Residential property, commercial property and a property business – Greg Watson has Palmerston North covered when it comes to real estate. Born and bred in the Manawatu, he loves his city and he knows it well.

“I’ve lived in Palmerston North most of my life, I call it home and we love the lifestyle,” Watson says. “It’s a great place to live and a great place to raise a family. From an investment point of view, I like the stability. You get relatively constant but conservative capital gains and relatively good rates of return.”

Watson wasn’t looking for a job in property when the opportunity presented itself. In 1996, his father Ken, a former banker, and his brother Marcus, thought the time was right to start a real estate company in Palmerston North and asked Watson if he’d like to be involved. It was too good an offer to pass up, he says, and once Watson Integrity got off the ground he took over the property management side of the business. The profits from the company were initially invested back into growing the business, but by the early 2000s the three Watsons decided to put their money directly into the property market.

Together they bought a pair of twobedroom stucco-clad units for around $80,000 each, spending a small amount of money to tidy them up. By 2004, they’d increased in value enough to allow the three Watsons to buy another two units, each for $95,500, and a threebedroom house. Those early properties demonstrated the leveraging potential of property and introduced Watson to the upsides of units: low maintenance, small gardens and strong rentability.

In the meantime, Watson had met his wife Sandy who was already on the property ladder in her own right. In 2003 she had bought herself a low-maintenance brick-and-aluminium unit on a small section for $105,000.

“I thought she’d paid too much, but history tends to make a fool out of you,” Watson laughs. The couple moved into his house and started renting hers out for $180 a week. They’ve spent a small amount of money on it over the years to repaint, replace the bathroom and put in a heat pump and extra insulation. It’s currently rented for $290 a week and valued at around $270,000. That house has been Watson’s best buy, thanks to his wife, and the equity has been a huge help in kick-starting their more recent investments.

‘Life’s busy for everybody, it’s easy to let a few years go by and you look back and think ‘‘If only I’d bought something’’ GREG WATSON

In 2012, Watson, along with his dad and his brother, decided to sell the five properties they jointly owned and put the money into buying rent rolls to grow the business. The two original stucco units sold for $160,000 each, while the second pair of units went for $146,000 and $154,000; the house had increased in value by around 50%. The trio also purchased the centrally-located building out of which Watson Integrity operates: “For many years the landlord wouldn’t sell, but eventually he did. We’ve built up quite a lot of equity in the building, we have a tenant upstairs, and it’s been a great investment in its own right.”

With their two children at school, last year Greg and Sandy Watson decided to expand their rental portfolio. They went to their broker and found out how much they could borrow without stretching themselves too far; “my general approach is somewhat conservative, with a longterm outlook”. They decided to look at two and three-bedroom properties that were reasonably central to Palmerston North, and that would allow them to add value. With first home buyers out in force, they found all the three-bedroom homes were pushed beyond their buying power.

“Palmerston North and Manawatu, like most of the regions, are very busy at the moment. After the GFC, it stayed flat from 2008 to 2015. Now we’ve been finding there’s a lot of competition, with usually around four offers on each property. Part of the challenge is that we’re up against both investors and first home buyers – and the first home buyers, if they’ve missed out on a few, get emotional. We’ve missed out on half a dozen properties.”

Eventually they found a two-bedroom brick-and-aluminium unit on a small section, in a good area with plenty of tenant demand. The 60m2 unit cost $210,000 to buy and they borrowed an extra $20,000 to do some renovations: “We’ve been having a lot of fun in the last few weeks, repainting throughout, curtains, heat pump, all the flooring, the insulation and the bathroom. The kids have been helping out too, ‘supervising’ me as I paint cupboards.”

He says the property will rent for $300 a week when it’s done and there’s a tenant all ready to move in. One of the Watson Integrity team will be managing it for him – Watson says he’s too much of a softie to manage his own properties. It will be cashflow neutral and Watson takes care to calculate exactly how much he can afford to spend without it eating into his family’s lifestyle. The most recent property he bought, also a unit, was admittedly at the top of his budget, bought for $250,500, but it still squeaked into contention because of where it was situated.

“It’s in an amazing location with no work to do, so a complete contrast to the other one. The goal is nice growth over 10 years plus, and it will rent for $280 to $300 a week,” he says. Buying, rather than waiting, is part of the plan: “Life gets really busy for everybody, it’s easy to let a few years go by and you look back and think, ‘If only I’d bought something’. If the right property comes along I wouldn’t let it go by.”

He would like to buy another property this year and to keep building up the portfolio while simultaneously growing the property management business. Ideally, Watson would diversify beyond Manawatu at some point, but for now he’s still enjoying the steady successes of the region.

“We’re quite excited to be taking steps to provide for our kids for the future. When you’ve got property, your options are widespread. You can keep them, sell them, or borrow against them – and as the equity grows, you can continue to purchase. Property works really well as an investment for the future.”

Greg Watson's Six Top Tips

1. Buy As Soon As You Can. I remember in 1998, we auctioned a property in Woodville, which is a village close to Palmerston North. It was a three-bedroom home with a single garage and it sold for $30,000 – even back then that was cheap. It’s worth about $200,000 now. I know everyone has stories like that, but if only I’d bought that then.”
2. Talk To Your Mortgage Broker. “What I’d advise anybody to do, is to talk to your mortgage broker and see what your borrowing situation is. See what you can do with your equity. We should have done it earlier – we were surprised by how much we could borrow.”
3. Consider Interest-Only. “Everyone’s situation is different, but we’re on interest-only loans. Given that we’re looking at a 10-year plus timeframe, it made sense to look at interest-only, because it meant the trade-off between repayments and rent is more favourable.”
4. Put In Clean Offers. “If you can get your finance lined up and prearranged you know you’ve got what it takes to put in an offer. Our offers have been fairly clean and uncomplicated, no finance clause. When you present your offer, which could be slightly lower if it’s less complicated, you might be the offer chosen. You’re removing a barrier for the vendor.”
5. Cut Down Your Vacany Time. “We’ve been renovating, there’s been stuff everywhere, but we’ve still shown tenants through and we’ve got someone lined up to move in. If you’re doing renovations, don’t let that stop you from finding tenants, you can reduce your vacancy times.”
6. Buy Landlord Insurance. “The biggest heartaches I see are bad experiences with a tenant either not paying rent or causing damage at the property. What underpins pretty much all of those conversations is lack of insurance. As an investor myself one of the best pieces of advice I can give is to get specialist landlord insurance. Don’t try to scrimp and save – the right insurance is the difference between being $300 out of pocket and $3,000.”