18 months to a $1.75m property portfolio
In 18 months, 31-year-old Bay of Plenty man Michael Burge has built a property portfolio worth just under $1.75 million.
He moved from Auckland to the Bay of Plenty two years ago to start investing in real estate, after several years spent learning about the sector. In the next couple of weeks, he will settle on his fifth property.
He says the properties now generate enough rent that he would not have to work if he did not want to.
Burge said, growing up, his family never ‘‘completely struggled’’ but it was sometimes a problem. ‘‘To me that didn’t make sense. The 1 per cent have everything – I wanted to find out how did they get there? What did they do? What do they know that I don’t? Unfortunately this stuff isn’t taught in schools so I had to find it out for myself.’’
Initially, he focused on business before shifting his attention to real estate. Eventually he was in a position where he had money in Kiwisaver and money in savings and needed to do something with it. ‘‘I knew that KiwiSaver has to go to property so I thought I may a well learn as much as I can about real estate investing so I could get the most out of that money.’’
The first house he bought was $195,000 and required a 20 per cent deposit. Every property he buys is cashflow positive, which means the rent generated is more than the cost of holding the property.
The second house was also bought with a cash deposit, of 30 per cent of the purchase price. From then on, further houses have been bought by renovating the existing properties, having them revalued and borrowing against the new valuations.
In one deal, he made $110,000 in capital gains in four weeks through work done on the house.
The first home took six months to renovate, while Burge lived in it. KiwiSaver rules require that anyone withdrawing money for a first home lives in it for at least six months. But the next renovation took only 13 days.
‘‘Once I’d done the first property, it was a case of fine-tuning the process to do it better and faster next time. Essentially it’s the same thing on repeat, it just gets easier and easier. Once I know what the bank requirements are and what they are going to need, rather than making excuses, I just go ahead and do it.’’
FIGURE.NZ Mean weekly rent in the Rotorua District, New Zealand. Burge said over time he had become less conservative about his investment, being willing to take on properties that required more extensive renovation work. He had been willing to invest in areas that others had said not to.
Others who wanted to do the same should try to tap into the knowledge of those who had already done it, he said. ‘‘You don’t know what you don’t know so you need to learn from someone who is doing what it is your want to be doing, even if it means paying them.’’
Burge said he had a lot of support from the New Zealand property investors’ group on Facebook.
He said the only thing he would have done differently is to have started earlier. ‘‘I look back now at all the deals I’ve done – and seeing what prices have done in Rotorua – there’s honestly not much I could have done better.’’