Stay invested in housing

BY MARY HOLM


Q: My wife and I are 32 and move to Britain in four months for a stay of two to three years, then return to New Zealand.

We will have income there that meets our needs but little prospect of saving more.

After selling our house here, we will have about $270,000 in cash.

We may need to dip into this for unexpected expenses, or want to for travel opportunities, but most is available for "investment".

Upon return we would want to use at least most of it for our next home.

For the bulk of the money, the time frame seems too short for shares or managed funds, and we have neither the inclination nor aptitude to get involved in investment property.

We are thus considering putting most of it into either Government bonds or a finance company (for example, Elders Finance). What other options are available, and how do they compare?

A: Hang on to your hats, rental property fans. I'm going to recommend your favourite investment!

I agree that two or three years is too short for a share or share-fund investment, and normally I would say the same about property. Values fluctuate too much.

But in this case, you plan to buy a house when you come back. What if, in the meantime, house prices soar?

If you're out of the housing market, you could end up returning to a lower-quality house than you now own.

The best way to be sure your money will buy as much house then as it will now is to stay invested in housing.

That might mean keeping your house and renting it out. I know you're not interested in investment property. But you can hire a property manager to run things for you.

Another option would be to sell your home and buy a purpose-built rental unit in a fairly central suburb. Again, it could be professionally managed.

Such properties tend to bring higher returns than suburban houses.

On the downside, you would have to pay agents' commissions, legal fees and so on when you sell your home. It might not be worth the cost and hassle.

Note, too, that this is a somewhat different housing market, so prices could rise more or less than on the sort of home you'll want to buy on your return. Still, there'll be some correlation.

What about the money you want available for spending? There should be some profits from renting.

Also, if you keep your house and rent it out, ask your mortgage lender before you leave if you can raise the loan a bit.

If you buy a unit, keep some money aside and put it in a bank account.

Convinced? Perhaps not. If you really can't stomach the idea of renting out a property, you should go for a fixed-interest investment, perhaps one of the ones you suggest.

Just recently, on June 22, I wrote about all the good fixed-interest options.

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