Keeping The Property Dream On Track
A couple have proved how good team work and nerves of steel here and overseas can deliver impressive portfolio results, writes Joanna Mathers. Photography by Jared Dobbs.
31 March 2022
Sidecar racing isn’t for the faint-hearted. Hurtling around tracks at breakneck speeds, it features a motorbike rider and a “swinger” who lies flat in the sidecar, leaning out around corners to keep the bike balanced. The swingers don’t have seatbelts or roll cages and, as they lean out, the road races underneath them.
In the mid-1980s, Kiwi Cliff Tolley was involved in this extreme sport. The motocross champion had moved from Napier to the United States to further his career, and took up sidecar racing when he arrived. And it was here, on the sidecar circuit, that he met wife-to-be, Juli Anne (Juli).
“She chased me down because I was a star,” Cliff laughs over the phone from Tauranga.
Juli adds: “He was really good. We had mutual friends and I knew people involved in the sport. We’ve now been married for 30 years and have been investors for most of that time.”
Property investing is also not for the faint-hearted. But Cliff and Juli have made it work. Investing in the US and New Zealand, they’ve shown how hard work (and nerves of steel) can achieve excellent results.
The Tolleys investment journey began with a set of cassettes and a Walkman.
It was the early 1990s and they were married and living in Los Angeles: Cliff was a mechanic, and Juli was a trainer in medical software. They had the good fortune of acquiring their first house via the generosity of Cliff’s boss ... even though they had just $5,000 between them.
“His boss needed to sell his home and move somewhere bigger,” Juli says. “But as we had so little money at the time, he carried us for a $40,000 second loan so we could qualify for a loan from the bank.”
This act of generosity saw the couple moving into the 90m2 home in a “not great” suburb of Los Angeles. “There were actually drive-by shootings taking place in the suburb,” says Cliff.
And around this time they started listening to property investment cassettes given by a friend. “We talked to each other about it and said, ‘we could actually do this’,” says Juli.
As a first step they contacted a local real estate agent they knew, asking if they had any potential investment properties on their books. They did – a property that was under contract that looked like “falling over”.
Again, they had little money (“only $9,000 between us,” Juli shares). But this particular property had been repossessed by the bank, and “the bank was desperate to get rid of it”.
They were given the credit they needed and landed themselves a duplex in San Pedro, for US$113,000. “It was cash positive from the start,” says Juli.
“And we had stars in our eyes,” laughs Cliff.
They had the investment bug, and they had some good advice. An older associate of theirs, who was a successful investor, took them under his wing. “He introduced us to the firm of ‘OPM’, ‘other people’s money’,” says Cliff.
“He explained that we had already been using this, firstly with my boss who lent us the money, and then with the bank. He told us we needed to think of other ways to utilise ‘OPM’.”
The Tolleys were keen to maintain their momentum, so they decided to invest in another duplex, this time in Long Beach. But this would prove to be tricky. Nature intervened and sent a once-in-500-year storm their way.
“I remember I was in the Oakland airport, waiting to fly back to Los Angeles after a work trip,” says Juli. “And Cliff was on the television, helping rescue tenants after the flood.”
The downstairs of the duplex was completely flooded. The tenant had to move upstairs while Cliff fixed the damage. After a huge clean-up the couple decided to move into the duplex to finish repairs, which took a few years to complete.
“We arranged a ‘rent-to-buy’ arrangement with a roommate we had in our first home,” says Juli. “But this didn’t end up working out and we sold the house later, before moving to Valencia, north of Los Angeles to raise our family.”
Place To Invest
The New Zealand component of their property story would soon begin. Cliff was working for United Airlines and Juli had a growing career with Oracle, and both jobs gave them a bit more disposable funds to play with. “He told me it was the place to invest, that he was having great results here.”
The Tolleys had always planned to move to New Zealand at some stage: it was Cliff’s home country after all. So, investing in NZ made sense.
In the late 1990s they invested in two Kerikeri properties: a three-bed and one bathroom, and a four-bed and one bathroom. A third property in Kerikeri would be purchased in 2003.
They were negatively geared, but with a favourable exchange rate ended up with US$500 every month, which they used to top up their loans and save. While not a huge amount of money, it was enough to get them ahead.
But there was an issue investing remotely and getting the right people to manage the properties from a distance.
“We really did struggle to find anyone suitable,” says Cliff. This was pre-smartphone and at one stage the Tolleys had to send digital cameras by post to NZ from the US. But it gave them an opportunity to work out how they would like their properties managed something that would prove invaluable in the future.
‘I think New Zealand is slowly getting used to the idea of apartment living’ Juli Tolley
“We arranged our own structure and explained to the managers in New Zealand how it would work,” says Juli. It wasn’t always successful, but it was good training for their future in the industry.
Although they were still based in the US, they “went crazy” in 2005 and 2006, buying properties in NZ: three in Napier (Cliff’s old hometown) and three in Flaxmere.
Cliff explains that they had a property manager helping them identify opportunities; properties that were being sold by investors This connection provided them with a good tap of information on what was available.
“They would do research for us and send us photos,” says Cliff. “It was really useful having people on the ground.”
By 2010 the couple (plus their two children Tristan and Margaux) moved to Tauranga from the US. Juli’s mother had passed away, and they felt it was the best time for them to make the move. They sold all their properties in the US and made a bold decision: to buy the Tauranga franchise of Quinovic.
“Our properties were managed by two different Quinovic franchises and we knew their systems. We spent time with some of the franchisees, we felt it was right,” says Juli. “It was really scary leaving our good salaries and lifestyle, but we were ready and knew it was time to dedicate ourselves to property full- time.”
The property management business sits perfectly alongside their investments. And there have been more of them, including another duplex, this one nearby in Tauranga. To free up the money they had to sell the Flaxmere houses for the same amount they bought them for.
“The Flaxmere houses were cash-flow positive, but they were costing a lot in maintenance and we knew we could get better tenants in Tauranga,” says Juli. “We actually sold them to Graeme Fowler. It was a good experience to work with an investor directly, we both knew what we wanted out of the deal.”
They sold the Flaxmere houses, and purchased the Tauranga duplex for $520,000. They are now valued at $1.3 million.
They purchased another property in Dunedin when son Tristan went to university there. Bought for $455,000, it was rented out by the room, and positively geared. But it had water issues and was located in a gully: this resulted in $80,000 worth of repairs. The decision was made to sell, and in 2019 they sold it for $600,000.
“We were surprised and came out with $60,000 profit,” says Juli. “This helped pay down the debt on the other properties we own.”
The Tolleys diversified into commercial in 2019. With partners they purchased retail stores in Kaitaia and Gisborne, and both are cash-flow positive.
Now with six residential (and the commercial properties) across the country, the Tolleys have their eyes on the future.
They have always aimed for a minimum 6% yield for their properties (“this is still our aim,” says Juli), and the ultimate plan is for a portfolio to fully support them in their retirement.
While still champions of residential property investment, they admit the rules and regulations imposed by the government make it harder than ever to invest.
But they have plans for a new direction.
“In the United States, apartment living is really normal. In Los Angeles I lived in an apartment, and I think New Zealand is slowly getting used to the idea of apartment living,” says Juli. “We be keen to get involved in a project to build an apartment building or townhouses.”
Until then they are encouraging a new generation of investors. “We have been involved in motocross locally, training some young people in the sport. Some of these kids have grown up and are now investing in property themselves.
“They are making it work: investing with others, making sacrifices and saving for deposits. It’s possible for young people to become property investors, it’s just about being creative.”