Thinking Outside The Square
Sam Barnett’s unconventional approach, combined with a great work ethic and money skills, have led to a successful life in property, writes Joanna Mathers. Photography by Mark Smith.
31 October 2022
A “party house” in the rural fringes of Rotorua was the start of one man’s property journey. It’s a journey that’s seen him live in vans and travel the world (while rocking waist-length dreadlocks) as he steadily built a portfolio.
Sam Barnett bought his first investment property when he was 19. But while his appearance was far from stereotypical, his strong DIY work ethic and excellent money management skills have led to a successful life in property.
But it’s not been without challenges. An early adopter of the Airbnb model in Rotorua, he had to “pivot” back to long-term rentals post-Covid. A renovate-and-hold investor from the outset, he’s stayed true to this ethos. And it’s served him well, be it in the long-term or short-term rental market.
Born and bred in Rotorua, Barnett was living with his mum when he left school at 16. He started to work as an apprentice mechanic, and money was scarce.
“My mum didn’t have a high income, and she said that if I left school I would have to pitch in to pay the bills,” he says. “So I decided that if I was paying, I might as well move in with my mates.”
But the cost of renting irked him, and the attitude of landlords towards a group of teenagers wanting their properties meant it was hard to secure a home.
“I started thinking that given the amount of money we would have to pay, I could buy a house and rent it to my friends by the room.”
Not many teenagers have such property epiphanies, but back in 2004 there were still plenty of bargains to be had, but there was a catch.
“I talked to the banks and they said ‘no mate’. They wouldn’t give a mortgage to someone under 18, and I would need some credit history.”
Undeterred, Barnett started saving and watched the market. He lived in his van, and did up cheap cars to sell at a profit. Soon, a client at the mechanics gave him a break.
“He teed up a credit card for me, so I could document how I was using my money. This was so I could get some good credit history behind me.”
Saving is a discipline, and it’s one Barnett was taught early. He says his parents “were pretty tight. If I wanted something I had to work for it.”
His folks co-owned a service station, and he was able to earn money by cleaning shelves. He would save up for mountain bikes and do them up, selling them for a profit (a technique he used later when selling cars to get a house deposit).
This savings ethos would continue to steer the course of his subsequent property investments and underpin much of his later success.
With a good credit history, Barnett was finally in a position to buy an investment property. He found a place just out of Rotorua in a semi-rural area that was in his budget, but given his tiny salary as an apprentice he couldn’t service the mortgage by himself.
Luckily, he had enough mates who were willing to pay the rent. Five of them would move into the four-bedroom property, with Barnett living in the garage. Each of them paid $100, covering the mortgage. But being a landlord to five teenage friends wasn’t always easy.
“It was a bit of a party house, and obviously I took looking after the house more seriously than others. It could be hard sometimes when it came to conversations around money. But it was OK … I’d go away in my van to surf at the weekends so I didn’t stress out!”
But he was still able to add value. He often worked on mates’ cars, and one friend, a builder, returned the favour by helping him build a deck.
“When I bought the place there was a ranch slider to nowhere,” he laughs. “The deck was a really important addition.”
In 2008, he had his home revalued. Even though it was smack-bang in the midst of the GFC, the property had risen in value enough for him to use the equity to buy a second rental property.
This one, in Mangakakahi, was an Initial Home built in 2000. It needed nothing done to it, apart from a change of curtains, and he purchased it for just $164,000. He soon found tenants and the rent of $260 a week meant the house paid for itself.
But sadly this home was cursed with a run of bad tenants. This was a real learning curve for him, and he says he learned a lot from it. Self-managing, Barnett went through four or five tenants before he came across a couple with a baby, who were young and couldn’t find a house.
“I knew what it was like to be young and not taken seriously, so I had a chat with them and told them I would give them a chance,” he says. “They ended up being the best tenants I ever had.”
It was around this time he decided he needed the support of other investors. He joined the Rotorua Property Investors’ Association, but the “dreadlocks down to my bum” look meant he initially found it a little hard to connect with other members.
