Advice on Buying a home, including lots of links to people who can help.

Thinking of Buying a Home and Income?

As a real estate professional, I often get calls from people looking to buy a Home and Income, and there is some confusion about what actually defines such a thing. To be legitimate, a H & I must be registered as such with the local council, and will have a separate rates bill from the main house, as well as separately metred services.

A “granny flat”, on the other hand, is part of the main home, shares the services like water and power, and is only supposed to be inhabited by family members (such as your grandmother). Unless a Home and Income fulfills the legal requirements, it cannot be marketed and sold such.

Having sorted out the definition, I’ll explain why you should be looking to buy a Home and Income for yourself. I invested in just such a piece of real estate a couple of years ago and am just coming to realise what a great decision I made. The property is actually providing three income streams (it has a large storage garage as well as a 2 bedroom cottage and a four bedroom home). The rental income more than covers the mortgage payments, so I am able to make general improvements to the property (I like to keep my tenants happy and protect my investment) and, with the help of my Harcourts property manager, it’s become a passive income for me, for which I am happy to pay tax. Despite the change in investment property entitlements, with depreciation no longer able to be claimed, the high demand for good rental property means investors can have real confidence about the viability of this vehicle. My property has been fully tenanted the whole time I’ve owned it, and in the past year has grown handsomely in value.

Here’s an example: East Coast Bays homes, within walking distance of the beach, often appear to be beyond the average person’s means, yet if that property consists of a 4 bedroom home and a 2 bedroom flat, you could say that you are buying yourself a home for $750,000 and investing in a business for $250,000 which returns you $20,000 to $25,000 per annum. In essence, the “income” part is helping to fund you into a superior property. Or you could find tenants for the whole building and easily cover your repayments if you buy wisely.

Here’s one we recently sold in Park Rise, Campbells Bay for $870,000. This is a superb street, just a few minutes walk to the beach and Pupuke Golf Course. The 5 bedroom home was appraised at $850 – $975 per week, with the 1 bedroom flat at $260 – $275. Without adding in the expenses like rates and insurance, that’s roughly 7% return on the full purchase price. Or you could just move into a quiet street, full of quality homes, with the assistance of a tenant who is glad to live close to the beach.

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