Here's how to become a property investor
Owning a rental property has, for a long time, been one of New Zealanders’ favourite ways to build wealth.
Despite increasing regulation and rents that have failed to keep up with house price rises over the years, people still hold tight to landlording dreams.
So how do you actually become one?
Before you get a mortgage, you’ll need to find a deposit.
The banks require a 30 per cent deposit for an investment property loan. You might find a non-bank lender willing to lend to you with a smaller deposit, but you’ll usually pay a higher interest rate in return.
But if you already own a house, you may have built up enough equity in it that you can borrow against it – meaning you do not need the cash upfront.
To do this, the bank would usually allow you to tap into up to 80 per cent of the value of your existing house.
As an example, if you bought your place for $450,000 and it’s now worth $600,000 with a $350,000 mortgage, the bank might lend you another $130,000 that can then become the deposit on an investment property.
If you want to use your KiwiSaver funds for a deposit, you’ll need to commit to live in the property for at least six months before you rent it out.
For a loan application to be successful, you’ll also need to show you have enough income to meet the repayments on the new mortgage as well as your existing debt. That income will need to come either in rent from the property, your salary or wages, or – most likely – both.