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Topic # 238280 10-Jul-2018 11:54
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We're looking at purchasing a property on the Kapiti Coast; our preferred option is to buy a section and put something new on it. One way we thought of managing this (to keep it affordable) is to initially put on an affordable smallish house (not a tiny home!) to be used as a rental and potentially holiday home, but in a few years expand it so it's large enough for a full family home (at which point we'd make it our permanent home).

 

This has led us to think about prefab housing, including modular options, given the relatively affordable cost and quick build times.

 

Has anyone had experience with or thoughts on such building methods, and recommendations (or not!) of particular companies providing such options, ideally in the lower North Island?

 

The company that sparked our interest is Greenhaven Homes, which recently opened a show home in Manakau (north of Otaki); we're planning on visiting them this weekend, but I'd be interested in any other recommendations. I know of Matrix Homes as well, but a family member got seriously d!cked around by them so am not so sure of their competence to manage projects.

 

Thanks for any advice.


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  Reply # 2052908 10-Jul-2018 20:35
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Bump - to catch those who frequent this site in the evening! 


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  Reply # 2052961 10-Jul-2018 21:49
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Please don't "bump" posts. As that is just a form of spam.

Things to consider:

Covenants, does your section have any? Prefab homes might not be allowed. Might have to build a min floor area, use certain cladding ECT.

Council rules. Things like height to boundary. Can require a custom designed home of a weird shape to comply and avoid the need for a resource consent. The smaller the section, the more oddly shaped it is, same if it is sloping. Makes those rules harder to comply with. Or means that lots of big retaining walls and earthworks required.

Bank lending rules. Below a certain floor size, typically 50m2 or so. You need a much larger deposit. As they assess the house as bare land.

Site access. Can a large truck drive right up to where the house will go? Or does every single thing need to be transported by hand?

Cost of rework with your intended plans. Could be a lot cheaper overall to just build your full size house in one go. Or build a main house and a separate minor dwelling. But build the minor dwelling first.





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  Reply # 2053000 10-Jul-2018 22:24
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I wouldn't recommend stages, in terms of the actual structure. You will likely end up paying a lot more, and possibly doubling fees. You could just gib and line rooms, and not finish them for several years, which is what my parents did, and finished those rooms when they could afford to. The problem with prefab type houses, is that the often tend up looking like prefabs, so that can affect it's value. But that may not matter to you, if your main goal is a decent house to live in. 


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  Reply # 2053035 11-Jul-2018 02:46
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jonathan18:

 

Has anyone had experience with or thoughts on such building methods

 

 

I can't talk about particular companies, but I can say what you're talking about is (was once?) a traditional Kiwi building method.

 

Dad was a builder who at various times worked for a couple of NZ's pioneering modular home companies - Keith Hay & Lockwood.

For us - and I'm sure many others - the plan was to buy a section in a developing area on the edge of town, build an 'affordable' house on it, move in, and then - when finances allowed - build out the rest of it, sell, repeat. A 'staged build' I think he called it..

Mum remembers it as always living in an unfinished 'half house' - the pleasure of finally moving into a full size home muted by the fact that it would be sold & we'd move into another project..

I'm sure we built that way because it fit into the tax, development and building rules of the time. Which will have changed.
Right before the introduction of GST in the (mid?) 80's, our (and other) back yards suddenly filled up with racks of hoarded building materials.
In the 90's we lived in an area which had stricter rules for additions over 25% of the existing floor area, so everyone's houses expanded 24% at a time..

 

Your idea certainly looks worth investigating, I hope there's a sweet spot in the matrix of regulations, taxation issues and your financial requirements for it to work.


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  Reply # 2053082 11-Jul-2018 08:35
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Aredwood: Bank lending rules. Below a certain floor size, typically 50m2 or so. You need a much larger deposit. As they assess the house as bare land.

 

The guidance I have had on this is that the Australian banks run a mile from small apartments because they took a hit in Australia. However if you have a small dwelling on freehold land then I can't see why the banks wouldn't include both dwelling and land in their valuation.

