House #3: The home of your dreams

Congratulations, you've made it to your third house. Forget the others, this is your dream home, the one where you get what you really want.

And you will pay dearly for it. It is likely to be a sum you would never have thought you could afford when you first started on the property ladder.

The circumstances driving the move of many families to new locations and homes is schools and getting in the right zone. Other reasons may be changing matrimonial circumstances or a case of blended families all moving to a new, larger home for a new start.

In the old days, people bought a section and built a dream home for their expanding family, but this is becoming less appealing thanks to rising building costs and the council planning quagmire. Even a big renovation is a deterrent to those who have worked hard beautifying their first two homes.

If you have decided you want to buy the perfect home and don't want to compromise on location, you may lose a few nights' sleep over the rather large differential between the prices of that second and third home.

If your second home is in a popular location and nicely renovated, you should sell it for as much as $600,000 or $700,000. In exchange, if you are moving to a popular school zone, you will not get much change out of $1 million for a spacious family home in Auckland. Grant Lynch, co-owner of real estate agency Unlimited Potential, warns: "Your third home is likely to be the most expensive home you own. There are cars in the driveway, you want separate space for loud music and different televisions, and a swimming pool," he says. "Renovations have ended up being too scary. If you buy a house that suits, you are dealing with the final purchase price."

The Auckland Grammar zone is the main driver for the move from a second to a third home in Epsom, Lynch says. "We have people coming from Herne Bay often selling great homes to move into Epsom. Herne Bay does not have a secondary school solution."

Lynch warns that the market for a good third family home is highly competitive.

"If it is in the right location and does what you are asking it to, then you have to try pretty hard because someone will be standing right beside you wanting to buy it too. If we have a family home, a third home, it will be very competitively bid for either by private treaty or tender. We can't get enough of those."

The suburbs around Pt Chevalier and Westmere are popular for third-home buyers, and Ross Brader, a real estate agent with Professionals, is targeting this market with the sale of his own $1.15 million home in Pt Chevalier.

He bought it in 1999 when it was two ex-state duplex units. Since then he has spent $500,000 on it. With the help of architect Mal Bartleet it has been transformed into a multi-use space for families. There is plenty of room for grown-ups to have time away from the kids. The house, at 46 St Michaels Ave, has two staircases, one of which goes up to the master suite, with walk-in wardrobe and a twin shower. There is also a bathroom and bedroom downstairs, useful for live-in grandparents. The new owners would not have to do a thing, says Brader. There are three living rooms, and the fittings are top quality.

In their third home, people don't want to make a compromise on location, says Brader. They return to areas they would have liked to afford when buying their first and second home. Brader says people come from all over to live in Pt Chevalier, from Northcote, Birkenhead, Titirangi and Mt Albert. "They want to be in a coastal suburb with access to the beach. There is more of a lifestyle," says Brader.

If you become fixed on sending your children to inner Auckland schools you are in for a large mortgage but there are alternatives.

Geoff Bawden, chairman of the New Zealand Mortgage Brokers Association, says parents sometimes move to the country to get more house for their money. Then they either freight their kids into school at a huge cost or send them to boarding school, he says.

The advantage of living further out is that it is still possible to find a site to build your dream home.

The Parker family of Bucklands Beach recently moved into their nearly completed new house. It is home to a combined offspring of seven kids ranging from 11 to 18.

Andy Parker used architect Paul Clarke from Crosson, Clarke & Carnachan to design the 300 sq m home. "I believe in using architects. They know how to use space efficiently," says Parker, a builder.

Although it has been designed to give a bedroom to each child - seven bedrooms and a study - Parker's plan is to turn it into a home and income once the kids leave. A two-bedroom apartment with living room can be separated from the rest of the house.

For now, there is plenty of living space for everyone. There is a private front yard and a backyard - one lounge opens on to the backyard and the other opens out to the front. "The thought was that the kids could use the back and we could use the front," says Parker.

