Sorted For Retirement
This couple haven’t long been in the game, but an early retirement is on the cards, writes Amy Hamilton Chadwick.
1 March 2018
If they stand at home, in the right spots in the garden, Geoff and Dana Walsh can see all three of their rental properties. Each one is within 200 metres of their house – making managing the tenancies a little bit easier for the couple, who were runners-up in the 2017 Landlord of the Year Award.
“We try not to be overbearing, but if the tenant rings up and the tap washer’s stuffed, I can be around in five minutes,” says Geoff. “If I’ve forgotten a tool I’ll just go back home and get it.”
Walsh knows his way around the tools very well; he worked as an Army mechanic most of his life. Having joined as a cadet, back in 1989 at the age of 17, he has lived at army bases all across New Zealand, moving 33 times. He has done three tours: one to Bosnia in 1995 (“that was a real education”) and two to East Timor in the early 2000s. Having spent 26 years in uniform, he’s now off the tools and in an office job, but some of those skills are still being put to good use for his tenants.
While Geoff takes care of maintenance and inspections on the rentals, Dana is in charge of doing the accounts and finances for the properties. The couple met in 2007 at the Hutt Valley Gun Club.
“Yeah, it was the last place I expected to meet someone,” laughs Geoff. “I was into clay target shooting and so was my [now] father-in-law. Dana grew up around it, got her licence and decided to give it a go. I got paired up with her to show her the fundamentals.” Already an experienced florist and business owner, Dana took a break after the birth of their son nine years ago, then built a successful online florist business from home, beautifulflowers.co.nz.
It was 2010 when the couple decided to have a go at rental property, helped along by a boost from Geoff’s many years of military service. When he reached his 20-year milestone in the Army, his superannuation fund paid out and that lump sum allowed the couple to pay off the mortgage on their home. That left them thinking about how best to put their money to use in the future. Dana’s friends and family members had told them about getting great returns from rentals, so they set out to buy one for themselves. They wanted to buy rentals that they would be happy to live in themselves, providing quality accommodation and a great service as landlords.
“From my time as a tenant I thought, ‘what is it that I would look for?’” Geoff says. “What we wanted was professional couples or families because they generally don’t move. What do they want? They want to be close to the shops and the good schools, in a good area, where neighbours are not on top of each other.”
‘We try not to be overbearing, but if a tenant rings up and the tap washer’s stuffed, I can be around in five minutes’ GEOFF WALSH
The couple bought a classic Kiwi home – a three-bedroom standalone house and garage on a flat fully fenced section in Upper Hutt. They paid $300,000 for the property, “a very good price,” Geoff says, during a lull in the market in 2010. It originally rented for $380 a week but has increased to $450 per week for a net yield just under 7.4%. So far, this property has been their best buy. It’s also been the source of their biggest lesson, about carefully vetting tenants whilst also balancing the statistics, with their own gut instincts.
“When we got our first rental, the advice was, ‘As long as they’re paying the rent it’s all good’. Our property ended up going from an all-in-one tenancy with a pair of girls, to three brothers living there. One boyfriend moved in, then one girl moved out. At each stage they asked, and we said, ‘Yeah, alright’. Now we would definitely think twice.”
That ended up at the Tenancy Tribunal in a claim for arrears and damages, and it also changed the way the Walshs check prospective tenants and set their rental agreements.
“We’re very specific about the number of people allowed in the dwelling, and there’s no subletting. After those guys rented with us, they rented with the Crown at Rimutaka,” Geoff says dryly. “It makes it very difficult to get damages out of them.”
Sometimes, though, it goes the other way. One single mum with three daughters PROFILE DANA & GEOFF WALSH applied for one of their rentals and when they ran her name through Tinz, “it came up with all the red flags you could have. We checked her out thoroughly, called all her referees, and it turns out she’d had a business with her husband that went bust and that impacted on her credit rating. She was a model tenant, never missed a payment, took really good care of the house and only moved out because it was too small for her growing family. You have to look at each person as an individual rather than a statistic.”
A Growing Portfolio
Three years after buying their first house the Walshs bought a second rental, then a third in 2014. The next two are the same as the first: classic three-bedroom standalone homes on flat fully-fenced sections, all within a short distance of their home. Each house was improved with painting, insulation and heat pumps. Tenants appreciate the effort – the first property now has a long-term tenant and the other two both have their first tenants still in place.
‘We changed banks a year ago, got better rates and knocked 10 years off the mortgages’ GEOFF WALSH
Their strategy when it comes to the figures is for the property to be, “pretty close to being able to pay the mortgage with some fat for interest rate changes”. Their portfolio is very slightly negatively geared, but only because they’re aggressively paying down debt to achieve their goal of having all of the properties mortgage free by the time Geoff retires.
“A one-for-one exchange of income is the plan,” he explains. “We’ve got over $600,000 of equity available. We changed banks a year ago, got better rates and knocked 10 years off the mortgages. We use revolving credit so if something pops up we can dip into that if we have to. We’re not eating dried noodles around a lit candle, but we also don’t want to be running in the red.”
They’re picky about their buys, though. Since their 2014 purchase, Geoff and Dana have walked through 100 properties but not found one at the right price. Upper Hutt has “had a bit of a boom” in recent years with out-of-town buyers providing strong competition for locals. They’ve got their eye on something promising right now, though, branching out from their other purchases. It’s a commercial space with two flats above it, so they’re excited about the prospect of “something a wee bit different”. It’s also a full two kilometres away from home, so they won’t be able to see it from the garden.
Retirement On The Horizon
Living and investing in Upper Hutt has worked well because it’s allowed the Walshs to have a detailed understanding of the local market. They’ve also become involved in the Wellington PIA, with Geoff now on the executive team. It’s been a fantastic forum for learning and meeting other investors.
They’re in this for the long haul: “First off it’s our retirement plan, and I’m planning on retiring at 60. Then, when we get too old for it and we’ve had our bit, we can pass it on to our son and maybe he can live in one of the houses. By the time he’s old enough houses could be pretty expensive. There are many options. So, unless they stop performing, the whole portfolio is to hold and pass on. This is a way to provide him [our son] with a brighter future.”
How To Do A Tenant Check
- Start with a check on Tinz (tinz.nz), Geoff Walsh recommends. The site pulls together information on a tenant from 15 sources, from Tenancy Tribunal orders to credit checks, driver’s licence verifications, home ownership details, debt recovery services and more.
- Check that the tenant’s referees are actual people – are they on Facebook? Do they have a social media or online presence?
- Call all the referees. It’s tempting to call one, get a good report and not bother with the others. But it costs you virtually nothing to make the call and it helps you ensure you’re protecting one of your most valuable assets.
- Take your gut instinct into account. It’s just as important as doing your research. A tenant can look good on paper but if you get a bad feeling, it’s better to say no – and vice versa.
- Check all new tenants, before you let them move in. That includes boyfriends, siblings or other relatives of your current tenant, even if you trust the tenant.
If you’re called about a past tenant, and asked for a reference, be honest, adds Geoff: “There’s a duty of care to be honest. I’d be gutted if somebody sang the praises of someone who ended up negatively affecting our portfolio.”