Paying off your home in your twenties seems an unachievable goal for the majority of millennials – but tenacious New Plymouth couple Kristy and Richard Kelly did just that. She was 26 and he was 28 when they achieved that first audacious goal, and they’ve kicked a few more big ones since then.

At the October NZ Property Investors’ Federation Conference they won the 2019 Landlord of the Year award, proving that good land-lording and financial success can go hand in hand.

It was the perfect way of measuring themselves against their aim to be “not just good landlords, but great landlords” and it shows just how far they have come since they bought their first property, when Kristy was only 19 years old. The New Plymouth property was purchased as a home and although they took out a 30-year mortgage, they set themselves a goal to pay it off in just 10 years.

“We actually paid it off in seven years,” says Kristy. It was simply a matter of living on 40% of their income (she works in accounts and he trained as a joiner, as well as refereeing first-class and sevens rugby) and eschewing the finer things in life.

“We had simple cars, we didn’t go out to expensive restaurants, or concerts or have extravagant holidays. We just lived simply and all that money went on the mortgage.” Kristy says it helps that both are savers rather than spenders, and denying themselves small luxuries meant they were able to start and quickly grow an investment property portfolio.

Time To Buy

During a New Year’s Eve holiday in Papamoa in 2014, they investigated the local market and saw that the prices hadn’t risen in 10 years, and there was a lot of new infrastructure planned for the area.

They acted quickly and purchased a property in Papamoa for just $265,000 – predicting that the boom starting to happen in Auckland would find its way down to the Bay of Plenty. They were, of course, correct and only five years later their property is worth $510,000. Shortly after, in 2015 their first home was sold and they purchased a much larger and newer home in Bell Block, Taranaki which they set about paying down. Within three years they had paid off that small mortgage too, during which time they decided to buy a smaller unit to live in, while renting out the larger property.

The smaller, granny-flat unit was in original 1970s condition and they lived in it and renovated it at the same time, with Richard’s joinery skills coming in handy.

The renovation created more equity, and combined with the increase in value of their Papamoa property, and paying down mortgages, they were able to purchase twice in 2016.

A fair bit of research into regional markets was necessary, as they wanted to diversify geographically,

and they discovered that Palmerston North hadn’t yet had the value increases that other regions had experienced. It had a great base of tenants and while the prices were low, the rents were comparatively high.

The other bonus was that it was close enough for them to be able to manage rentals there themselves. They snapped up a three-bedroom house for $228,000 and were right about the great tenant pool – when they went to tenant it they had around 90 applicants.

“We thought ‘how about we purchase another one?’ So within the month we purchased another one,” says Kristy. The second property was purchased for $195,000, and was tenanted immediately from the pool of tenants who applied for the first property.

The Palmerston North market has since seen significant value increases and the properties are now valued at $340,000 and $300,000 respectively. Following the two purchases, the couple then focused on debt reduction and maintenance throughout 2017, before “going again” in 2018.

This time they bought a block of three, two-bedroom flats in New Plymouth, with a high yield. “That was quite a targeted move,” says Kristy, “we wanted to get into something a bit different.” Around this time, they sold the Bell Block property for $600,000 (almost $180,000 more than they had purchased it for three years earlier). Since then, they’ve purchased a standalone unit on a cross-lease section, also in New Plymouth.

Top Tips For Landlords

For Kristy and Richard Kelly living their values is crucial to their success as landlords and investors. They share their key values:

For every tenant

• All properties are fully insulated, many over the minimum requirements

• All properties well heated

• Safety-stays on windows

• Good quality smoke alarms

• Door locks changed in between every tenant

• Land map showing water mains provided to all tenants on arrival

Reward good tenants

• Christmas gifts every year

• Leaving rent under market value for outstanding tenants

• Being flexible to tenant requests

• Allowing pets

Live beneath our means

• Live on 40% of our personal income, put 60% into the business (either as investment or debt reduction)

Be innovative

• Use technology

• WhatsApp groups for each property to communicate easily, instantly and for free

• Xero tracking categories for each property

• Offering help with community services card application

Work hard

• Do maintenance and renovations ourselves to save money and ensure quality is up to our standards

Treat this as a business

• Comprehensive financial analysis in Xero, tracked per property

• Bank accounts reconciled daily

• Property profiles, inspection checklists, inspection reports provided to tenants

• Financial forecasts prepared and updated monthly

We strive to treat our tenants exactly as we would like to be treated and treat their homes as if we were living in them ourselves’ - KRISTY KELLY

Better Landlords

Kristy and Richard manage all of their properties, bar the Papamoa property due to its location. It’s important to them to have excellent relationships with their tenants.

“We strive to treat our tenants exactly as we would like to be treated and treat their homes as if we were living in them ourselves.”

They communicate with their tenants primarily through the WhatsApp app, because it’s free; it acts as a group chat so all their tenants can receive and send messages and be informed, and everything is in writing.

They like to sweeten the deal for their tenants by allowing pets on a case-bycase basis; letting them make additions to their properties (for example, putting in their own gardens); and giving them gifts at Christmas time.

They try to resolve all disputes by communicating first with their tenants, but they did have one dispute go to the Tenancy Tribunal last year.

The tenant had stopped paying rent without warning, and at the three monthly inspection, which was due at the time, the landlords and tenant agreed to resolve the issue, with the tenant deciding to vacate. She also agreed to have some damage to the property fixed.

However, at the final inspection the damage was not fixed and there was additional damage. The couple took the tenant to the Tenancy Tribunal and rent arrears, the cost of fixing the damage and reimbursement for the costs of cleaning the property were awarded to the landlord. But due to their “firm and fair” approach, the relationship with the tenant remained intact. They organized reimbursement with the tenant through manageable fortnightly payments. “We wished [her] well and provided an honest reference for [her] for the next house [she] was applying for.”

Better Goals

The pair have had a completely different challenge late this year, welcoming baby daughter Laine, who is now two months old and keeping them pretty busy. However both are still working and naturally there’s plans to pay down their mortgages even further.

They’re not actively looking for property currently, but if something comes up they’ll consider it.

It’s probably about time they had a breather; since they started investing in property in 2014, they have achieved some pretty big goals. They’ve acquired $2 million in assets, and Kristy estimates around $1.4 million in equity.

But the fiscally conscious couple have no plans to coast along. Rather, they have set themselves some pretty lofty goals: they want to retire on a passive income by the age of 50, and in the meantime they want to achieve $2 million in equity by the time they are 45 years old. At just 35 and 37 years old, they look well and truly on track to achieve this.