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how much do you need to buy an apartment


Apartment Specialists Podcast No: 156

Summary:

How much do you need to deposit when buying an apartment? What are the restrictions and bank limitations when you are taking out a loan for an apartment purchase? Watch the video and read the article to get more information and insights about getting your financial needs in order when buying an apartment.

How Much Do You Need to Buy an Apartment

As an overview the basics on how much you need to buy an apartment are pretty straight forward and can be put into three different categories.

1) Owner occupiers apartments or apartments with the most capital gain opportunity.

These apartments are not your shoe boxes and so are of a descent size. To buy one of these apartments you will need at least a 20% deposit.

2) Investor Apartments or Income focused apartments.

These are your smaller apartments, income focused and to buy one of these apartments you will need at least a 50% deposit.

3) Lease hold apartments.

These are generally lifestyle purchasers or in some cases high return purchases. To buy a leasehold apartment you will need a deposit of at least 50%

Now, unfortunately it is not that simple. BANK CRITERIA makes it quite confusing as they are all different and cause a lot of buyers to waste a lot of time and energy.

For a buyer, there is nothing more frustrating than finding the perfect apartment only to find out that you can’t buy it because the bank won’t give you the money you need.

For example Banks have restrictions on:

  • Apartment size (i.e. if an apartment is under 40m2 or with another ban 50m2)
  • Apartments in hotel leases
  • Apartments that are in a building that once was used for something else (i.e. an office building that has been converted to an apartment)
  • Apartments that are leasehold
  • Specific Apartment buildings

And plenty more.

This is why I highly recommend seeing a broker who will, for free, match you with the best bank for your needs and at the lowest rate; and in most cases, get you a better deal than if you walked in off the street.

The important thing however is to use a top mortgage broker who knows apartments and has relationships high up in the banks.

What do you need to know about Apartment Buying in Auckland? How do you get the best deals? Download our Buyers Guide to get much sought after insights. You can also email andrew@apartmentspecialists.co.nz or call +6421 424 892 to get the best Auckland apartment expert to help you.

TRANSCRIPTION:

How much do you need to buy an apartment? Andrew Murray from Apartment Specialists here. I’ll be talking about how much money you need to by an apartment.

Everyone is talking about apartments. We all know that finance is different when coming to buy a house compared to buying an apartment. I’m going to first start off with the basics, and you can put apartments into three categories when talking about purchasing.

We’re talking about owner/occupier or capital gain purchases. Number two, being investor apartment purchases. These ones are more income-focused. Then three which is leasehold apartments and  lifestyle purchase or in some cases – very, very high return purchases. All this because of the negative stigma surrounding the leasor.

Number one, being an owner/occupier or a capital gain purchase. Now, your finance is generally restricted to give a blanket rule to about 80%. These are apartments of a decent size. If you’re going to buy an apartment that’s $400,000, you’re going to need an $80,000 deposit. If you’re going to buy an apartment that’s $500,000, you’re going to need $100,000 deposit and so on.

Number two, your investor apartments which are focused more on income. These are your small apartments. Because they’re restricted by bank criteria, that means the prices are lower and the rents are higher compared to the prices. This means you’ll get a higher return.

These apartments are restricted by the banks that’s why the finance is only 50%. If you’re going to buy an investor apartment, say as a smaller apartment, then that means you only need it financed for around about 50%. However, if you’re buying a $300,000 apartment, you’re going to need $150,000, which is quite restrictive. That’s why it’s generally an apartment you buy later in life when income’s more important than capital gain.

Number three, our leasehold apartments. This is your lifestyle purchase or your purchase with a view to high return, because it’s a smaller apartment. It’s leasehold but because of the stigma and the lack of people being able to purchase, less people purchase them. Leasehold across the board, generally speaking, is 50%. If you buy a leasehold apartment and they ask a million dollars, you’re going to have a $500,000 deposit. If you buy a leasehold apartment that’s $300,000, and you’re going to need $150,000 deposit.

Those are the basics and this is where it gets confusing. Every bank is different. One apartment that could be under the owner/occupier or capital gain purchase category in one bank, in another bank it could be an investor purchase. This is because of their size criteria. For example, ASB Bank will lend 80% on apartments 40 square metres or higher, where say Westpac will lend only 80% to apartments that are 50 square metres or higher. I’ll cover the actual current bank criteria in a different podcast, but that gives you an idea.

There’s nothing more frustrating than a purchaser coming to purchase an apartment to find out that their bank won’t give them the money they need. Put yourself in that situation. You’ve found that apartment and all of a sudden you can’t get finance. Now, on top of this, they also have restrictions on apartments and hotel leases.

Apartments that have been converted, for example, a used office blocks or used for something else, and it has been converted into apartments, it will often go for 65%, a common figure in most of the banks. And then they’ll also not lend on specific buildings if they’ve lent to too many people in that building. So, that’s another one you need to know from your banks – which apartments they won’t lend to.

