a new build.

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But KiwiSaver funds can't be accessed until final settlement so you will need other funds for the builder's deposit.Read your contract carefully in case the finished product is not what you expected, or if the developer strikes trouble before the project is finished. Be aware there may be significant delays.

Read also: Auckland CVs out of date within months

More bang for your buck out of Auckland

Junior doctor Matthew Stretton pooled his resources with a school friend to get into the property market.

The 25-year-old Aucklander and his buddy, Heath Coleman, 24, bought outside the big smoke in a bid to get a bigger bang for their financial buck.

"We had a bit of money but not enough to buy a house each or one in Auckland," Stretton said.

The pair amassed a deposit of around $80,000, allowing them to borrow up to $400,000.

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They looked around Auckland for several months but the houses in their price range would not earn enough rent to make the investment work.

"We thought about looking further out, in Tauranga, Hamilton or Rotorua," Stretton said.
"We saw properties that won't grow in price as much as in Auckland but are selling at a much lower price so you can buy a bigger house."

They settled on a property in Tauranga for $185,000 at the beginning of March.

It has a valuation of $220,000, giving them an immediate $35,000 in equity.

They are now renting out the house for $240 a week.

"It was an amazing result and [properties like that are] not that hard to find," Stretton said.

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The pair will make minor improvements to the house, including turning its garage into a third bedroom, then look to increase its rent and borrow against it to buy an investment property in Auckland.

"Our goal is to get into the Auckland market as soon as possible. Migration is not slowing down and with property shortages, values are only going to go up."