The most important thing, he says, was that the newly married couple had their own area and their architect has made sure of this. There are six bedrooms upstairs and one downstairs, which goes to the 18-year-old, who makes lots of noise. Parker is a pragmatist when it comes to dream homes. "I don't really think you ever have the dream home. The dream changes as your family life changes. This is our dream home at the moment and in 10 years' time it will be different," he says.

"As a builder, I think building new is good because you get up-to-date materials and you get whatever you want in your new home, and can model it exactly how you want it. It is just being lucky enough to afford it."

For homeowners chipping away at their second mortgage, it may seem hard to fathom how they will be able to afford upgrading to a third home. Well, in theory, you should be earning at the peak of your career in your 40s and 50s, which is typically when you buy the third home. And because of this, people are happy to take on more debt.

After up to 10 years in your second home, you should be walking away with a decent amount of equity, say financial advisers. Says Bawden: "They have got good equity in their second homes, they are generally experienced borrowers, and they are not too scared [of borrowing again]."

Bryan Richardson, project sales marketing manager at Colliers International and past owner of Bayleys Remuera, says: "They (third-home owners) are probably earning over $150,000 per annum plus bonuses. They can get rid of the debt quite quickly because they have the ability to repay. They might be borrowing a lot - $1 million or more."

Nick Duff, a partner at Financial Vision, says people often come into money in their 40s and 50s. A parent dies, there is a career change, they sell a business or a shareholding in the business, he suggests.

"People pay their mortgages off quickly at this stage using income surpluses. Compared with when you are 30 not every cent that comes through the door will be used up. For professional people cashflow is anything from $120,000 to $300,000 every year.

"The mortgage at the end of the day is a tool - if they go from $600,000 to $1 million the question is how long will they be burdened by it?"

A release from large monthly mortgage payments can come with the fourth home, which is usually smaller and lower maintenance.

Leaving your dream home for a more practical, lower maintenance place can be a wrench for some who are particularly in love with their houses. But for others it is an exciting time to look forward to, when they can take a rest from maintaining gardens and clearing gutters. Martin Morgan, central Auckland franchise owner of open2view.com, is a happy downsizer since his daughters left home. "We had a half acre of land, swimming pool, a huge house, but when the girls left it was just a drag."

After a brief move to another house, the Morgans bought a freehold three-bedroom apartment in inner Auckland. "For many of us a dream home is a goal and then having achieved it we realise that now that we have it, it does not give pleasure; it's a burden the time you spend looking after it.

"Then you say you want a life. It's time for a couple to be together after 30 years of taking care of children's needs."

Sue and Peter Stanley recently moved into Broadway Park from their eastern suburbs home and they haven't looked back. "The house was too big for us and we had done our share of maintenance and the garden," says Sue.

Speaking from her three-bedroom apartment, she is happy with the decision. The apartment is sunnier than their old home and they have great views of the harbour. Although her grown-up daughter initially fought the sale of the family home, she likes the new place. There is room to stay and when the children get a bit older, they will be able to use the swimming pool and tennis courts, says Sue.

The facilities with an apartment complex come at a cost.

"There is a huge body corporate, rates are huge because we are part of Broadway Park."

The security is incredible, she adds. The move from a large house to an apartment with good storage was a challenge. "We had to get rid of a huge amount of clothes and books," says the librarian.

One slight hitch to the Stanleys' plans was that the proceeds from their home did not cover the apartment and a big refurbishment of their beachhouse at Mangawhai Heads.

But the couple are philosophical. Both are still working and they will continue to save interest from investments so that they can do the renovation in a couple of years' time.

Their experience is not unique. As many homeowners will find, the transfer from the high-maintenance house in the 'burbs to a spacious apartment close to amenities can be a sideways move financially, rather than an opportunity to squirrel away some cash.

It is an adventure most people will experience, and hopefully at the end of the journey, they will emerge, owning their home and having more time to do things they want to do.