Considering an additional property for wealth growth? Assess risk tolerance, financial stability, and loan approval. Factor in management demands and potential costs. Understand tax implications and explore alternatives for mortgage acceleration. Seek guidance from a specialised financial advisor or mortgage broker for informed decisions.
___________________________________________
“Currently a homeowner with approx 530K mortgage, the house currently valued at approx 950K. Household income of 190K, no kids, 20K savings, but planning to spend that over Christmas. Minimal expenses other than groceries, rates, power, water, etc. Is an investment property the best way to go? If so, is it possible in our situation? I’m guessing the maintenance/management of one would be pretty expensive. I have tried our mortgage broker but have not really gotten any answers. The end goal would be to shorten the length of our mortgage. Has anyone here been in a similar situation and managed to invest well?”
___________________________________________
Investing in an additional property can be a strategic move for wealth accumulation given your current financial situation—a $530K mortgage against a $950K valued house and a household income of $190K. However, before venturing into real estate, assessing your risk tolerance is imperative. Real estate investments come with market fluctuations, property management challenges, and potential vacancies. Additionally, evaluate your financial stability, ensuring you have a robust foundation, including an emergency fund, manageable debt levels, and a stable income.
Consideration must also be given to loan approval. With your existing mortgage, securing financing for an investment property depends on factors like your debt-to-income ratio, credit score, and specific lender requirements. Furthermore, managing an investment property can be time-consuming. Evaluate whether you have the capacity to handle it yourself or if the option of hiring a property management company is more suitable for you. Factor in potential costs associated with property management, as this will impact your overall return on investment.
Understanding the tax implications is crucial. While there may be tax benefits associated with owning an investment property in New Zealand, it’s essential to be aware of any obligations that may arise. If your ultimate goal is to expedite mortgage repayment, consider whether investing in another property aligns with this objective. There may be alternative strategies to accelerate mortgage repayment without taking on the responsibilities of another property. Seek professional advice from a financial advisor or mortgage broker with expertise in investment properties. They can provide suitable guidance, helping you make informed decisions aligned with your specific financial goals and circumstances.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
