So you're thinking about upgrading to your dream home.
What should you think about to position yourself
that is going to allow you to have the best long-term gains?
What's going on?
Everybody is Blandon here again from Mortgagehq.
This is the third video to our five part series,
and I'm going to share with you two things that astute investors think about
when they upgrading their home.
Now, this video is not for everybody, but if you're someone that wants the best
for their family
and yet you want to make sure that you're not going backward financially,
or you're just someone that doesn't want to think like the average buyer
but think more like an astute investor, then this video is for you.
And if you say till the end, i'm going to share with you
when I think is the best time to actually upgrade your home.
So the first thing to consider,
are you going to get yourself better long-term value by upgrading
now if you're going to be spending more money
and you going to take out this bigger mortgage for another 30 years, wouldn't
you want to buy something that is going to give you better long term capital gains?
And what do these kind of properties
look like if we refer back to historical data property with good
development potential or just properties that are on bigger land in general
have a high correlation with higher than normal capital gains,
freehold titles are obviously slightly better than unit titles, or cross
lease titles.
If you can elevate yourself and looking from above
just the house itself,
you want to think about the suburbs in the school zones as well.
Obviously, higher decile school zones will usually have slightly better
long-term gains or locations where the transport is easy,
such as being really close to train station will also have that effect.
When it comes to the suburbs, you want to look at government spending.
What does that exactly mean?
Government or the local council usually have a budget on where they want
to spend money to upgrade amenities or community centers or even infrastructure.
There's usually a high correlation between these suburbs that have upgrades
and better long-term capital gains.
So don't be afraid to roll up your sleeves and do some research
on which suburbs are getting more money being spent.
Auckland, for example, you can go to Panuku developments
to see exactly where the council is planning to expand on.
My suggestion for you, when you're planning to upgrade is spend
time to learn about what
properties are going to give you the best long term outcome.
The second thing that you should consider is, do you already have an investment
plan in place?
Often when I see clients upgrade, they tend to max out the borrowing capacity.
That would usually mean that they need to allocate a lot more cash flow
for the bigger mortgage commitment that they're taking on, which would result
in less cash flow for their investments or savings.
And this is exactly what happened to my own parents as well.
For the first 15 years that we were in New Zealand,
they upgraded their home four times.
I'm obviously very grateful because we always have better environment to live in.
But what it did do to them
is take a toll on the progress that they would make on their financial future
because in their fifties,
they still had a mortgage and very little retirement savings.
And I really hope to help people avoid this.
Although they had the income to service the loan again, they would increase
their fixed commitments significantly, resulting in slower investment growth.
More often than not, though, clients don't even have an investment plan in place.
The only thing they that might have is a 3% contribution
towards the KiwiSaver and maybe the $20,000 in their savings account.
So I think it would be prudent and important for people in that position
to really think whether or not upgrading now is the right time,
and you should plan out your financial future for your family
because sometimes it doesn't take that much.
It might just be one to two investment properties over 15 years,
and that should achieve the goal that you want.
Do not hesitate to reach out to a mortgage adviser
and help you plan this out because they can show you the implication
between upgrading your home right now or potentially buying
a couple more properties down the track
and what that might look like in the future for you.
And as always, if you find value, please smash the like button
for the YouTube algorithm.
And as mentioned earlier, when do I think it's a best time to upgrade?
Is when your investment properties
can actually pay for the new mortgage that you are soon to take on.
So essentially allow your property investments to pay for your upgrade.
For example, you already have a 500,000 dollar mortgage on your owner occupied
and you want to upgrade to this home where you need to spend another $700,000.
Now, if you have enough equity on your investment property,
this $700,000 is going to cost you around $540 extra a week
If there's enough equity and enough rental income to cover for all of this.
Then you can assign this extra 700,000 dollar mortgage onto the investment
property, so your net position on your owner occupied is still the same.
So that's why you want to build your rental property portfolio earlier
and the sooner you can achieve this.
So in summary, I definitely support upgrading.
If you're making sure that you're putting yourself in a better position,
you're buying a property that's going to have better long-term
gains or better long-term capital improvement value.
Also, you should consider whether or not
you actually setting yourself back financially
because you never want to just think about now.
Because you could end up being in your fifties
and still have a big mortgage with very little investment plans in place.
And if you are in that position
where you are in your fifties and you have a mortgage.
Don't be afraid to get the kids involved.
You could potentially do something together that's going to help each other
and be able to have better outcomes for them and yourself as well.
If you want to learn more about my story.
You can check out the home page on our YouTube channel and share
exactly how I have helped my family out,
and they have helped me out and we became in a much better position.
Until next time, I'll see you guys again.