What are your options?
- could you get the home you want by renovating or extending instead?
- how much more will you have to pay to get the home you want – can you afford it?
- would it be a good idea to keep your current home as a rental investment?
- if you’re selling so you can retire do you have any other options?
Should you do up or move?
Selling and moving can be an expensive business. So if you like the area but the home no longer meets your needs, renovating or extending may be a good option instead of selling.
On the plus side
You save the cost of moving and selling your home. Estate agents fees could be up to 4% or more of the price you sell your home for – and moving could cost you several thousand dollars. There’s more about costs later on, and a list of costs in the guide Tool kit.
On the other hand
You need to be careful that you don’t overcapitalise and spend more on your home than it’s worth. If you alter your home would this make it better than other homes in your street or area? If the answer is yes, you may not get all your money back when it’s time to sell.
It’s not for everyone
Doing up a home is not for everyone. It can be hard living in a home during renovations, and if you have to move out for a while it can add quite a bit to the cost of the project.
There’s more about renovating in the ‘Building and renovating’ section, and some advice on what may or may not add value to your home.
What will it cost to move?
The main costs you will have when you sell are the real estate fees and your moving costs. But you also need to be prepared to pay some one-off expenses for your new home, for instance if you need to make repairs or buy new appliances and furniture.
Real estate fees
The real estate agent is paid by the seller when the house sale becomes unconditional.
The fees and costs can vary quite a bit from company to company. Some companies charge a base fee plus a commission based on how much your home sells for. Others charge just a commission and some charge a fixed fee no matter what your home sells for.
Base fees are usually around $500 plus GST. Commissions are usually about 3-4% (plus GST) of the sale price, but may work out less for more expensive homes – or you may be able to negotiate a fixed fee. You may also have other costs such as advertising (which you pay even if the home doesn’t sell).
You may be able to get a better deal, especially if you sign up with just one agency, so be prepared to talk with several agents and negotiate the fee. However, the fee is not the only thing you should think about.
Moving costs and insurance
Moving costs vary considerably. You could expect to pay anything from $1,000 to $3,000 to move within the same town or city. It also depends on how much of the packing you will do yourself.
Most contents insurance policies don’t automatically cover your belongings during a move, so you’ll probably need to ask your insurer to give you extra cover for the day. Or the moving company may be able to provide the cover. If you’re planning to do any of the packing or moving yourself, it would pay to check what the insurance will cover.
Should you keep your home as an investment?
Many New Zealanders own a second home as an investment. It makes sense to do the sums and think about the possibility of keeping your current home as a rental property before you decide to sell. It could be one way to start or expand your investment portfolio.
On the plus side
If owning a rental property is something you have in mind for the future, keeping your current home when you move could be a practical way to achieve it. It means you’ll save on the time it would take you to look for a suitable rental property to invest in, you won’t have to pay a real estate fee to sell your current home, and you should have a good idea of what maintenance might be needed.
On the other hand
Not all homes are suitable rental properties. You need to be sure the home will be easy to rent, and that you can get enough rent to cover the costs of keeping it. We can help you work out how much you might need to borrow, and what your loan would cost.
Will the rent cover the costs?
To get an idea of the rent your home might fetch, check similar places listed with local rental agencies. The Department of Building and Housing website provides information on average rents for homes around the country.
You could also ask a rental agency, or property manager, to give you an opinion about how easily your place might rent and what rent you could expect to get.
Ideally your rent should cover your loan and all expenses for the property. You need to allow at least 25% of the rental income for running costs such as rates, insurance and maintenance – and more if you use a property manager.
Would it make a good rental?
You need to try to think about your home in a detached way (which is not always easy).
- is the home in a good, safe area?
- are there good facilities nearby, such as shops, medical centre, sports grounds?
- is the home close to public transport?
- is it in good condition?
- is it easy to maintain?
- are the grounds easy to look after?
- is it sunny, sheltered and not damp?
- are the living areas a reasonable size?
- does it have 2-3 bedrooms?
- does it have a modern bathroom, kitchen and laundry?
- are appliances and fittings in good order?
- is there a garage or off-street parking?
- is there private outdoor living space?
- how much rent could I expect to get?
- would the rent cover the loan, rates, insurance and upkeep for the property?
If you’ve answered mainly ‘yes’ chances are your home has reasonable rental potential. But you also need to check with local authorities to see if there are any plans for major changes in the area that could affect the property’s future value, such as zoning changes or plans to build a motorway nearby.
Try to avoid ‘having to sell’
It’s best if you don’t have to sell in a hurry. So if you’re making an offer on another home, give yourself plenty of time to sell. And make your offer conditional on your home selling at a price acceptable to you. If you can’t sell by the date set and don’t want to miss out on the new home, ask your lender if you can get ‘bridging finance’ (a short-term interest only loan) to tide you over.
If you’re in a position where you think you may have to sell, it could be a good idea to put your home on the market sooner rather than later, to give yourself more time to find a buyer willing to pay the price you want.