So you want to become a property investor
Susan Edmunds and Bonnie Flaws speak to landlords worried about impending reforms.
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. 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 likeminded individuals were looking at long-term and that it’s not about the get-rich-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. 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. Caraline Abbott
‘‘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.’’
Ani Ruawhare
Caraline Abbott
‘‘I get satisfaction from knowing my tenants are comfortable, warm and dry. Their house is nicer than mine.’’
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 fourbedroom 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, she said.
‘‘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 usually did not cover all the costs of owning the houses.
‘‘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 fatcat landlord is incorrect.’’
–Stuff
Charmaine Seccombe