So you want to be a property investor
Susan Edmunds Bonnie Flaws
Property investors have been in the news this year as the Government turns its attention to the rental market.
They’re in for more stringent standards on the heating and insulation of their rental properties, and changes to the Residential Tenancies Act will give tenants more rights.
But some landlords say the perception that they’re ‘‘greedy fat cats’’ cashing in on their tenants is unfair – and that the Government is penalising them for trying to get ahead.
Ani Ruawhare
Ruawhare did not own a property at all until 2011. But the Aucklander spotted her chance when KiwiSaver was introduced.
As a manager at an electricity company she put 8 per cent of her salary into her account and built up as much money as she could before withdrawing it for a deposit on her first home in 2011.
From there, she decided investment properties were her future.
‘‘I was either lucky enough or clever enough to realise that passive income would be a benefit to not working to the death at the ripe old age of 100,’’ she said.
She bought her first rental in 2015 and has since expanded her portfolio to four – two properties in
Auckland, one in
Rotorua and another in the works in
Hastings.
The key to success had been understanding what the banks were looking for when they assessed an application, she said. ‘‘It’s working out when people talk about capital gains and yields, until you understand what those numbers mean, it’s like learning Japanese in a week – it’s not going to happen.’’
Ruawhare found attending seminars and joining investor groups helpful.
‘‘It was really good for me to understand what other like-minded individuals were looking at longterm and that it’s not about the getrich-quick, which was what was in my head at the beginning. Now it’s more slow and steady wins the race.’’
She said a few bad landlords seemed to give all investors a bad reputation.
Most wanted to provide good properties for tenants. ‘‘If you have good properties you’re likely to have good tenants.’’
Ruawhare said she had experienced solid capital gains. ‘‘I believe this happens when you have good tenants and you are willing to keep the property in good condition.’’
There was a long-term benefit in having a relationship with people who would look after a house.
But she wanted more to be done to provide investors options to deal with rental arrears. That was a major problem for many landlords.
Charmaine Seccombe
Seccombe started thinking about investing in property soon after she and her husband arrived from England in 2006. The property prices in the Wellington region were better than they were expecting, and the exchange rate was on their side.
‘‘We thought ‘let’s just have a look at this’ and got in touch with a local agent who seemed to be quite prolific.’’
They bought a four-bedroom house in the Hutt Valley in 2008 for $235,000. ‘‘Admittedly it was not in the best part of town but we didn’t know that then because we’d just arrived it. It’s worked out fine.’’
It is now worth about $450,000 and they have since bought a second rental property. ‘‘We are thinking about a third one but with all these changes going on in the background, we are waiting to see what happens.’’
The houses are owned by a lookthrough company with Seccombe as the sole director.
The proposed end of no-cause terminations is her biggest concern but she said the changes all felt a bit one-sided, and too heavily in the tenants’ interests.
Investors were given too hard a time.
‘‘They, whoever they are, say we are rolling around in money but our insurance premiums on the bigger house were up $60 last year and we haven’t made any claims or anything. How are we meant to recoup that?’’
Rent coming in routinely did not cover all the costs of owning the houses, she said. ‘‘We are not going to reap the benefits of owning until we get to the stage where we think we have to sell one and hopefully get a lot more than we paid for it. I do think the image of the fat-cat landlord is incorrect.’’
Caraline Abbott
Abbott became a landlord after she and her husband were left an inheritance by his father, and they decided property was the best place to invest it.
‘‘It’s almost been better than expected, we have great tenants in our investment property,’’ she said.
‘‘It was in great condition [when we bought it] so we haven’t had to do much maintenance . . . It looks after itself pretty much.’’
They wanted a rental property within
Rotorua, where they live. ‘‘We wanted something close to home.’’
Abbott said the Government’s plan to ringfence tax losses would mean she might need to structure her affairs differently. ‘‘I’m questioning why it’s only residential landlords that are being targeted and not all businesses.’’
Despite that, she is looking for another investment purchase. ‘‘I would like to buy somewhere else in Rotorua. We’ve got three children and ideally they would have a property each as their inheritance. If we were able to get more than three that would be awesome.’’
