Blast From The Past
Vicki Holder speaks to seven memorable investors profiled over the past 12 years in NZ Property Investor and discovers the secrets to longevity.
1 May 2016
Robyn Grinte: Burnt But Not Bowing Out
Robyn Grinter, who was first profiled in 2004, has weathered big storms since she was caught in the downturn of 2008. At one stage she owned over 400 properties. Thanks to her property investments, she was having a great life, travelling the world with her family. But suddenly the booming market simply stopped and she was forced to put her properties on the market by her lender.
“Don’t believe stories banks won’t call up loans if you are paying them,” she warns.
“Most of the good ones we sold at a loss over the [following] couple of years to get into a cash flow neutral position and keep the banks happy. We sold everything we could; put everything on the market including our own home. We couldn’t sell that for a reasonable price so the bank ended up mortgagee selling it.”
Still, she managed to hold onto some properties and played it safe for a while. Grinter now has a portfolio of valuable properties worth about $12 million. She is gradually selling them down, and has about another dozen she wants to off-load.
“I got into trouble subdividing and developing which I didn’t really understand and had been taking the advice of others who didn’t really understand either.”
She became a real estate agent three and half years ago and loves real estate. But she made a commitment not to buy while she is in this position as she doesn’t want to be seen to be competing with the people she deals with.
Grinter has warnings for those who are buying aggressively in the current market.
“Keep your equity high – that is what saved me. Be careful who you trust. And understand what you are doing if you take on something more complicated than the bread and butter things you are used to.
“Don’t think you are bullet proof. Be prepared to ride things out when the market turns, as all of a sudden, properties will stop selling again. If you get into trouble, when it does turn, pick up the phone when it rings, open your mail, talk to people if you can’t pay, work out a plan. It will save you in the end. And always look for the diamond in what happened."
Mike Collins Weather The Storm
Since NZ Property Investor last profiled Mike Collins in 2005, he has established a new life on the Gold Coast where he runs a wireless internet business for apartments and hotels. Back in New Zealand he had owned apartments in a building run by a university. “When they stopped managing it, they took out the internet structure as well. As a tech geek, I thought, I could replace that and fix it. That’s where Freedom Internet was born. I expanded into Australia three years ago and now look after 300 buildings across Australia and New Zealand.”
Property and wireless internet – it’s been a good marriage, he says.
Collins has been investing since 2000 but most of his properties he bought in the period up to 2005. At the peak of the market, he got into a partnership and started buying more with a friend who already had eight properties. They did it at the worst time, Collins says.
“We carried the portfolio, losing about $2000 a month. But these were an educated investment because now they make $2000 a month.”
Luck was on his side. “Just a bit of a push and I could have over-extended and lost everything.”
Looking back, he says: “I weathered the storm pretty well. It wasn’t easy. Interest rates were high, rents weren’t so great. It was a matter of tightening belts and getting flatmates. I picked up a lot of good stuff from Phil Jones and others like him. I found out when you know what you’re looking for, you can make some really good decisions, rather than throwing a dart at the board.”
Despite “hitting the skids” with some tough times from 2008 to 2012, Collins held onto most of his New Zealand properties. Now managed by a small property management company, he has a portfolio of 20 properties – mostly Auckland houses, a block of flats in Wanganui and a couple of houses in Tokoroa.
He says the temptation was to “quit” a few properties. He ran an IT company and luckily had maintenance contracts that kept him afloat. “It wasn’t easy. I’m glad I didn’t extend further. But if I did the numbers at the time, there would have been no change to the cash flow. I knew things would improve. If I had sold, I would have lost the opportunity for a lift in capital gain later. There was no choice but to hang on.”
Collins hasn’t been active in property investment in Australia and says had he continued living in New Zealand, he would have been more active. He sold the first house he bought in Australia and made $90,000 in a year in order to buy a nice house in a nice neighbourhood.
“It’s how far can you push the envelope between living well and investing. There’s only so much that you can focus on. Opportunities are like lollies in a candy store. There’s only so much you can grab and enjoy.”
The Shuermers: 'Young Guns' Grow Up
When they were profiled in 2004, Hadley (then 27) and Aaron Shurmer (25) were the “young guns” of property, and had been buying and growing a residential portfolio of multi-tenant student flats and professional accommodation in Christchurch with their parents since their early twenties. But what started out as fun grew into a full-time job with many stresses and strains. So by 2006 they had sold up and split the profits four ways, which led Hadley to “live the life of Riley on permanent vacation” for many years while Aaron, with his BSc in Computer Science established Red Paris, a boutique web design company in Sydney. He also switched to investing in commercial property because he felt it was much easier than residential.
