Are you struggling to buy a first home? Maybe it's time to think about becoming a landlord instead.

Property experts say making your first house purchase an investment property is something that should pay off in the long run.

David Whitburn, director of FUZO property, spent years living in rental properties while he built up his own investment portfolio. "It was a sacrifice that helped us get ahead."

As a strategy, it had multiple benefits, he said. People could afford to rent a nicer house than they could hope to purchase. A would-be first-home buyer could purchase a property in a cheaper part of the city and rent a more luxurious property elsewhere.



"You don't have to pay most of the outgoings, nor the repairs and maintenance, and as a result you can live in some really nice properties without having to put up much capital at all."

Buyers could also approach their property purchases in a more businesslike way, he said, than if they were emotionally tied up in paying for the roof over their heads.

"It becomes a safety thing for so many people, they want to get their home loans down and put all their effort into that and it distracts them from going out and buying an investment property. More people could do so much better if they delayed their own home purchase and bought rental properties first."

Recent Trade Me statistics showed paying an Auckland mortgage was roughly a third more expensive than renting the same property, because while house prices have soared, rents have not.

Wellington's mortgages were 9 per cent more expensive and Christchurch's just 1 per cent.

Barfoot and Thompson statistics show that in central Auckland, the average sale price for a three-bedroom home is $1.5 million, or $1826 a week on an 80 per cent mortgage with an interest rate of 5 per cent. But the average rent for a three-bedroom home is $835 for those same suburbs.

Whitburn urged young people to see what was available in suburbs further out of the city, and in new areas. Landlords can still get a loan for a home that is under construction with a deposit of 10 per cent, rather than the 30 per cent required in Auckland for existing properties.

In less central areas, rents come closer to covering the mortgage. In Ranui, the average house price is $595,038, or $633.50 a week on a 70 per cent mortgage at 5 per cent, which could rent for $425 a week.

Whitburn said some of the cheaper suburbs had had faster rates of growth than the pricier central suburbs.

West Auckland's prices are up more than 27 per cent year-on-year, according to Quotable Value, beating central Auckland's 24.1 per cent increase.

"Most young people I have a chance to have a chat to are not thinking they can afford a place themselves so they are not thinking about having a rental either," Whitburn said.
Property commentator Olly Newland said he often advised clients to become landlords if a first home was out of reach. "They can get on to the property ladder. It might not be up to the standard they would want to live in themselves but at least they are on the ladder. It's better than sitting there doing nothing."

He said the goal was eventually to cash the properties in and buy a house to live. Anywhere from Whangaparaoa to Hamilton was probably a good bet, he said. Outside Auckland, investors can get a loan for an existing home with 20 per cent deposit.

Martin Dunn, who operates an investment property finders service and runs City Sales, said people with a limited budget could buy an inner-city studio for $250,000 and rent it out if it was not what they wanted for themselves.

"It's better to do that than spend the money on a trip or a car. You've got to do something. Even successful businesspeople often admit their true wealth has come through property."