First Home Buyers Letting Strangers Move in First

First Home Buyers letting strangers move in first…

When you visualize First Home Buyers what springs to mind? A young adult posing excitedly by a sold sign, and preparing for a personal interior styling mission?

Well, you might be right in a lot of cases. But for some First Home Buyers, they’ll be buying their first property with the plan to let strangers set up home. Buying a property to rent out first might be the key to helping First Home Buyers enter the property market.

Why would First Home Buyers buy to rent?

There are many reasons why you as a First Home Buyer would make your investment property and your first home one and the same. For example, you might not want to buy in the location where you are currently living, you might want to stay at home because it’s cheaper than paying a mortgage, or you might plan to move to another location in the future and want to buy now before prices go up.

The advantage of a First Home Buyer buying a home to rent out is that someone else is paying the mortgage, so it effectively becomes your investment property. If you get a good house price, you may have no outgoings on the property at all once you’ve claimed all the tax deductions you can. Or, you might have to pay only a small amount each week to top up the mortgage, which will hopefully be paid back through capital gain over time.

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Any downsides with a first home as your investment property?

There are, of course, downsides with a first home acting as your investment property. First of all, you will often need a larger deposit for a rental property than you would for a first home that you plan to live in. It’s also worth noting that you don’t qualify for a Kiwisaver first home deposit subsidy from the government for a rental property, nor can you withdraw your contributions for that purpose. If you want to use the subsidy, which can be up to $5,000 for a single and $10,000 for a couple, you would need to live in the property in the first place before renting it out.

While New Zealand does not have an official “Capital Gains Tax”, there are tax obligations for Kiwis who buy property with the intention of making a profit. It is important to be aware of this as you go through the house buying process.

Home buyers should also remember that an ideal rental property and the ideal first home can be different. A rental property purchase should first and foremost be viewed for its financial return. A beautiful property may not, in fact, be as profitable as a standard one such as an ex-state house on an easy care section.

Tips for picking your ideal tenants
Are they pet owners? Pet Owners? First of all, decide if you are OK with tenants having pets – and if yes what pets. If not, you better find out quick smart whether your potential tenants have any friends of the furry kind.
Are they raging party animals? Party Animals You can’t be too precious about your home if you are renting it out. However, if you have inkling that potential tenants are party goers ready to trash your home, you might want to keep looking.
What would their references say about them? References A few quick calls to references for tenants could be the assurance you need that they will respect your home. Although, keep in mind they are unlikely to choose references who don’t vouch for them!
Confident they can pay the rent? Can they pay rent? If you get the sense you’ll be chasing up your tenants every week for rent, you might want to go back to the drawing board.

What does becoming a landlord entail?

Becoming a landlord entails needing to learn to deal with tenants and manage maintenance. Some landlords outsource this to rental managers, for a charge of around 8%-10% of the weekly rent.

A good book to read is the self-published Young & Singles Guide to Property Investment by Jodi Cottle. Cottle was a teenager when she bought her first flat in Wellington with the help of a deposit from her parents. When she sold the property the capital gain allowed her to pay off her parents and put down a deposit on her next property. She didn’t live in either property, preferring to let them to tenants. Published in 2008, the book is still available through some booksellers such as or on Trade Me.

Checklist for renting out your property

The New Zealand Government provides a guide to help landlords work out what they need to consider when they rent out their property. This guide could be particularly helpful for First Home Buyers who might need a little extra support in working out the process.

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