“There’s no real issue with tenants. The risks are maybe greater but you don’t get the constant rubbish you get with residential tenants. Commercial tenants don’t want to damage your property because it’s their place of work where they have clients coming so they look after it.”
Aaron learnt a lot from his early start in property. He also had a proven track record with the bank and this good relationship made it easy to borrow. But his first foray into commercial was not without problems.
“I bought a brand new building. It was small and untenanted – not a great decision because it was expensive for what it was. And I didn’t understand that you don’t tenant through TradeMe with commercial. You need to go through a commercial agent. That’s how it works as they have relationships with tenants. [My wife and I] totally stuffed up. It was six months before we tenanted the building.”
Things have since gone well for Aaron, who returned to live in Christchurch. The earthquake caused little damage to his properties. If anything it was advantageous, causing strong demand and rents to rise rapidly. “It was boom time,” he says.
He’s reached a point where he’s finding it difficult to expand quickly without buying “as is, where is” properties. “Banks are making sure we don’t up-risk ourselves. We’re picking the eyes out of the market and doing good deals requiring work to be done – as opposed to – here’s a building, here’s the rent. The occasional building pops up that we will buy.”
His advice for would-be commercial investors is to take care. “There’s a ridiculous amount of dumb money around. People have huge amounts of insurance money they want to put into a building. People are so cashed up it’s driving yields down. It’s getting to the point where commercial property has unrealistically low yields. It might work now but in five years’ time when it’s back to normal, you’ll lose your money.”
As for Hadley, who is now married and talking babies, he regrets selling up everything. He bought one property, a seven-bedroom house in Riccarton just before the 2011 earthquake which helped provide for his lifestyle. After the earthquake, he met his wife Vivienne who encouraged him to start buying again. He purchased a unit in the old prison complex in Lincoln Road, which he has since sold, and his own home, which he is renovating.
Having seen his brother Aaron succeed with commercial, Hadley thinks he too might head in that direction. In the meantime, he’s studying a doctorate of engineering to make himself more marketable careerwise.
The really big lesson in his property career, Hadley says, is “don’t sell”. “What we should have done is hand the rental properties over to a manager. It was becoming a 30-hour/week job which is lovely but we’d gone from 10 to 20 hours to a full-time job.
“Think long and hard if you’re looking at selling and why you’re selling. If it’s because you want something bigger and better, go for it. But if it’s just not working, change what you’re doing. Make it work. That’s what we should have done.”
Tina Chan's Rising Trajectory
Since we profiled her in 2009, Tina Chan has married and now has two children, aged nine months and two and a half years – and she’s busier than ever. Although there have been a few stops and starts, she has continued the impressive trajectory she has been on since joining Ron Hoy Fong’s mentoring group 10 years ago.
Currently, she and dentist husband Joshua are expanding their Melbourne dental practice, adding staff so the clinics work on auto-pilot and shortly looking to establish another clinic in Melbourne. The plan is to start franchising. At the same time, they are leveraging off the business to keep growing their property portfolio and have three projects they are currently renovating.
They have bought nine more properties – four last year – since 2009. While the yields from their 21 properties (six in Australia and 15 in New Zealand) don’t support themselves, the strong cashflow from their high income business and a good business plan have made it easy to borrow.
At the moment, they are settling the family in a home in Toorak, one of Melbourne’s best suburbs and this week they also bought a villa in the “double-grammar” school zone in Epsom valued at $1.8 million, for $1.52 million.
Key to her success, Chan says, is good support from her husband. The two work well as a team. “He finds the properties, I negotiate the deals. I’m a person who always follows through with tasks, so I’m good at achieving goals.”
The busy lifestyle has forced Chan to be even more organised and she gets up at six am to express milk for her baby who goes to childcare.
Her advice to others is to be careful who you trust when employing professional trustees for your properties. “It has cost us $20,000 – it was an expensive mistake.”
She also says: “Surround yourself with people who are passionate and positive about investing in property. Have a network to bounce ideas around. That helps keep you going. I still catch up with Ron every couple of months and he gives me helpful feedback.” Chan laments there is nothing like APIA in Melbourne and all the investor groups she has found seem to be run by people with a conflict of interest.
While much has changed in Chan’s life, she is still sticking to Ron’s advice, either buying properties below value, finding property with a twist that makes it desirable or buying and adding value.
Chan has a business background and thinks about the next big thing. She has her sights set on a building development next. And having borrowed 100% and tripled the sales for their last clinic, the banks are very receptive to her doing it all over again.
Liz Harris : Quake Recovery Opportunity
Nearing the end of her EQC and insurance nightmare with 23 apartments awaiting repairs by EQC in 12 buildings plus a repaint on one building, Christchurch investor Liz Harris can see the light at the end of the tunnel. Now, further opportunities are calling.
