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June 15, 2024 40 mins

This week, Paula's guest is Property Academy Podcast co-host and resident economic for Opus Partners, Ed McKnight. He shares advice for getting on the property ladder, including how to maximise the 'no-cash method', where to buy and what sort of homes to look at, and what to know about maintenance. Plus, he discusses his former life studying opera and the lengths he went to get a first job. 

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Episode Transcript

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Speaker 1 (00:01):
Hello.

Speaker 2 (00:01):
I am Paula Bunett, and welcome to my New Zealand
Herald podcast Ask Me Anything. Now. One thing I've bluntened
life is it's never too late to learn something new.

Speaker 1 (00:20):
So on this podcast, I talk to people from all walks.

Speaker 2 (00:23):
Of life to hear about how they got to where
they are, get some advice and guidance.

Speaker 1 (00:27):
On some of life's biggest questions.

Speaker 2 (00:30):
Right, a bit of a different episode for you.

Speaker 1 (00:32):
Today.

Speaker 2 (00:32):
We're nearing the end of season five of Ask Me Anything,
and we have had so much great advice across the season.
But today we've bought in a big gun for some
really practical advice on a topic that is often top of.

Speaker 1 (00:45):
Mind for many. Kiwi's Property.

Speaker 2 (00:48):
Ed McKnight is the resident economist at Opus' Partners. He
is also the co host of the Property Academy podcast
and co author of Wealth Planned, How to Invest in
New Zealand Property and Retire on real Estate.

Speaker 3 (01:02):
Wow.

Speaker 1 (01:03):
He is with me, Hey, Ed, how are you?

Speaker 3 (01:06):
Oh, Paul, it's a great honor to be speaking with you.

Speaker 2 (01:08):
It's good of you to come on two roles for
my podcast, so that it's quite easy. I do first,
as I'm allowed to ask you anything. Are you comfortable
with that? Oh?

Speaker 3 (01:20):
Yeah, I think it's going to be great.

Speaker 1 (01:22):
You don't have a choice anyway, what do you do?
What do you do? Don't ask me about And then
the other one.

Speaker 2 (01:29):
I call it the safe space, which means even if
I ask you something, you say something stupid.

Speaker 1 (01:36):
I'm not I'm not going to judge you on it.

Speaker 3 (01:40):
Just quietly and you get right. Can you believe he
said that? Oh my god?

Speaker 2 (01:45):
I mean I had to confess to Ed before we
went live on this, and I tried to joke at
a speech this week and it went quite badly.

Speaker 1 (01:51):
So here you go. If you could invite anyone to dinner,
who would to be?

Speaker 3 (01:57):
I'd actually say, I'm my grandfather. And I'll tell you
the reason why. I know, Oh you giving me a face, pook.

Speaker 2 (02:02):
I am giving you us. No, I'm giving you the
soft spo. There is gorgeous face.

Speaker 3 (02:07):
But I'll tell you the reason why. Because when he
was alive, we didn't get on very well, and you know,
for I think for a year we didn't actually speak.
And the reason I'd invite him, and I've actually thought
about this, It's not some canned answer that I'm giving you.
But the reason I'd invite him is I'd want to
make amends. And everyone said, well, the reason you too

(02:28):
didn't get on is because you were too similar. And
I bet you if I talked to him today, I'd
have a lot more respect for him, because at age
kind of mid thirties, he packed up life in Ireland
and he brought us three young kids over here to
New Zealand, and he started a new life and a
small town called Harwarder, which is in South Tartanaki. And

(02:49):
I always thought that that takes a lot of gumption.
And I think that's the beautiful thing about New Zealand
is that so many of us, our ancestors, have come
from somewhere else, and all of them came here seeking
a better life. And I just think it'd be really
nice to get into my grandfather's head and kind of
hear that story, which I assume is there.

Speaker 1 (03:08):
How old were you when he passed?

Speaker 3 (03:12):
I would have been fifteen. Yes, you could imagine you
have a.

Speaker 2 (03:15):
Completely differently a relationship with him now because you're.

Speaker 3 (03:19):
Thirty two about Sune thirty two, thirty.

Speaker 1 (03:22):
One better not age you had.

Speaker 2 (03:25):
I I've got a daughter older than you to see
you know, so we've set there so that I can
mother you.

Speaker 3 (03:34):
How good's your chicken? Pop Eye?

Speaker 2 (03:35):
Paula ah smoked fish pie. That's the one that's to
die for, she says.

Speaker 3 (03:42):
She.

Speaker 2 (03:43):
Okay, what we're going to do it is in the
first part, we're going to each to know you a
little bit better, and then we're going to spend a
bit more time on the second part of the podcast.
Because everyone always wants to talk property. I of course
met Bailey's real estate, mainly do commercial I've got to
say it is more of my jam.

Speaker 1 (04:03):
But I was talking to the.

Speaker 2 (04:07):
Residential guys this morning, so I said to them, I'm
an expert for the podcast this afternoon. Hey, so you're interesting.
So you are only thirty one. There you go, and
you have so you're an economist. So have you studied
that at university?

Speaker 3 (04:23):
Yeah, so it's quite interesting. I did both economics at
Auckland University and wake it all. But I also did
a double major with opera singing.

Speaker 2 (04:33):
I knew the opera and that's why I was trying
to put the two things together and couldn't quite get there. So,
I mean, there's so many questions in there, right, So
how on earth did you know that you could were
interested and could sing opera?

