I am moving away from Auckland to care for my mother very soon. I own a freehold property in Auckland worth $330,000.
I am renting it out through an agent, as I would prefer to stay in the housing market. I don't have a need to buy a house to live in where I am going.
I appreciate that a lot of things can go wrong with tenants, but I'm keen to give it a go. It also gives me a place to return to if I need to come back to Auckland.
Should I sell and invest in funds?
Mary Holm: You know what they say about sleeping dogs. I reckon the same applies to home ownership in your circumstances. Keep the house.
This is not without risks. For one thing, as you acknowledge, perfect tenants are hard to find.
However, it sounds as if you will be elsewhere in New Zealand and better placed to keep an eye on the property than overseas landlords. You might, for instance, meet the tenants at the house - after giving them advance warning - when you are on a trip back to Auckland.
Given that you have no mortgage payments, it might be wise to charge a low rent. That should give you more tenants to choose from, and they're likely to stay longer.
Even so, if you move back into the house later you've got to expect the odd carpet stain, damage to woodwork and so on - which is harder to accept in your own home than in a rental. You might want to set aside some of the proceeds from renting to redecorate before your return.
On the question of whether you would be better off selling and investing the money in a managed fund, the answer is, "maybe". These days, rental income after expenses usually amounts to a pretty low return on the money invested in a property - and I'm even suggesting you make your rent lower!
Many landlords have made up for the low yields by making big gains when they sell. But such gains look less likely in the near future. In any case, you may not sell the house, but move back in.
In short, you'll be lucky to get a high return on your $330,000. But where else would you park the money? In high-quality fixed interest - such as bank deposits or good corporate bonds - the return is also unlikely to be high. In a share fund it might be high, but it also might be low - especially if your investment ends up being for just a few years.
Overall, I think you're wise to stay in the housing market, so that you'll always have a home regardless of whether prices plummet or soar. You also avoid the thousands you would pay in real estate and lawyer's fees if you sold and then bought later.
What about hassle? Selling may be more hassle upfront, but renting could be worse over the long term. However, if you get a rental agent with good recommendations from others, and keep track of their work, things should go smoothly most of the time.
Mary Holm is the author of bestselling books on KiwiSaver and personal finance. She is also a highly praised seminar presenter. Her written advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following that advice.
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