Investor learns from early failure
Nick Gentle’s first property purchase in Kawerau was a disaster, but he has learned a lot in the past 15 years,
The first investment property Nick Gentle bought was the ‘‘wrong property, in the wrong town at the wrong time’’ – a twobedroom flat in the town of Kawerau – but the Rotoruabased landlord has learned a lot since then.
‘‘I didn’t have any ambition about being wealthy. I just wanted to be in control of my own time.’’
Nick Gentle
Early Days
In high school, a Japanese language class kicked off a longtime love of the country. So after completing his studies at Otago University, Gentle headed off there. He taught English, worked at Goldman Sachs and then went to work at a small computer company where he met his future wife.
But it was a combination of career dissatisfaction and the desire for future flexibility for himself and his family that led him to start thinking about property investment.
‘‘It was really about having some choice in the future about where we went and making sure our children could spend quality time with family.
‘‘I didn’t have any ambition about being wealthy. I just wanted to be in control of my own time,’’ he says.
So he started off his portfolio buying a property near his home town of Te Puke. It didn’t go well.
‘‘I bought the wrong property, in the wrong town at the wrong time,’’ Gentle says. ‘‘And I was locked up in high interest rates – I bought it before I started learning what I was doing. I had no idea.’’
That was in 2008. In the intervening years, Gentle has done multiple property deals and bought, renovated and sold dozens of properties.
He now holds three student rental properties in Wellington, one in Invercargill, as well as a rental in Rotorua, plus his own family home where he lives with his wife and young son.
All of them were bought in a dire condition, gutted and rebuilt. He is also the co-owner of a specialist investment property agency, iFindProperty, a property management company iRentProperty and a property sales agency iSellProperty – all based in Rotorua.
It’s fair to say he has honed his expertise since that early failure. And learnt some lessons.
‘‘When you’re investing from overseas, there is just stuff you cannot do,’’ he says.
‘‘You can’t run around and look at properties at the weekend. But a pro is that there’s no emotion, you just look at it in pragmatic terms.’’
Any absentee investor also needs a good team of people – a property finder, a property manager for rentals, a good mortgage broker and a builder you know and trust. It can take a while to build up that support team.
Choosing property
The ‘‘right’’ type of investment property really does depend on your goals. Generally, Gentle encourages people to avoid anything quirky. The reason? ‘‘You can always sell a threebedroom, one-bathroom house in a good location on a quiet street,’’ he says.
While Gentle himself likes taking on ‘‘absolute wrecks’’, the process can be long and slow – getting in quotes for the work, getting the necessary consents and managing the project. There are also lots of ‘‘gotchas’’ says Gentle.
‘‘Councils can be challenging and there can be underlying problems with older properties. You need to get a good builder to go through the property. And consider – can the building even be rescued?’’
Run things like a business
For Gentle, properties are his business, so for rentals he considers tenants as his customers.
‘‘I don’t know where we got to this nonsense where tenants and landlords are enemies,’’ he says.
‘‘When Healthy Homes came in I didn’t have to lift a finger, my properties were already up to standard.’’
Running a business also means watching the finances. Gentle keeps an eye on the markets, paying attention to inflation and long-term rates and how they affect his situation.
‘‘Kiwis obsess to the last detail about any property deal,’’ says Gentle.
‘‘But they sleepwalk through mortgages. This is a huge part of managing your debt and people just seem to go on autopilot.’’
He also recommends anyone investing in property to get careful tax advice from a property tax accountant, especially for those planning to mix developments or renovations into investment activity along with a buy and hold model.
Gentle says the two activities are looked at very differently by Inland Revenue, and there are some long-term ‘‘fish hooks’’ to be aware of for anyone doing both.
Know the goal
It is also important for people to think about their property investment goals.
‘‘I always start by asking, where do you want to get to? Why are we doing this,’’ says Gentle.
Some may want to save money, others may want an ongoing income.
For those spooked by rising rates and an unpredictable property market, Gentle is clear.
‘‘If you’re feeling nervous, sit down and run some numbers to see exactly what they look like over next the next five years, and break them down into dollars per week.’’
The worst thing you can do is stick your head under a blanket, he says.