Profile – Luke Nicholls. Home from home
Buying and renovating properties feels like home for Luke Nicholls, who grew up with an active investor father ... and the hard yakka has certainly paid off, writes Amy Hamilton Chadwick.
15 June 2023
Luke Nicholls started investing early, building a rental portfolio while also growing a tech start-up that helps landlords manage their own properties. Buying and renovating properties feels like home for Nicholls, who grew up with a father who was an active investor, buying and flipping houses across New Zealand.
“When I grew up we often lived on construction sites, or we were going around doing up properties on the weekend, helping Dad out,” he says. “That was a big thing for me – it instilled in us the mindset of ‘hands up, not hands out’, of asking what I can do to help out instead of asking for a hand-out … my Dad is a bloody hard-arse!”
First property at 21
After seeing his father’s success, Nicholls was determined to buy a rental: “Property is the backbone of the Kiwi dream.” After leaving school, he worked five days a week while also studying entrepreneurship and management at university, in an effort to save up for a house while also launching his future career.
He didn’t have time for much else, but he was very happy to sacrifice the traditional university experience in favour of getting onto the property ladder.
“I always had a vision to purchase my first property as soon as I could, and start the rhythm and process of building a portfolio. My social life took a bit of a hit, but it was all worth it in the end when I was able to buy my first property at 21.”
He moved into the property and began renovating it. Once the renovation was complete, he rented it out – he still owns the property and it has been a lynchpin for his growing portfolio.
Along with building a rental portfolio, Nicholls has a tech start-up which helps landlords manage their properties.
Homes with potential
The strategy for Nicholls is a time-tested one: buy solid but run-down standalone family homes and renovate them. He’s a firm believer in buying the best house in the worst street, and looks for a strong “skeleton” that needs some love and attention. He buys across the wider Wellington region, including Lower Hutt, where he lives, and more central suburbs like Northland, Karori and Miramar.
His favourite type of property to buy? A 1970s-era three-bedroom weatherboard home on its own section. A typical renovation on one of these properties would include installing double glazing, a new bathroom, new kitchen, new carpet, new roof and a repaint. Renovating to that extent is a capital-intensive exercise, but he saves money by doing as much work as he can himself, often with the help of his tradie friends.
Over time the capital value of his earlier purchases “has grown quite significantly”, so despite recent price drops it’s a strategy that still stacks up as far as Nicholls is concerned.
Once complete the homes are often rented by families, or occasionally two couples.
“All my properties are freehold standalone properties – it’s my vision of what I grew up with. Four walls, a back yard, some privacy and a safe space,” he says. “In my opinion, every Kiwi deserves to live in a safe and healthy home, so it’s a privilege to provide this. Taking old unhealthy properties and improving them, transforming into a home, is a pretty exciting and rewarding process. It’s adding value to the community.”
Nicholls believes every Kiwi deserves to live in a safe and healthy home.
Seed of a good idea
Nicholls has always managed his own properties, and he has tried out several types of property management software in his efforts to make the job simpler and faster. In 2019, he was chatting to Aaron Rama (Rama and Nicholls have been friends since kindergarten). Rama is a technologist, and when Nicholls complained to his friend about not having a simple one-stop platform for managing his properties, Rama said they could build one themselves.
The seed for Keyhook was planted, and together the friends developed and tested the platform before it officially launched in August 2022. It’s a user-friendly app for storing documents, providing reminders for inspections, and even automatically generating ad copy that will appeal to prospective tenants.
Landlord clients also have access to a support team providing advice on a range of issues from maintenance to legal questions. It costs $4.99 per property per week ($259.60 annually), plus a $25 flat fee for arranging repairs and maintenance. That compares favourably to standard property management fees of 8 to 10 per cent, which averages around $2,200 per property per year.
“We’re able to do it at scale and automate it,” says Nicholls. “We’re onto something. I use Keyhook for all my properties and I save money by not paying a third party to do something I know I can do myself.”
Perhaps one of the most innovative features is the option for remote inspections. As the landlord, you conduct a pre-tenancy inspection that takes photos and videos throughout the property, guided by Keyhook. Then you have the option to ask the tenant to do a self-inspection. If the tenant is willing, they follow the same journey through the property, taking the same photos and videos, and the software compares the images to identify damage and notify you. Records are permanently stored and can be used to sort out any disputes.
“I like to do inspections myself until I have a good, trusting relationship with my tenants,” Nicholls says. “I do have a couple of tenants who do it themselves and I just do a once-a-year check-up to make sure they’re happy. Tenants really like this option because it’s less invasive, and you don’t have to organise a time to go into the house.”
Currently searching for his next project, Nicholls is looking for a bargain in the sub-$600,000 price range. He likes to finish working on one property and get it rented out before he moves onto the next one. The renovations usually take at least four months, so one new property per year is a comfortable rate for him. He recently missed out on a property he liked, but he’s prepared to be patient to get what he wants at the right price.
“I’m keen to find bargains or properties with a lot of potential that need a bit of TLC. I’m actively looking, but I’m quite picky.”
His borrowing ability has dropped slightly with the recent higher interest rates; prices are lower, too, but he believes property will still prove a winner: “I think that in the long run the value will obviously rise.”
The last year has been a challenge, with falling prices and rapidly rising interest rates, but that’s certainly not enough to break Nicholls’ stride. He sees opportunities rather than challenges in the current conditions.
“There are a lot more bargains out there at the moment, where people need to sell and there hasn’t been enough interest in the market. I think this is a great time to look at purchasing new property for an investor or a first-home buyer. I’m not recommending that you buy, but it’s an opportunity.”
Nicholls finds one new property per year – with a reno time of four months – is a comfortable rate.
Luke Nicholls’ top five tips for investors
Lower Hutt based investor Luke Nicholls has a few tips for other young Kiwis who want to get started in property investment.
1 Build a strong relationship with your mortgage broker
“They’re able to help advise you, and provide value over and above connecting you with a bank. Get someone on your side who you can trust, and who understands what you’re trying to achieve.”
2 Buy in areas where you feel confident
“I’ve got a couple of mates who keep telling me to [buy in] Christchurch, but I don’t like to gamble. I like to be certain, and know the area intimately, and all the council plans. I feel safe and confident buying where I know.”
3 Save money by doing as much work as you can
Renovations are expensive and tradies can be hard to pin down, so when you’re starting out it helps to do as much work as you can. Cleaning, painting and demolition are easy places to start, or improve your DIY skills to save even more money.
4 Live-in renovations can keep costs down
While renovating his first few properties, Nicholls lived on site, saving him rent and allowing him to work long hours doing up the house. Now he has his own home, and he bought a house that didn’t need work, which allows him to focus on his investments rather than spending weekends repainting his own place.
5 Don’t believe the fearmongering
It’s not easy to get into rental properties now, but that doesn’t mean it’s impossible, or that it’s not worth the effort.
“It’s doable. So many people have just given up. I definitely worked my butt off to purchase my first property, but it’s still doable.”