The Privilege Of Being A Landlord
‘My investment, your home’ is a mantra Natasha Middleton has lived by for 17 years. It’s part of the reason she’s this year’s Landlord of The Year, writes Laine Moger.
1 November 2022
Very much a DIY investor, Natasha Middleton does house renos, and property management, herself.
Middleton is extremely ‘hands on’ with all her renovation projects.
For Natasha Middleton, being a landlord is more than just about owning property. She sees it as a privilege, a rare entry into the lives of others.
“You see a part of people’s lives you never expected to be a part of … you’re talking to them and you see how they live. It’s a humbling experience.”
It’s this emphasis on people that won Middleton the Landlord of the Year award at this year’s New Zealand Property Investors Federation conference in Palmerston North. She and her husband self-manage their 10 properties (nine in Hamilton, one in Putaruru) and have self-managed for over 17 years.
They bought their first home in 2001; their first investment property in 2005; and have been expanding ever since. Middleton laughs as she retells the story of how her husband became an investor.
“There was this four-bedroom house and it was filthy but bulletproof. I rang him up and said: ‘I’m putting an offer on a property. Can you go around and sign the sale and purchase agreement’ … he hadn’t even seen it. That’s trust.”
Middleton says there was never any question of if she would be a property investor. She can’t remember where the idea first came from, but it’s “always” been a plan, right from high school.
Her husband wasn’t as keen out the gates. “There’s generally a leader and a follower in a relationship with these things,” she says. “I wouldn’t say he’s been dragged along. He sees the merit in it [investing] for sure, but I definitely drive it.”
Her investment strategy has always been “very straightforward”.
“We purchased some average properties, did them up ourselves, and rented them out.”
But straightforward can often be the best option with investment, as her success has proven.
THE ‘RABBIT WARREN’
Middleton’s first investment property was a “rabbit warren” of a house, with a whopping nine bedrooms. “It was a great property for learning but not the best property for first investment,” she says retrospectively.
It was a leasehold house purchased for $200,000 and gave a “ridiculous return”, but there just wasn’t a high demand for the area it was in. It took 12 months to renovate, after which she was lucky enough to rent out all nine rooms to a group of migrants employed by the same factory under one tenancy.
“So, for about 12 months everything was fine,” she says. “But then it got more interesting.
“Room-by-room rentals don’t work unless you get the right mix of people. After the group of overseas workers left, we re-thought our approach and tried to rent it room-by-room. It was a nightmare. “We had drug issues, police visits, holes in the walls and the whole backyard dug up into a garden.”
This has been one of the few properties Middleton has sold, and she still struggled with the decision.
“Landlords aren’t supposed to get attached to properties, but I do,” she says. She ended up selling it last year for $650,000 to a first home buyer when changes to boarding house laws became too arduous. “Lots of lessons there,” she says.
And there have been many purchases, and lessons, since that inaugural nine-bedroomer. Nine years ago they bought a five-bedroom house in Nawton they planned to live in, for just $280,000. But circumstances changed and they rented it out for $400 a week.
“This was a rookie mistake. We had missed the mark on market rent … our tenants told us to put up the rent when they left,” she laughs.
Being a responsible landlord and building trust with tenants is important to Middleton.
“Since then I’ve learned to annually review rents and check against the current market. It’s now rented for $620 a week, but if we split the property and create a house plus minor dwelling we could improve cash flow by an additional $200 a week.”
Another interesting opportunity arose five years ago, in Putaruru, when they bought a brick three-bedroom home on 1000m2 with a rural outlook for their extended family “as a bit of an insurance policy”.
During the sales process the vendor discovered one room had meth contamination (“which freaked everyone out, including the vendor”) but as Middleton already had experience with meth contaminated properties, and knew how to remedy them, they weren’t phased.
They bought the property for $318,000 and remedied the meth issues.
“Weirdly it came with a ‘free’ block of land, 6000m2, zoned residential, separate title. Thank you! Although the home is rented at a good market rent of $450 a week now, it’s the potential that holds the key.
“We are currently investigating what we can do with the block of land and looking to put a relocatable home on the 1000m2 property (two homes, two incomes).”
‘Being able to talk to tenants builds trust, and makes dealing with problems much easier’
While the renovation successes have been huge, it’s being a responsible landlord that Middleton cares about most. Despite self-managing a sizable portfolio, Middleton works full-time as a civil engineer for an energy company.