 

Different banks have different lending rules so it pays to shop around.


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  Reply # 2053118 11-Jul-2018 08:49
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I think it's a great line of enquiry and I can see the logic in what you're proposing. Our place is a Keith Hay from the 60s which has been trucked twice, also in Kapiti.

 

Bear in mind that there's not a lot of land coming to market in Kapiti. New subdivisions will often have covenants against off site manufacture. Sections in established areas are limited in number, most are very challenging sites (not as bad as Wellington City sites though!), and overhead power lines are prevalent which may preclude trucking something on.

 

Greenhaven specialise in eco homes, so may not be the cheapest for you.

 

If you have a relatively unchallenging site, then you may find that going through a cheap group builder like A1 homes will be comparable cost wise, and probably more palatable for your bank. I wouldn't worry too much about allowing for a Stage 2 in your Stage 1 floor plan e.g. if you need to chop a bedroom in half to form a hallway then all that requires is a bit of timber and gib.

 

If the goal is a basic house to rent out with a view to building a nice house in future, then why not buy an older existing house, rent it out, and bowl it when you can afford to build a nice house in one go?


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  Reply # 2053119 11-Jul-2018 08:56
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If you are looking at bach option, there is a company who advertise in AirNZ magazine that do a modular bach.

 

I know nothing about them except they are prefab and easily removable and look quite good.

 

Something that would put me of what you are considering is the cost of getting building permits twice.

 

Think about that in relation to building a house in stages too.  It would suck if you went to build stage 2 and had to change parts of stage 1 because the rules or the council's mind changed.





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  Reply # 2054177 11-Jul-2018 10:43
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alasta:

Aredwood: Bank lending rules. Below a certain floor size, typically 50m2 or so. You need a much larger deposit. As they assess the house as bare land.


The guidance I have had on this is that the Australian banks run a mile from small apartments because they took a hit in Australia. However if you have a small dwelling on freehold land then I can't see why the banks wouldn't include both dwelling and land in their valuation.


Different banks have different lending rules so it pays to shop around.



Should have been a bit clearer. They will still account for the house value. But they will apply their lending rules that they use for mortgages on bare land. Which typically means that you need a 50% deposit.

Former workmate had this problem. Wanted to buy a rural property, freehold with a standalone house. But the house was only around 30m2 floor area. Bank required 50% deposit. Workmate unable to buy what would have been his first home.





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  Reply # 2054182 11-Jul-2018 10:51
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alasta:

 

The guidance I have had on this is that the Australian banks run a mile from small apartments because they took a hit in Australia.

 

 

Those banks took a hit in NZ too - in the housing price collapse of 2004.  Mostly due to cheap and nasty shoebox apartments in AKL.

 

We just bought a small (<50m2) apartment with 0% deposit.   Aussie bank, ANZ had no issues lending us the money.





Mike



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  Reply # 2054195 11-Jul-2018 11:28
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Thanks all for the really useful feedback. A lot of things have been raised that we hadn’t initially considered, for example the additional cost of building consent if building in stages; or potential access issues like power lines and site access etc for prefab builds.

I can’t imagine size of the house is likely to be an issue, if we do go down the route of building in stages: the first stage would be 70-90m2, plus potentially a garage, hence why I mentioned ‘small’ not ‘tiny’. That said, I get the point of doing it all in one go, but that will no doubt come down to the issue of total cost. If we do build, given it’ll be ultimately aimed at being our own permanent home, we’d want to make sure it’s of a style and quality that we are comfortable with (as one can accept more compromises from a holiday home). This is why a company like Greenhaven does interest us – potentially aesthetically interesting houses with some decent fundamentals such as efficiency baked in. (I understand some have aesthetic concerns about ‘prefab’ houses, and having looked at a number of providers I can see where this comes from – who wants to live in something that’s not much more interesting than a portacom? That said, I really don’t think Greenhaven’s designs are close to falling in this camp.)