Now that doesn’t mean that’s a bad apartment complex. It just means they’ve got too many clients that they’ve lent to in that building. I must agree, it does get confusing and there are plenty more rules when you get into finance. That’s why I do not advise going straight to a bank. I’d advise going to a broker, and make sure you go to one of the top brokers that specialise on apartments.

I can recommend you to some – just flick me an email. These are the ones that have relationships up high, and will get you better rates and better deals. You can get them free and what they do is they put them out to all the banks and see who will give you the best deal. They will also match the apartment you’re looking for, or what you’re looking for with the sizes.

I hope that helps. Andrew Murray talking about how much you need to purchase an apartment.

Cheers!

What do you need to know about Apartment Buying in Auckland? How do you get the best deals? Download our Buyers Guide to get much sought after insights. You can also email andrew@apartmentspecialists.co.nz or call +6421 424 892 to get the best Auckland apartment expert to help you.

Apartment Specialists Podcast No: 136

Summary:

What exactly is an owner occupier? Why is this the most common type of buyer in the market? What are the things important to this buyer? Andrew Murray will answer these questions on this podcast, as he reveals the facts about an owner occupier. Find out more on this video.

TRANSCRIPTION:

Buyer type number five owner occupier. Now as you can tell, these type among the other types of buyers. You can figure out this for yourself. It is about what kind of questions you need to ask yourself and also the questions you need to ask a real estate agent.

So, the biggest one with owner occupier, is to figure out, what your budget is? What the restrictions are on that budget? Most home occupiers are going to be having some finance components to what they’re purchasing. For example, if you looked in the book, a buyer number one was talking a lot about bank criteria. With owner occupier,  your bank criteria is going to limit you.

That is my advice! Because I find the bank that best suits what you are looking for, in all. If you look at an apartment that is, for example, a two bedroom and you’re with Westpac. It’s under 55 square metres and you need 70% finance, you’re not going to be able to purchase the apartment because Westpac’s criteria means that any two bedroom below 55 square metres at this current time is not allowed. I’m doing this podcast means that they’ll only lend 50%.

You will need to be searching online at realestate.co and Trademe at apartments you canno t actually purchase, which is wasting your time. What you need to do is work out what your budget is. Then you have got a price range to search in online. Secondly, find out what the restrictions are on the actual complex. Find out what buildings they won’t lend on, because there are quite a few buildings that if you’re with a specific bank they won’t lend on.

They have over-capitalised or what’s a better word there, they have lent to too many in the building so they have a risk. For example, GE bank won’t lend more than 20%, 25% of apartments within the building. That’s another one and then drive around town. Think about where you’d like to live and look at the buildings you like.

Also, look at the building you don’t like. And then have a list so you’ve got a criteria for what you’re looking at. The amount of times that I’ll have a buyer, that inquire on properties that don’t suit them or they can’t actually purchase is frustrating not only for the real estate agent, but especially for them.

Eventually, they’ll find a property that they really like, but then can’t purchase it, which is even more frustrating. An owner occupied purchase is often a one-off or it’s often people who are not as experienced with purchasing property. And if that is the case, feel free to go and ask your real estate agent to spend some time with them first. In order to help you figure out your criteria. Have a meeting with them first, and take half an hour or 45 minutes of their time.

Most real estate agents should do this and have a chat with them about what suits them. Obviously, we are apartment specialists, that is what we do. But to help you figure out what you need to do. You’ll also see some guides on our website. Usually, buyer’s guides on what you can do to help you figure out what your criteria is.

It is really important to know what you are looking for. Otherwise, it is pretty tricky and I see home occupiers who come in on lifestyle properties. But then they don’t understand they can’t purchase these because they don’t have the 50% deposit or equity. Sometimes be very disappointing and it’s also my mistake if I have a viewing and I haven’t asked a buyer if they have got finance of 50%. Most of the time they come over, “I love it! I want it!” And then they find out they can’t purchase it.

I hope these five buyer types have helped and yes, what I am going to put on track next is a couple of podcasts on the questions you need to ask once you have found the apartment or apartments you like. And to know that you are making a safe purchase, you have an idea on what questions you need to ask the real estate agents to find out if it is leaking, or if there are issues on the apartment.

I hope that helps. Cheers.

Apartment Specialists Podcast No: 131

Summary:

This podcast gives you an overview of the different types of apartment buyers in Auckland. Why do you need to know what type of buyer you are? What are the things that a buyer is concern about when they are choosing an apartment? Watch this video to get all the details.

TRANSCRIPTION:

Good day. What kind of apartment buyer are you? Now you go in Trademe and there are 600 to 700 apartments on the market. Are you anyway confuse? Are you trying to figure out values? Are you finding it difficult to figure out what is a good buy and what is not a good buy?