Her ultimate aim is to be mortgage-free with passive investment income.
‘‘We are by no means rich. I think I make $20 a week on our rental but then the tenants needed a new oven and that was any profit gone. We are by no means moneyhungry people. I’d much rather run at a loss and have a healthy home for my tenants, and rely on capital gains.
‘‘I’m just a normal everyday person. I get satisfaction from knowing my tenants are comfortable, warm and dry. Their house is nicer than mine.’’
Andrew Coop
Coop says it will take a year to recover the money he lost when a tenancy went bad recently.
The Whangarei investor owns 61⁄2 houses – half of the one he lives in with his partner, and five rental properties. There is also a coastal property that cannot be rented. Most are let for between $450 and $500 a week,
He’s benefiting from Whangarei’s growth as a satellite of Auckland, but investing has not been completely stress-free,
He recently had to move on a tenant who stopped paying rent. ‘‘The couple broke up, she moved out and he stayed behind,’’ Coop said.
‘‘The tenancy laws say that if one of the people on a lease leave, then the tenancy is over. From her broken email I counted 21 days from that.’’
He was told to book a hearing with the Tenancy Tribunal but that took seven weeks, by which time the house was trashed and he needed police help to get the tenants out.
‘‘They [Tenancy Tribunal] don’t represent small [concerns], they just have one solution for everything and that’s the hearing. I don’t want to wait for seven weeks and watch someone [I don’t want] in my house.
‘‘I’m not going to deal with the system anymore, I would consider not following the system. If someone is illegally occupying my house, I’d consider not waiting to act. I wouldn’t be patient.
‘‘My beef is, where is the mediation? Why did I have to go for a hearing that was black and white pretty much, and clean up afterwards? I’ve got better things to do. Like broken condoms under the couch, stuff I shouldn’t have to deal with.’’
The Tenancy Tribunal adjudicator said he had to book another hearing for costs. ‘‘ ‘Go clear the rubbish then come back and tell me what you’ve spent’. So this had cost me $7000 and the rent was $402, so I’ve put it up to $460 but even at that it’s going to take a year to get that money back.’’
He said the law changes were unfair.
‘‘I think the Government is trying to stop wealth, to bring the poor and middle class together but they are penalising one side. They’re trying to put their foot on me and help some other people up at my cost. So I feel like I’m getting targeted.
‘‘So I’m going to capitalise on it as much as I possibly can. I don’t go out for breakfast on Saturday morning, and disposable income goes into those properties and now the Government is trying to take the wind out of my sails.’’
Kerry Beveridge
Beveridge looked to Timaru for his first rental property because, living in Christchurch, he couldn’t afford to buy one there.
‘‘It was a 5 or 10 per cent deposit on that one. So I bought it and rented it out and was flatting in Christchurch.
‘‘I was absolutely terrified but the numbers worked and I was interested in being a landlord at that stage.’’
He said he had built his portfolio to ‘‘more than three and less than I want’’.
‘‘My goal would be over 20 houses. I buy properties to hold for the long-term . . . I’ve got some three-bedroom houses, I’ve got some flats, I’ve got a boarding house.
‘‘My goal is to be able to provide goodvalue accommodation, the cheaper end of the rent scale.
That’s a place I quite like to be. It gives me options, I can give people some good references if they want to go to other places.’’
Sometimes when a tenant moved on the house was immaculate: ‘‘you would never know that anyone was there’’. Some were trashed.
‘‘The problem is that the tenants that trash the property make it harder for the good tenants. You always have to expect the worst and hope for the best.
‘‘I see some people that are absolutely great tenants and I love having them, but when they move, they’re going to get someone [a landlord] not so good. I think the few ruin it for the many.
‘‘I had a tenant that was a good tenant but ended up flooding the flat, which flooded the downstairs which . . . put the insurance up and that means your costs are increased. Small cost increases have a flow-on effect.
‘‘The insurance company wouldn’t pay for this person to stay. So we paid for them to stay in a hotel.’’