The idea of purchasing a decent house now and replacing it down the line (say just prior to moving there permanently) makes a lot of sense; with this in mind it’ll help determine what are otherwise appropriate sections for redevelopment. In the end, I imagine this is where we’ll need to end up, given it’ll be probably cheaper and certainly easier (especially given the lack and cost of suitable sections).

In terms of use of the property – does anyone here have any direct experience and advice they can offer on the merits or otherwise of Airbnbing the house versus standard rental? Are there any particularly good sites or books that offer such guidance? I know the Kapiti rental property market is somewhat crazy (low supply and high demand and therefore pretty high rental prices) but am not sure if this also translates into the pay-per-night rental market. While we can switch from one form to the other, the initial se-up cost of the Airbnb option is much higher, given the need to fit the house out, hence why we want to make the right decision first time.

Thanks again for any advice and comments.

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  Reply # 2054203 11-Jul-2018 11:49
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Personally I don't see the concern around aeshetic of prefabs - modern ones look fine to me.

 

 

 

Tourism in Kapiti is a pretty slim market, and I don't see anything changing that soon, so I'd be hesitant about AirBNB here. You need a good occupancy rate to make a comparable return to normal renting


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  Reply # 2054209 11-Jul-2018 11:56
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MikeAqua:

 

alasta:

 

The guidance I have had on this is that the Australian banks run a mile from small apartments because they took a hit in Australia.

 

 

Those banks took a hit in NZ too - in the housing price collapse of 2004.  Mostly due to cheap and nasty shoebox apartments in AKL.

 

We just bought a small (<50m2) apartment with 0% deposit.   Aussie bank, ANZ had no issues lending us the money.

 

 

Interesting. Normally you'd never get a mortgage on anything with less than a 20% deposit, unless it's a brand new dwelling in which case you might get away with 10%. However the banks are allowed to ignore the LVR rules for a certain proportion of their lending so they must have seen you as a particularly desirable customer.

 

I planning to buy a 40 sq m freehold unit in a nearby development so it will be interesting to see how I go. With a 40% deposit and debt to income ratio of less than 3x I would be surprised if all the banks turned me away.


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  Reply # 2054678 11-Jul-2018 23:07
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MikeAqua:

alasta:


The guidance I have had on this is that the Australian banks run a mile from small apartments because they took a hit in Australia.



Those banks took a hit in NZ too - in the housing price collapse of 2004.  Mostly due to cheap and nasty shoebox apartments in AKL.


We just bought a small (<50m2) apartment with 0% deposit.   Aussie bank, ANZ had no issues lending us the money.



Do you own any other properties apart from that apartment? If you do, then the bank would also have a mortgage over them as well. No need to stump up a cash deposit, as the bank would assess total value of your properties Vs total amount of money you owe on your mortgages.







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  Reply # 2054750 12-Jul-2018 09:11
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Aredwood: Do you own any other properties apart from that apartment? If you do, then the bank would also have a mortgage over them as well. No need to stump up a cash deposit, as the bank would assess total value of your properties Vs total amount of money you owe on your mortgages.


Yep, that’s how how our bank’s offer works: as long as borrowing doesn’t exceed 80% for our own house and 65% for the investment property (latter being the standard RBNZ requirement), but of course it’s all based off the equity in our current house (which is over 80% of the house’s value).

If we intend to go for the rent-per-night option (eg Airbnb) they assume no income from rent at all in terms of their calculations, wheareas a normal rental it would be counted, therefore the sum able to be borrowed would be larger.

Does anyone here have experience with operating an Airbnb or similar accommodation? I’m still interested in this, because at least you do have some benefits of also being able to use the property.


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  Reply # 2058885 19-Jul-2018 15:27
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Looked into Matrix Homes a while back, but also read about some issues with communication and delays.  Wasn't a surprise to hear they've gone into receivership.


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