Investor, property expert and consultant, best-selling author, TV ‘guru’ and Authorised Financial Adviser.
How did you get into property investment?
From an early age I loathed working regular hours. It was a complete mystery as I came from a family that respected hard work, security and jobs for life.
I think it was the advent of Rock and Roll in the mid-50s that did it. I became a drummer and had the best years of my life playing gigs in rock, jazz and rhythm and blues bands. With that came independence, enormous fun and more money playing one or two gigs a week than most highly paid workers.
When I was 21, an advertisement in the Herald caught my eye – a house in New Lynn for three thousand pounds, 500 pounds deposit and the balance at one per cent. Within 18 months I had trebled my equity by paying the mortgage down and resold it for one thousand pounds profit. The cheque I received after settling all debt was more than three years’ average salary. Despite hisses from some quarters I decided that this was the life for me and went on to buy, do up and resell scores of houses in the following years. That is, until I discovered the joys of commercial property.
What has been your worst investment?
It was probably an office floor in the city that had fake leases, tenants and valuations. It cost me vast sums of money and it was several years before I could get rid of it. The vendor was a convicted criminal, which I didn’t know at the time. I must have been one of his last stings. It was years before he came out of jail and I could sue him. Pouring money into lawyers’ pockets eventually worked and I got some compensation. But I still lost a packet and a lot of hair and sleep.
What has been your best investment?
I once bought a large factory where the owner thought the tenant was vacating as the lease was up, and he would lose his rent. I talked to the tenant in private and found out that he had no idea his lease was ending and he wanted to stay on. So we signed an agreement for a higher rent and a new lease in the event that I purchased the property, which I did. The new and higher lease kicked in, massively increasing the value of the property, literally overnight. Eventually I sold up and doubled my initial investment.
What do you make of the current Auckland property market?
The current property boom in Auckland is unprecedented having gone on for so long compared to other booms. I think it will continue as long as the economy is sound, immigration continues to flow in and interest rates stay low.
However, I detect weariness among investors who simply cannot make sense of the numbers when it comes to price versus income. Homeowners who are moving up or down the ladder are far less likely to be concerned about their home’s potential rental income, but investors are acutely aware. So too must be the banks, which are not happy to lend to investors who need to prop up a property investment that is cash-flow negative. I believe this weariness will be reflected in the eventual slowing of price increases, although homeowners will offset this to a large degree.
Why do you think investing in property is a good idea for the average Kiwi?
I believe everybody should own a piece of land that they can call their own. History shows that the acquisition of land has been a driving force since time began – it is hard-wired into the psyche of human nature. Investing in property gives people a sense of achievement and a place to call home. The longer they wait, the harder it gets and the shorter the time to achieve this admirable goal.
What are some of the common mistakes you’ve seen people make when investing in property?
The most common mistake people make is to fall in love with a property and pour in money with no regard to the value they get in return. It matters less if the property is your own home, but for an investment it can be fatal.
I have seen investors duped into thinking that if they renovate a rental property it would automatically increase in value. In many cases the money is wasted, and if the property is rented out, any upgrade is reduced to sawdust inside two years, as tenants are notorious for not looking after a property that they don’t own.
Another common mistake is not to check LIM reports properly – the type of title (unit, strata, freehold, leasehold, cross-lease) can make a big difference to value and saleability.
With commercial property a common mistake is not to read the fine print of leases and to overlook the responsibilities of the tenant and the landlord, especially when it comes to who pays what for outgoings and expenses.