A Bach for Christmas

BachThe holiday season is just around the corner and a ‘Bach for Christmas’ is now firmly in the sights of some property owners looking to spend their newfound home equity.

The average property increase in Auckland since 2011 is 34 percent and homeowners are ‘doing the numbers’ and finding ways to spend up. A new boat, car or bach for Christmas? The problem with these purchases is they are all liabilities that cost you money rather than make you money.

Buying a second home for fun is a better spend than buying a boat or car but it’s still going to cost you each month in loan repayments, rates, maintenance etc.

Incomes are said to be keeping pace with inflation but not a lot more so debt servicing needs serious attention for any purchases that require a loan and other fixed ongoing expenses.

A mortgage broker quoted in an article on NZHerald said:

“The rationale has been that they can’t find anything in the investment market to buy … so they’re now making the decision to do the lifestyle choice and buy a second home.”

Umm they are not looking hard enough. As a property investor I’d wait until I found an investment property if I was deadset on spending the equity. A second home is a liability costing you money whereas an investment property is an ‘investment’ which produces an income to pay the expenses and ideally provide ongoing cashflow and maybe a profit.

It will be interesting to see just how many homeowners do purchase the car, the boat or bach this Christmas.

This blog article was written for PropertyBlogs by Mobilize Mail.

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