Dream Team Couple Reach 120 Rental Properties
Jenny Keown interviews the wealthiest residential investors in New Zealand on how they achieved success.
1 September 2016
Shannon And Hayley Tawhiti bought their first investment property for $120,000 in Hastings in 2004. Fast-forward 12 years and they have built a net worth of well over $20 million – and are thought to be the wealthiest private residential investors in New Zealand.
For the first time, the Tawhitis who prefer to stay away from the limelight reveal how they built their property empire, and what lessons they have learnt along the way.
“We’ve flown under the radar for years, but now we feel we are in a position to tell our story,” Shannon says.
These two were pretty darn serious from the get-go. Shannon, aged 34, of Ngati Rangi, says by the age of about 15, he knew he didn’t want to work in a packhouse or survive week to week. He met down-to-earth Hayley (33), of Ngati Tuawharetoa, at Kati Kati high-school, and says he was attracted to her good looks, extreme loyalty and hard-working nature.
It is Hayley, who keeps Shannon ‘the ideas man’ balanced, he says. Softly spoken, the pair are humble about their success and say it goes back to their roots. “One of the key things about us is that we don’t come from wealthy families. My Dad worked in forestry, my Mum was a cleaner,” Shannon says.
“They weren’t business people. They were hard-working, and we have both got our work ethic from our parents.” Yet Shannon didn’t want to be tied to an employer in the same way as his Dad.
Aged 18, in 2000, Shannon moved to Hawke's Bay to become a winemaker, and Hayley followed a year later. In 2003 Shannon went over to California to work on a vineyard for three months and managed to save a house deposit. In 2004 they bought their first house and renovated it.
“We basically didn’t have any idea what we were doing. We just wanted to add value. My Dad has building skills and came down and helped me,” he says.
The Raureka property went up in value, which enabled them to buy another house in Mayfair, Hastings. They did it up, then kept on going.
So while their 20-something mates were partying or frittering away their discretionary income, the Tawhitis were up ladders at 9pm at night after their working day, painting ceilings on their investment properties.
They had the same goal: “We decided that by the time we were 40, we were going to have 20 houses, a boat and a holiday house,” Shannon says.
They became better at buying and doing up houses, by spending minimal amounts to create value in a short time-frame.
“Every spare dollar was put into the properties, and we managed the properties ourselves. Then after four to five houses, we hit leverage lock, and couldn’t borrow any more from the banks.”
The couple either had to earn more money or sell some houses down.
Shannon found an answer – fattening lambs on orchards over the winter.
“I was working in a winery and saw someone do it and thought, ‘I could do that’. You buy a lamb for $20, hold it for six months, and sell it for $80, and then times that by a few thousand and it’s quite good money,” he says.
Leap Of Faith
Aged 23, Shannon made the big leap and left his job at Beach House Wines.
“My employer was really good; he basically gave me the confidence to go out on my own. He said ‘Look, Shannon, you are going to be better off going out on your own; you are on the phone organising property transactions while brewing. I’m holding you back,’” he says.
The advice was some of the best he has received, he says. “Your job is a security but ultimately it can hold you back from other opportunities.”
Hayley left her hairdressing job soon after Shannon, and they launched themselves into their property investment business, which involved a large amount of property trading - expanding their portfolio throughout Tauranga and Auckland.
Today, they own around 120 properties, but it varies each week, says Shannon.
The couple have used every strategy in the investment property book: Shannon loves the wheeling and dealing side of investing.
“I do a lot of transactions privately and I’ve learnt that whatever you want in a transaction as long as it works for both parties, you can do a deal. Price is not everything. Convenience is more valuable than a dollar,” he says.
It was a new venture that made their rental portfolio really bloom.
Shannon: “At 30-40 properties, [property portfolios] are generally self-sustaining, but to get from there to 100 is a huge step and it’s very rare for people to be able to do it.”
In 2011, the couple launched Relocate Homes NZ, which sources houses throughout the North Island, renovates, repairs and delivers them.
“I thought it was easy and straightforward, and bought some gear and trucks and trailers. We now have eight staff based in Auckland and Hawke’s Bay – a renovation team and a house moving team,” he says.
Shannon buys a lot of land privately, relocates homes to the land, and has lifestyle blocks under development around the country. “There aren’t many people who can buy large tracts of land in Hawke’s Bay and once you break it down on a per site basis, it is cost effective. Once the land is there, the houses are piled and the renovation team finishes them off,” he says.
They have bought a lot of blocks off Housing New Zealand, and finished developments in a six-week time period. “I understand all the tricks and loopholes to make it cost effective, and get it done quickly,” he says.
Of course, the couple have gone through hard times. The recession was difficult, he says, when banks tightened lending and interest rates were still high and it was hard to tenant properties.
“It teaches you to work harder. We picked up sections in town for $70,000 and people thought we were crazy, but we relocated houses onto them, and have sold a couple of them lately and they have trebled in value. I wish I had bought more,” he says.
Another testing time was mid-2015 when a story about We Move Homes Ltd appeared in Hawke’s Bay Today, saying that the company faced liquidation over an alleged $53,000 tax bill.
Shannon says the case was settled directly with the IRD and the company wasn’t liquidated. He put it down to miscommunication between his company’s accountant and the IRD.
On the question of why they have succeeded in property, Shannon repeatedly says a solid foundation is key.
“You need a decent team of advisers, lawyers, bankers and tradespeople around you – don’t take the cheap option. Keep debt levels low, have clean strategies and stick to your knitting,” he says.
Their 12 full-time staff are paid well, and one of their team is on well over $100,000 a year. “I pay on performance. If there is someone who is really good and takes the weight off my shoulders, they get rewarded,” he says.
Last year, Shannon says ASB inducted them into their elite banking group, and effectively paid for the couple to bank with them, removing the fees from their facilities, and cutting their interest rates from 6% to a low 3% freeing up $200,000 of cashflow per year.
“It has made things way easier. The projects we do now are just a phone call and a discussion,” he says.
So what’s the plan from here? The Tawhitis could retire comfortably now, but won’t.
One of Shannon’s friends advised against early retirement. “It would be like driving 100 miles an hour down the motorway – because that is the pace of your life at the moment – and hitting a brick wall.”
I do a lot of Transactions Privately and I’ve Learnt that whatever You want in a Transaction – as Long as it works For both parties – you can do a deal. Price is not Everything. Convenience is more Valuable than A dollar – Shannon Tawhiti
The friend knew, because he had done the same thing and suffered depression.
“What we are doing is cashing up a number of properties while the market is strong, and we have bought a number of commercial properties in Hawke’s Bay, so less tenants and larger-scale now,” he says.
Shannon is going to keep going with the wheeling and dealing – his passion – but wind down to 30 hours per week, and get intohunting and fishing.
“These are the things I gave up. You probably don’t need to go as hard-core as us, and probably enjoy life a bit more. Luckily I’m still fit enough to do them,” he says.
The couple have four children under six years old and are proud of the fact they have set them up for life.
Hayley jokes there is only so much window cleaning one can do and is going to do some charitable work. The couple already sponsor NZ boxing title holder MJ Bland.
It’s worth noting the couple treat their workers like family, want them to do well in their lives and are constantly giving them advice. “They were here last night – that’s all the beer bottles outside,” Shannon says. “A tall box meeting,” laughs Hayley.
Shannon insists there is nothing special about him and Hayley. “We’ve just chosen what we want to do and stuck with it.”