Private property issue #50 - pak'nsave property investor

Private Property – our weekly newsletter that gives you insights into what's happening in the NZ property market. Written by managing director Andrew Nicol. Sign up to receive this in your inbox every Thursday.

My goal is to make this newsletter as practical as possible … so you can take action as a property investor.

So this week, you’ll hear two case studies from real property investors. These come from Tuesday night’s Property Live webinar.

Pak’nsave workers become property investors at ages 23 & 25

Adam and Maddie live in Canterbury (just north of Christchurch).

They’re in their early 20s. Adam is 25, and Maddie is 23.

They both work at Pak’nSave. So as young people just starting out in their careers, they’re on very “normal” incomes.

They saved hard for the deposit for their first home and got on the property ladder 2 years ago.

Since then, their home has increased in value substantially. And they’ve used the increased wealth to begin investing in property.

However, when they started looking into whether they could afford to invest … they found their incomes were too low. The bank wouldn’t lend them the money.

So they both approached their bosses, and each scored a pay rise (the Earn, Baby Earn strategy).

That allowed them to put this 2-bedroom townhouse under contract. It’s in Woolston (Christchurch) and costs $539k.

It’s currently being built and is expected to be complete mid-this year.

On the webinar, I asked Adam and Maddy about any property mistakes they’d made so far.

They said: “We’re pretty young, we haven’t made very many yet … but we did rent a 3 bedroom home for a while, and spent almost $30,000 on rent. We should have just rented somewhere cheaper.”

In hindsight, this is an obvious lesson, but one early-stage investors often miss. If you can live with a smaller (or generally cheaper) house … you will save your deposit much more quickly.Kathy and Alun

“We’ve made almost every mistake in the book.”

The second property investors are Kathy and Alun. Just so you know, Kathy is a property partner here at Opes. But she is also building her own property portfolio.

Right now, Kathy and Alun own 6 properties:

• 1 owner occupier

• 1 holiday home

• 2 investment properties, and

• They have another 2 investment properties being built

Kathy and Alun have seen their wealth grow substantially over the years.

However, a lot of things have gone wrong in the process. And it’s important to talk about this. Because property investing is not sunshine and rainbows. Here’s just one story –

“I tried to do the insurance myself.”

Right before heading back to South Africa for a family emergency, Kathy discovered that her tenants had moved out of one of their rentals– without warning.

Apparently, the tenants had got into a big fight, smoked some meth, and left the property abruptly and without warning.

On top of that, the insurance had lapsed.

Kathy had tried to organise the insurance herself but hadn’t set it to auto-renew. Then after calling the insurance company, they wouldn’t renew the policy.

So here she was about to head across the world, with no tenant in her property, no insurance, and all the Thursday before Easter weekend.

What would happen if the empty property was broken into over the long weekend?

Ultimately, she got hooked up with a good insurance adviser, who sorted it out before Easter weekend. But the lesson is to ensure you’ve got a good insurance adviser at the start to ensure you’re covered.

This is just one of the stories they shared on Tuesday night.

To be fair to Kathy, while they’ve made every mistake in the book … she and Alun have followed almost every strategy in the book too.

She recently showed me her copy of my book, Wealth Plan.

Directly after the conclusion, she’s written out every strategy she followed (see below).

Great stuff. Kathy, this is the drive that will continue to make you and Alun successful.

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