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Start Small, Think Big

Gurpreet and Kanwal Gill are just new investors, but their savvy strategy is underpinned by a passion for property and a commitment to learning, as Joanna Mathers discovers. Photography: Nicola Edmonds

By: Joanna Mathers

1 October 2018

Starting small and thinking big has been a successful strategy for a Lower Hutt couple on the path to investment succees. Gurpreet Gill and his wife Kanwal have only been in the game for just over two years, but they already have four properties in their portfolio and a real passion for investment.

Gurpreet (30) and Kanwal (29) moved to New Zealand nine years ago from India (they didn’t know each other at the time). They both came here to study; Gurpreet had an economics degree, and moved to Waikato to undertake a a graduate diploma in business, while Kanwal completed her Bachelor of Information Technology in Wellington at WelTec.

The pair met in 2014, but in the early days they had rather different goals.

“I always wanted to be a property investor. But Kanwal wanted a massive mansion,” he says.

“It was in Greymouth,” Kanwal laughs. “So it was affordable.”

It didn’t take long for Gurpreet to convince her that property investment was a better idea than a Greymouth mansion. He gave her a copy of Rich Dad, Poor Dad by Robert Kiyosaki, which she read in three days; “It was a real eye opener for me,” she says.

On The Ladder

With Kanwal on board, it was time to start strategising. They realised that the key was to start small. “We wanted to minimise our risk, not throw everything into an investment that could financially ruin us.”

By purchasing a property and living in it for a few years, they could take advantage of the lower loan-to-value ratio (LVR) and get their foot on the first rung of the property ladder.

Gurpreet has a website that sells liquor, and Kanwal works in IT, and they saved hard for a deposit on a small home. The first home they purchased was a Petone two-bedroom brick and tile unit, one of a block of eight.

“We didn’t know that Petone was going to become so popular, so it’s been a great investment. We paid $198,000 for it in December 2015,” says Kanwal.

‘You have to be savvy and proactive, it’s hard work, we go to open homes every weekend’ GURPREET GILL

Interestingly, Gurpreet didn’t actually see the place until the day he moved in.

“My work is based in Invercargill, so I travel a lot. I had seen pictures of the place, but only Kanwal had been there. I was actually pleasantly surpised.”

It took nearly two years for the couple to purchase their first rental property, but they were years well spent. They read up on property investment, went to seminars, and did everything they could to extend their knowledge.

One of the more expensive upskilling exercises they undertook was a Property Apprentice course in Auckland.

“A lot of people told us we were wasting our money with this, because it cost around $10,000 all up, including hotels and flights. But we have definitely made our money back – it was probably the most useful thing we have done when it comes to our education,” says Gurpreet.

Kanwal says there were a lot of “aha” moments during the three-day course.

“The lecturer would say ‘people make this mistake’ and we would look at each other and think ‘yep, that was us’.” says Kanwal. They actually had a deal on the cards back in Wellington when they were doing the course, but realised after they finished that the figures didn’t work.

“We pulled out of that deal. The main thing we learned was that the figures need to be right if you are to invest in property. Otherwise it’s too risky.”

Time To Invest

Armed with knowledge, Kanwal and Gurpreet purchased their first rental property in August 2017. The twobedroom unit was located in Upper Hutt, part of a block of ten, and a private sale.

The asking price was $125,000, but the seller was intending to do some renovations before they sold, so the Gills went in with an offer of $110,000 and told him to save himself the time of doing it up. He accepted the offer.

“All the issues were cosmetic,” says Kanwal. “We just needed to put in new carpet and paint the interiors. We spent less than $10,000 on the renovations all up.”

The unit had been renting for $200 a week before the couple bought it. It’s now renting for $270, a gross yield of 12.3%.

Their second rental purchase was a little less straightforward. The seller was asking $220,000 for the two-bedroom unit, but when the Gills did the figures they didn’t add up.

“We weren’t really interested in buying a two-bedroom place for that price,” says Gurpreet.

Coincidentally, there was an open home for a rental next door at the same time as the viewing. The Gills asked the property manager if she would mind them looking around. It was here they made an important discovery.

“All the units had massive living areas, and this one had utilised some of this space to create a third bedroom. The living area still looked big, and we realised the figures on the property we’d been looking at would be much better if it had three bedrooms,” says Gurpreet.

They decided to make an offer of $210,000, which the seller didn’t initially accept.

“We had a bottom line of 5.5% net return on our investment, which didn’t work if we paid the price he wanted. He actually did the numbers himself and told us ‘the numbers work’, but I said ‘they may work for you, but they don’t work for us’,” explains Kanwal.

After a few weeks, the seller agreed to their offer of $210,000, and by October 2017, they had their second rental property.

The addition of a third bedroom wasn’t a costly exercise. They sourced a door and windows from Trade Me; that plus the addition of a wall cost under $5,000.

This rental is currently bringing in a gross rental yield of 9.3%

The Gills’ most recent acquisition (a three-beddy in Kelson, Lower Hutt) isn’t a rental – it’s their new home – but it’s freed up the Petone property.

This suburb has been booming in recent years (it now has an average house price of $1 million plus) and they are currently getting an impressive 10.3% gross return on a property that cost them under $200,000.

‘The lecturer would say “people make this mistake” and we would look at each other and think ‘‘yep, that’s us’’’ KANWAL GILL

Gurpreet and Kanwal have no interest in trading; buy-and-hold is their preferred strategy. They are currently investing most of their spare time in learning the ins and outs of renovation, something they admit has not been their strong point.“We’ve made a few mistakes along the way,” says Kanwal.

“But it’s something we are keen to learn more about. We’re slowly getting there.”

One of their key philosophies is you don’t find bargains, you make them.

“You have to be savvy and proactive. It’s hard work, we go to open homes every weekend,” says Gurpreet.

They work as a team when it comes to all their investments. As Kanwal works full time during the week, she can’t get out and about, so she’s the Trade Me expert. Gurpreet runs his own business, so he can go and visit the properties she finds online.

“Often Kanwal will give me an address and that’s all I know about the place until I arrive,” explains Gurpreet.

They also support each other during the negotiation process; if one of them is feeling a little off, the other will take the lead. It makes for a formidable team.

By starting small, investing time and energy in property education, and sticking to their figures, the Gills have quickly developed a property portfolio that will provide them with a great foundation for future growth. They have some simple advice for people wanting to get into the investment game.

“Be humble - you don’t have to rip someone off to get a good deal. A great deal is when it works for both parties.”

Gurpreet Gill's Top Tips For New Investors

  1. It’s never too late to start, the best day to start is today.
  2. Invest your time and money in education, it is better to learn from education than from your mistakes.
  3. Join your local Property Investors’ Association, it not only puts you in touch with similar minded people, but also gives you access to discounts from major retail chains.
  4. Find experts in the market; real estate agents, mortgage brokers, accountants, lawyers and mentors to help you succeed.
  5. Do your numbers and stick to them; don’t let your emotions take over.

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