“I didn’t look anything like the other people there,” he shares. “But I learned heaps and I heard a lot of inspirational speakers. One of the key lessons was around offset mortgage and revolving credit facilities.”
‘When I bought the place there was a ranch slider to nowhere. The deck was a really important addition’ Sam Barnett
Barnett purchased his first major renovation in 2011. The duplex he copurchased with a friend “was the worstlooking house I’d ever seen. But it was in a good suburb, in Fairy Springs, and the duplexes had separate titles.”
The homes were bought for just $180,000 ($90,000 each) with Barnett spending $25,000 on a full renovation. He would go on to rent the property for $260 a week, with only $100 a week spent on the mortgage. (The home was revalued at $180,000 by itself.) The strategy was so successful he bought another duplex up the road, also in terrible condition, and renovated that. Then he quit his job and went travelling, backpacking around the world on the money he was making from the houses.
Barnett would go on to travel for five years, supplementing his income from property with stints in Western Australia mines, working as a mechanical fitter. He made good money, visiting New Zealand intermittently, “making ridiculous” offers on houses that would occasionally be accepted.
It was during this period, in 2014, that he met his partner, Lauren Atkinson, back in NZ.
He was still living an itinerant life, back and forward from the mines in Australia to NZ, “but it started to become tedious. I did it for a year.”
And when he returned he changed his strategy. His tenants in the first house gave notice and he decided to move back in and rent it out by the room.
So he did a cursory tidy up, bought bunks and put the house online for travellers, renting it bunk-by-bunk.
“As Rotorua is such a popular tourist destination, it was always booked out. This was before Airbnb and I popped on the Hostelworld website.”
But he soon found there was more demand for the entire house. Airbnb was just taking off, so he completed a full reno and listed it on the site.
He would soon add more stock to his Airbnb portfolio, purchasing two “extremely run-down” properties in the same are for just $215,000. The couple lived in one home while renovating the other. A few months later they bought the house in front, which proved ideal for large group bookings. This process was repeated until they had nine listings.
As there were only five Airbnb offerings in Rotorua when they started out, they had a dream run for a while. “Our yields were about 50 per cent,” Barnett says.
It was hard work; they were renovating houses, cleaning up to five holiday rentals a day, and managing the bookings themselves.
“The thinking was to get the hard work done when we were young, so we could take it a bit easier when we had kids.”
The success of the short-term rentals was such that they would go on to buy their own dream home by the lake, with its own self-contained apartment, “a luxury guest house”. They still live there. The holiday home dream run wouldn’t last. Holiday spots like Rotorua, which were booming when tourists flocked pre-Covid, were hit hardest when the borders closed in early 2020. Barnett and Atkinson made the most of the situation, however. With long-term rental demand booming, they renovated and rented the houses out long term, getting top rents.
They have been renovating each of the properties in their portfolio over the past few years, and still have two Airbnbs. The capital gains on the houses have been impressive: the first duplex he purchased in 2011 for just over $90,000 sold for $385,000 in 2019. A second duplex with two titles purchased shortly after for $170,000 is now valued at $1.1 million. And after selling down some property, he is looking at a yield of an astonishing 35 per cent at current lending: “But this isn’t a true indication as property prices have increased so much.”
Barnett is still looking for properties to renovate and add value (“as soon as you stop looking you lose touch with the market”), especially high-end lakeside properties.
He acknowledges recent years have been hard for investors, but believes the Healthy Homes policies are good, although they have pushed up rental prices. But at 35 he can look back on over 15 years of investment and has advice for young people wanting to get on the ladder. “In the early days it was really hard. But if you come up with new ideas, look at different ways of doing things, you can find new ways to add value.”
Barnett and Atkinson have recently added two new members to their family: Indy (3) and Billie (9 months). They all live on the lakeside in Rotorua enjoying the results of years of judicious investing. This is one of the great joys of property investment, the ability to pass on wealth to the next generation. But it’s likely that they will also have to work hard for their goals. “[I want them to know] that no one owes you anything, and if you want something, you can work for it.”