It’s hard to keep up with Harris as she rattles off the big numbers and updates in her busy investment empire. No wonder she has stepped up the management activity and is restructuring to ensure the business becomes more professional – which involves employing more staff, establishing a maintenance and repair unit and transitioning family members to professional board level.
Harris lost 60 buildings and houses in the Canterbury earthquakes, which have now been demolished as well as 47 boarding rooms. Many have been settled and repaired and she has rebuilt 40 so far. Since 2011 she has bought 33 new apartments and a big boarding complex that includes eight apartments with five bedrooms, rented by the room. She has also bought nine houses and apartments in Nelson and built seven more.
“It seems slow and ongoing. There are still a lot of stressful things. It just keeps going on and on,” Harris says. “On the whole, insurance companies have been good. It just takes a long time. The earthquake has created so much extra work.”
It has also created some great opportunities to expand. Harris owns many flats and carparks bordering vacant land so has been buying neighbouring land. For example, she has extended a 2000sqm property to 3200sqm to create a bigger holding.
“I looked around at commercial, stocks and shares, and couldn’t find anything else to do with my money where I could make as much money as residential property investment. This is the best way.”
Fortunately, Harris was in good financial shape when the earthquake struck. “You just never know what’s around the corner,” she says. “Just make sure you’re well insured. And never give up. Make sure you get what you’re entitled to.”
The earthquakes never dented Harris’ enthusiasm for the city. She’s still out there looking for more land and properties. “Hopefully we’ll get the central city back. But rents have dropped back a bit.”
Having turned 60 recently, Harris certainly doesn’t want to work in the business day to day, although that’s just how it’s been lately.
Restructuring means making bigger picture decisions these days. She’s also making sure she takes advantage of her business success by devoting more time to her well-being, taking campervan holidays around the US – where she and her husband travel twice a year. They also have a house in Mexico where they stay.
“We’ll go away for about four months of the year and we’re trying to make that five months. I love that; living quite simply, seeing amazing things in the world. It’s fantastic!”
Fenton Peterken: Money Keeps Rolling In
Since talking to Fenton Peterken in 2006, he has sold his accountancy practice in Whangarei and having initially bought the West Auckland Just Cabins franchise in 2010, is now the nationwide franchisor with 46 areas and growing strong. “I don’t have to worry about every six minutes of my day. I don’t have staff or premises and I keep earning whether I’m at work or on holiday – the money just keeps rolling in. You’re much better able to leverage your time and costs. It’s just the best.”
As a property investor, Just Cabins made sense to Peterken and he is eager to promote them to other investors. “You can pay $65 a week for a cabin and earn an extra $200 a week income without consents because they’re on wheels. It’s a lot cheaper than adding another bedroom.”
There’s a lot more competition than there used to be when he started out. But Peterken is continually innovating with new products and services to keep ahead.
After selling three houses on a property he’d subdivided in Whangarei, he relocated from Whangarei to Auckland in 2012 as his Belgian wife prefers the big city. Plus, because he needs to travel around the country for Just Cabins, he has to be near Auckland airport with all its connections.
“It’s also a better property market and getting in at 2012; we’ve done well. I bought a three-bedroom bungalow in Mt Eden, added a fourth bedroom, another bathroom, put in sliders and opened it to a deck. We’ve moved the rent to $1000 a week.”
As well as his Mt Eden property, he still owns his Belgian property, three properties in Whangarei and he bought a family home in Mount Maunganui three weeks ago for a friend who wants to buy a rural home but still needs to live in Mount Maunganui Intermediate zone for his son. “With current interest rates, the yield covers what I’m getting on the loan.”
Peterken thinks like an accountant and always looks at the numbers. He will buy if there’s an opportunity to add value by renovating or doing something like converting a three bedroom to a four where you can increase the rent.
But he warns not to buy in the boom just because everyone else is. “Eagles don’t fly in flocks. Go contrary to the market and don’t follow the crowd. Look at long term trends. Don’t go for this month’s winner.”
He says: “Don’t get into properties with negative cashflow because you’ll keep having to fund them and you may get caught when interest rates go up, which they will. Keep a conservative debt ratio. If credit becomes tighter, you won’t be subject to the whims of banks wanting more equity. It’s about growing and not putting yourself at risk. As you get older, your capital is the thing you need to protect. You don’t have time to recover lost capital if you’re in your 50s or 60s. As you get older, make sure your capital is protected. Don’t chase the highest risk.”
And, lastly: “Do the analysis. Don’t expect interest rates to stay at 4% forever. Look at the numbers because things will change and you don’t know when.”