‘Fear of being poor’ motivates mega-landlord
Property investor Andrew Nicol started out selling tadpoles for 10c each, and now, at 37, he owns 30 properties, down from 40. He talks to
Chat to Andrew Nicol and it is clear property investment is a nobrainer. You just need to follow a few rules and learn from others’ mistakes, including his.
Nicol and Ed McKnight of Opes Partners have co-authored Wealth Plan, a new book that lays out a plan to accrue substantial retirement savings through property investment. And it’s fair to say they know what they’re talking about – Nicol is just 37, but he has already bought and sold about 100 of his own properties.
He currently has about 30 properties, down from 40.
‘‘I always wanted more properties than my age, and I’m 38 this year. But I’ve been selling off a few, as tax changes have made a lot of my properties inefficient.
‘‘These are mainly postearthquake properties I bought in Christchurch that require a lot of maintenance – and they are being bought by first-home buyers and others who don’t mind renovating.’’
Nicol is happy to share his motivation for starting his getrich journey. It was his parents, who were bringing up the family in what he calls ‘‘a poor area of Christchurch’’.
‘‘My parents scared the s... out of me financially,’’ he says. ‘‘They lived from pay cheque to pay cheque. Dad had two jobs and Mum had one but they had no money. They made me worried about getting through life myself. That’s when I started reading books like Rich Dad, Poor Dad, and I joined the Property Investors Association.’’
The entrepreneur talks in his book about very early moneymaking ventures, which included selling tadpoles to a local pet shop for 10c each, and going house-to-house selling homemade coconut ice. Neither were very successful.
He started working in a bank and managed to save $10k for his ‘‘starter property’’, which he bought when he was 19 – and no, it wasn’t a house for himself to live in. It was a rundown fourbedroom rental.
Right from the start it has always been about ‘‘investing’’. Emotion cannot come into the equation, Nicol says. ‘‘The only emotion that’s acceptable is fear – fear of being poor.
‘‘You have to be as calculating as possible when investing in property; it’s all about the numbers. As soon as you let emotion get in the way you begin to sacrifice the numbers, and it becomes a horrible process – you get anxious and you overpay. That’s fine if you are buying a house you’re going to live in, but not otherwise.’’
Nicol became a dad for the first time last year, and went through his own stressful family house-hunting process two-and-a-half years ago.
‘‘I was bullied into it by my fiancee,’’ he jokes. ‘‘She told me I needed to move out of my bachelor pad and grow up.’’
But Nicol says his first rental wasn’t the best choice. He made several basic mistakes. ‘‘I did a very poor job on the renovations, didn’t use a property manager, and didn’t do a background check on the tenants.’’
Things have improved greatly since then, and everything he and McKnight have learned, they share in their book, with plenty of case studies. And one of the most important messages is simple – saving won’t get you where you want to be. It’s never going to be enough.
‘‘The average New Zealander thinks the way to get rich is by working hard and saving – rather than understanding how to make their money work hard for them.’’
Nicol says Wealth Plan differs from other property investment books in that it lays out a framework for which property investment strategies to use through the three main stages of your life. ‘‘It’s not about using only one strategy, it’s about using them all, but at different times.’’
And crucial to the plan is creating more equity early on by ‘‘attacking’’ your mortgage and paying it off more aggressively. ‘‘Every extra dollar you pay off your mortgage is worth up to another $5 you can borrow for a new-build investment property, or $2.50 for an existing property.’’
First-home buying
Nicol admits there’s a lot of negativity surrounding firsthome buying today. ‘‘Whenever we take to social media to promote a tactic for first-home buyers to get ahead, we always get slated in the comments section,’’ the book says.
‘‘Here’s the thing. Not every tactic will be available and applicable for everyone. But you don’t need to use every single tactic to buy your first home.
‘‘You don’t need to be a rentvestor, and buy in the cheapest area in New Zealand, and use your KiwiSaver, and get the First Home Grant, and start a side hustle, and use the ‘bank of mum and dad’, and sell your car, your computer and your soul.
‘‘But you do have to do something. If you dismiss every tactic, and worry that none of them will work for you, your first property will stay out of reach. Find a combination that will work for you.’’
In keeping with their philosophy of gaining wealth through capital gains, Nicol and McKnight have a preference for growth properties over yield properties, because growth properties grow in value faster.
What to look for
The pair suggest you don’t limit your property search to your own town or city. Properties that tend to increase in value faster include those in regions nearer the bottom of their property cycle – at present they say the most undervalued region is Canterbury, followed by Marlborough, Nelson, Tasman and the West Coast, then Northland and Taranaki.
Other factors that increase property values faster include cities with higher population growth and larger populations, suburbs closer to the centre of a city, properties in higher-end suburbs, stand-alone houses and townhouses, and two- and fourbedroom properties increase in value faster than one-bedroom apartments.’’
They also warn about paying too much. ‘‘Properties that are bought at or under valuation have more room to increase in value compared with those bought above valuation.’’
Nicol and McKnight say the ‘‘blunt truth’’ is you have to get started. ‘‘If you buy this book, read it, put it down, walk away and do nothing, your wealth will continue on its current trajectory. Ultimately, your financial situation will be $40 worse off after paying for the book (or $3 worse off if you bought it second-hand from the op shop). We can give you the know-how, but you’ve got to take action.’’