Sarah Gray was 22 and studying nursing when her sister Tanya came to her with an unusual proposition. They both lived at home in Auckland’s rural north, and one day Tanya “called me into her room and asked if I wanted to buy a section with her”.

“She’d found a section that was just $5,000 while looking on Trade Me,” says Sarah. “But it was in the middle of nowhere, so it didn’t really work. However, it got us looking and we found out that there were properties around the country that we could afford, in less remote places.”

This was the impetus behind Gray’s first investment property venture, circa 2014. She was working weekends (“earning $17 an hour”) had some student loan saved and was shocked to find some of the houses for sale online were within her price range.

One of the locations with inexpensive houses was Raetihi, near Ohakune, in the Manawatu-Whanganui district. Close to Ruapehu (which worked for Gray as she was a lover of snow sports) the small town had houses priced from the early $100,000s. So, the two sisters decided to take a road trip and check it out.

Sarah says they had seen one property on Trade Me in the town, which they liked, but on viewing they discovered it was pretty rough. Subsequent houses were also sub-par but then they came across a place they both loved.

WEAR AND TEAR

A 1930s bungalow, it had general wear and tear (and issues with water pipes) but it was also charming. “We loved it,” Gray says.

But there was a problem. The sisters’ budget was low, and the owner wanted at least $130,000, which was beyond them.

“We were really disappointed, but we told him we couldn’t afford it and asked him to get back to us in a few months if it hadn’t sold.”

He did just that. The property languished on the market for a while, and the owner eventually contacted the sisters to see if they could come to an arrangement. After a valuation of well under his asking price ($105,000) they went back with an offer of $115,000, which was accepted.

With their combined 20 per cent deposit, the sisters went to Sarah’s bank to see if they could secure a mortgage. After much faffing about from that bank, they decided to try Tanya’s bank instead.

“They sorted it all out straight away,” says Sarah. “I couldn’t believe it; owning a property at just 22.”

With Sarah still living at home, studying and working (and then eventually finding work as a nurse) she was able to make the small repayments.

The house was used for their holidays (it was rented via Airbnb a few times, but as there were water issues it didn’t work that well). And so cheap were the repayments that the Gray sisters were able to repay the mortgage within five years.

‘It got us looking and we found out that there were properties around the country that we could afford’

SECOND PROPERTY

With a mortgage-free home, Gray started thinking about purchasing a second property. There was around $100,000 equity in the Raetihi home, which could be used as leverage on a second property. And Tanya, kindly, let Gray use her half of the equity as well.

She wanted something in a bigger centre this time. Hamilton was the first choice, but by this stage the horse had bolted as Aucklanders had flocked to the city and driven prices up.

After looking in Rotorua (“I have a friend who is a corrections officer there and they told me all the dodgy places and I was kinda put off”) she switched her attention to Whangarei.

In late 2017, she went up to the northern city and spent time with a real estate agent looking at properties with potential. She was introduced to a property not yet on the market, but the agent knew the vendor wanted a quick sale. And with a tenant in situ, it was likely to pay its way.

Located in Otangarei on a 900m2 section, the home had potential for subdivision. A former state house, it was solid and well built “although there were some holes that had to be patched up”.

She bought the property for $215,000 and says is has (generally) paid itself off. “Although it has been slightly more difficult with the removal of interest deductibility,” she explains.

The tenants have been fine except when the daughter of the first tenant moved in and caused damage.

“The house was being managed by a property manager at the time,” she says. After the drama was sorted, she decided to manage the property herself.

“I use the myRent self-management software. I communicate directly with the tenants, and we get on really well. I’ve also been able to find another landlord in the area through the app, so we also communicate with each other.”

For Gray’s second investment she decided on a former state house in Otangarei to be nearer to a bigger centre.

‘I really advocate for buying cheap as the first step into property’

FAMILY AFFAIR

Sarah’s third property venture was another family affair. Her mother had owned a section in Huapai for around 30 years, but never had the money to do anything with it. So, Sarah, her sister and father, decided they would put money into building a house on the section, using equity from the land, which was mortgage free.

They chose to build a home-and-income and the build (in 2018-2019) cost $670,000. The interest-only loan is being paid through a weekly rent of $1,170, and the property’s value has skyrocketed.

“We had it valued at the commencement of the build in 2018 at $1.225 million,” she says. They haven’t had it valued recently, but there has been a 31 per cent value increase in that area over the past five years, so it’s likely to be significantly higher.

Sarah has also bought her own home with her partner (“this was just in a normal way,” she laughs). And she is currently on a study scholarship, furthering her nursing education, specialising in mental health.

She has plans to subdivide and build on the Otangarei property (“hopefully later in the year”) and the Raetihi property is being renovated and may be used as an Airbnb again once this is complete.

Gray is firmly in the “buy low and hold” property camp and keen for young people to understand how they can follow in her footsteps. She’s even written a book about her experiences, Your First Step into Property Investment, that she’ll be popping online for young investors to read. “I advocate for buying cheap as the first step into property.”