It’s a big workload, which would make anyone wonder why someone would choose to put themselves through both. But Middleton says she just has an affinity for it, otherwise she would have passed it on.
It does mean inspections can be tricky to fit in, especially for Middleton who prefers to do inspections while tenants are home as a part of her overall approach. Generally speaking, she’ll tee up the properties on a weekend when the tenants are home so they can chat.
“Being able to talk to tenants builds trust, and makes dealing with problems much easier,” she says. “Giving that feedback to them is just as important as what they can tell you.”
A simple “I’m really happy with the way you are treating the property, thank you” goes such a long way, she says.
She has an understanding with all her tenants: “This might be my investment, but this is your home” which extends to all family members – including the furry kind.
Back in 2005, when she started investment, the Residential Tenancies Act was a four-page, double-sided pamphlet you could buy at the local book store, Middleton says. “Now, it’s a 30-page document.”
Regulations have been the biggest game changer in the business because it makes it a lot more complex, she says. Some law changes have greatly affected Middleton’s approach to her landlord responsibilities. One in particular is the removal of the no-cause 90-day termination notice, which restricts giving notice to tenants for renovations or incoming family members only.
For Middleton it means she’s not able to give as many people chances as she would have liked.
“There is a lady in one of our properties, a single mum to three kids, who was living in emergency housing for two years. She was just about in tears with the news that she had a house for her kids. It’s such a privilege to be able to provide that for someone, and she’s a fabulous tenant,” she says.
However, it’s unlikely she’d be able to offer the same opportunity to someone in the same situation now because the risk would be too high if things went south.
As much as she loves it, being a landlord isn’t always easy, she admits. Especially for someone who’s not a big fan of conflict.
“I once sat next to a large fella – who may or may not have had gang connections – and told him to pay his rent or he would have to leave,” she says. “It’s easier to hide behind emails. But if you want results you have to pick up the phone or sit down and chat.”
Middleton says she likes to give tenants a go and has taken on some interesting cases. “Sure, some let you down, but not all.”
For instance, there have been a “few whoopsies” with rents when tenants’ circumstances change, but there is support, such as LinkPeople and Emerge Aotearoa, to help tenants improve their situation through budgeting advice and support to keep their tenancy.
“It’s a win for us too. It gets the rent paid and provides a stable place for the tenant to live,” she says.
“There are also systems and resources like myRent and Tenancy Services available to help self-managing landlords keep track of their business and obligations.” Middleton struggled with the idea of applying for Landlord of the Year, but her decision to go for it was to shift the negative rhetoric away from the "greedy landlord” stereotype.
“There are so many caring landlords doing loads for their tenants. We do provide good homes and security,” she says.
Judges found she was a caring landlord who gives “generously and thoughtfully” for tenants in need and went above and beyond for her tenants and their pets.
“Sure, we [landlords] invest in property because we know there won’t be anything for our retirement. But in the process we provide warm, dry homes for families and we are employing tradespeople to keep up the maintenance,” says Middleton. “Those are all amazing community contributions to be a part of.”
EYE ON THE FUTURE
Middleton says they are currently reviewing their portfolio because some of the yields are now really low. “We have used the Steve Goodey spreadsheet and assistance from iFindProperty to re-evaluate where we are at.”
They have also pre-ordered cabins, where appropriate, mainly to offset the interest non-deductibility rules, and they are working through renovating the tired homes and keeping rent increases steady to stay in touch with the market.
“Our key strategy has been to ferociously pay down debt, which has worked, but it’s not the most efficient vehicle and there are other ways,” she says.
“Our current portfolio has a range of gross yields all in the 3-5.5 per cent range. This isn’t good enough anymore and we are looking to offset or swap some of these with higher yielding properties, ideally 10 per cent plus yields, or possibly some commercial options.”
TIPS FOR SELF-MANAGING
1) Ensure regular, researched annual rent increases that your tenants know are coming. It keeps your rents up-to-date and tenants will let you know of issues without fear of a rent increase. It also stops you feeling guilty if its a procedural, expected aspect to renting.
2) House keys – key everything the same for a house. You can even get padlocks keyed the same. So much easier than a bunch of random keys.
3) Tenant Selection – always ring and speak to referees. Ask targeted questions to weed out the scammers. Don’t rely solely on work references, they aren’t that helpful.
4) Inspections – keep them regular, something I struggle with, and always provide feedback to the tenant. Even a simple ‘thank you, everything looks great’ goes a long way.