When you buy an apartment, it is not like just buying a house. There are over 14 different types or categories of apartments, and you need to figure out which kind of apartment is going to best suit your goal. Owning an apartment is a solution to a purpose, and you have got to find out what your purpose is. Now it seems a little bit weird talking like this, but the point is, you are dealing with 700 apartments and you are shopping online.

You are going through Realestate.com, or you are going on Trademe, trying to find the apartments that suit you. You are asking all these questions. That is a lot of work and with that many on the market, that is pretty hard to figure it out. I mean I was an agent and I have been in the game for a while now.

However my first six months, I did not know what was going on and I was doing it everyday. Now the commitment from a buyers perspective, how do you figure out what is best for you? You need to figure out what is best for you and you also need to find out what kind of buyer you are.

What is the purpose of the apartment you are looking for? So what I am going to do is help you figure out what kind of buyer you are. You can then go through and take those 700 apartments and get them down to about 15. Now figure which ones are listed too high, figure out the ones that are inappropriate, and make the best purchase for you. Then you will be thanking me in five years and that is for sure.

Anyway, to give you an idea I will put it in five different categories. Now you are either an investor, where return or basically income is your main objective and capital gain is a bonus. Number two, you are an investor where capital gain is the main focus and income is the second main focus. Number three, you are an owner occupier, you have got certain criteria, like you may have pets or you may want to be in a certain part of town.

There are different kind of criteria. You are either concerned about lifestyle, so this is a purchase where it is about how you live. Capital gain is not as important, so that is were a leasehold would be very appropriate. Number five is high risk; that is where you are looking at buildings that are leaky because when they are fixed they are going to be worth a lot more. You are looking at buying into hotel leases, because they are harder to buy into, because of your finance, but when they come out. it is going to be worth a lot more.

What I am going to do is I am going to do a forecast on each type of buyer, and go into a bit more detail on each one of those five types. You can figure out how can you best find the solution that you want. And you could be looking at the wrong category. If you are doing that, you are asking all the wrong questions.

This is about your time, and time is valuable. You have got so many listings in the market and there is a lot of excuse my “French” – crap out there. You need to sort through it and the more education you have, the better purchase you will make. Anyway each week one will come out, and yeah I will talk to you soon.

Cheers.

Apartment Specialists Podcast No: 131

Summary:

This podcast gives you an overview of the different types of apartment buyers in Auckland. Why do you need to know what type of buyer are you? What are the things that a buyer is concern about when they are choosing an apartment? Watch this video to get all the details.

TRANSCRIPTION:

Good day. What kind of apartment buyer are you? Now you go in Trademe and there are 600 to 700 apartments on the market. Are you in anyway confuse? Are you trying to figure out values? Are you finding it difficult to figure out what is a good buy and what is not a good buy?

When you buy an apartment, it is not like just buying a house. There are over 14 different types or categories of apartments, and you need to figure out which kind of apartment is going to best suit your goal. Owning an apartment is a solution to a purpose, and you have got to find out what your purpose is. Now it seems a little bit weird talking like this, but the point is, you are dealing with 700 apartments and you are shopping online.

You are going through Realestate.com, or you are going on Trademe, trying to find the apartments that suit you. You are asking all these questions. That is a lot of work and with that many on the market, that is pretty hard to figure it out. I mean I was an agent and I have been in the game for a while now.

However my first six months, I did not know what was going on and I was doing it everyday. Now the question from a buyer’s perspective, how do you figure out what is best for you? You need to figure out what is best for you and you also need to find out what kind of buyer you are.

What is the purpose of the apartment you are looking for? So what I am going to do is help you figure out what kind of buyer you are. You can then go through and take those 700 apartments and get them down to about 15. Now figure which ones are listed too high, figure out the ones that are inappropriate, and make the best purchase for you. Then you will be thanking me in five years and that is for sure.

Anyway, to give you an idea I will put it in five different categories. Now you are either an investor, where return or basically income is your main objective and capital gain is a bonus. Number two, you are an investor where capital gain is the main focus and income is the second main focus. Number three, you are an owner occupier, you have got certain criteria, like you may have pets or you may want to be in a certain part of town.

There are different kind of criteria. You are either concerned about lifestyle, so this is a purchase where it is about how you live. Capital gain is not as important, so that is were a leasehold would be very appropriate. Number five is high risk; that is where you are looking at buildings that are leaky because when they are fixed, they are going to be worth a lot more. You are looking at buying into hotel leases, because they are harder to buy into, because of your finance, but when they come out, it is going to be worth a lot more.

What I am going to do is, I am going to do a forecast on each type of buyer, and go into a bit more detail on each one of those five types. You can figure out how can you best find the solution that you want. And you could be looking at the wrong category. If you are doing that, you are asking all the wrong questions.

This is about your time, and time is valuable. You have got so many listings in the market and there is a lot of, excuse my “French” – crap out there. You need to sort through it and the more education you have, the better purchase you will make. Anyway each week, one will come out, and yeah I will talk to you soon.

Cheers.