Speaker 3 (04:49):
Oh well, I got into it when I was probably
ten years old, and you know, you go along to
church and you sing along with everybody else, and if
you're the one who always wants to be the loudest,
as that was probably me. Then we just got singing
lessons and it continued for years, you know. But there's
a lot of.

Speaker 2 (05:08):
Dramas, there's a lot of gramas in there, and opera
is a particular one with a higher well I would
have thought higher skill level. So for you, as a
ten eleven year old to go down that path is
interesting in itself.

Speaker 3 (05:21):
Well, I just thought it was quite interesting. And I
think that was kind of the like when you go
and get singing lessons as a ten eleven year old,
that's kind of the They start you on really light,
classical kind of stuff and then you kind of graduate
into it if you're kind of inclined that way, if
you can't think, oh, this is kind of cool. And so,

(05:43):
like many skills, you start with your first lesson and
you just never stop. And the most amazing thing is
that I look at people who have actually made opera
singing their career and there are some amazing people. There's
a guy called Felipe Manu who was my flatmate when
we were twenty one years old. He went to the
same school as me and he was a very normal
guy from South Auckland and he happened to start seeing

(06:06):
lessons as well. And in August this year I'm going
to go see him play the lead at the Sydney
Opera House. And he's made it his career all around
the world. And that's a really good example of if
you've got some talent and you start with your first
lesson and you never stop, you will get somewhere.

Speaker 2 (06:22):
Yeah. So there's something about dedication, right, and there is
something to really committing. John Key used to tell me that,
and he'd a particular his story about squash was his thing,
and he would say, you know, he had two people
he knew one was both were talented, but one was
supremely talented.

Speaker 1 (06:39):
It wasn't that one that went on to the world stage.

Speaker 2 (06:41):
It was the other one because they had hard work
and dedication behind them.

Speaker 3 (06:45):
Yeah, and not stopping. So you know, I'm not saying
that I'd be as successful as my friend Felipe if
I never stopped. But I'm the one who stopped, and
he's the one who's in at the Sydney Opera House
because he never stopped going. I think there's a really
good lesson in that. It wasn't just that he's very talented,
though he absolutely is, is that he didn't stop.

Speaker 2 (07:02):
Now you you believe that there is a link between
an analytical brain and being musically talented.

Speaker 1 (07:10):
Don't you talk me through that?

Speaker 3 (07:12):
Well, I personally do think that it's quite amazing. When
you go and talk to people who are highly analytical,
often they've got some sort of artistical musical side. You
see it all the time. I remember when I was
doing a singing competition when I was very young. I
would have been fifteen or sixteen years old, and you're

(07:33):
standing up there and the judges start telling you about
their lives and some of them have maths degrees, and
it's just really there's this really strange connection between primarily
maths and music that you often see with a lot
of classical musicians. Now it's not all of them, you know,
some of them are kind of genuine creatives, but there

(07:54):
is this weird thing that you often see people who
are quite good at math, are also often quite good.

Speaker 2 (07:58):
At music, and you're on yours, you know, so often
they've got that absolute They may not have the talent,
but they've got the commitment to the arts and a
genuine interest in it, isn't it.

Speaker 1 (08:10):
You know, I couldn't help.

Speaker 2 (08:12):
I was just you know, I was thinking about Sir
metal Hill, and you know, just so many people like
that as well that have got and I would put
them in the sort of analytical brain as well and
that sort of context, and they've gone down that kind
of He's very much into the arts and what he does, and.

Speaker 3 (08:27):
I mean so much so he started his own international
violin competition which is very highly acclaimed as well. But
you see it a lot with when I worked for
the Auckland Phnemonia Orchestra for a while and sponsorship and
you get to meet a lot of people who support
the arts, and you often find there are a lot
of accountants, there, a lot of lawyers, and it's people

(08:49):
who are quite analytical who just like it for some
reason or the other, or studied music when they were
kids and have just continued on that love of it.

Speaker 2 (08:57):
M Okay, So talk me through the ad that you
did because you're you know you you thought you we
wanted to twig at the ASP or something. Was that it?

Speaker 1 (09:06):
And so you did you literally take out your own ads.

Speaker 3 (09:10):
Yeah, so what I did. This was back in the
day when Facebook was a little bit more loose. So
I was working at the Orchestra and I saw a
job going and Paula, it's so embarrassing when I tell
this story because the ending is so obvious. But I
saw a job going for like sponsorship manager at ASB,
and I thought, that sounds like a great job. I'd
like to go and do that. Only issue is they

(09:30):
wanted somebody with seven plus years experience and I had
one and a half. And I thought, well, I'm not
going to let that stop me because I once saw
I once went to a speech by John Key where
he talked about that you can't you've got to get
yourself in the room. You've got to make things happen. Okay, fine,
I'm going to make it happen. And so I thought, well,
how do I make myself stand out because I've got

(09:52):
no experience. But I think I'm okay, So we'll just
see how we go. And that was back in the
day where you could target on Facebook people who worked
for a specific company. So I built a website, a
very basic one talking all about why ASB should hire me.
And I thought, okay, well that's fine, but how do
I get this in front of the HR managers? And

(10:14):
so I wrote this website page about why you, as
an ASB employee employee, should recommend me to the HR
department and you should go down the hall to the
HR department and say, this guy's pretty interesting, he'd be
a great colleague, give him an interview. And so then
I spent I probably spent about twenty seven dollars and

(10:34):
fifty cents running these Facebook ads targeting ASB employees living
in Auckland. And you know, it got backed up, or
it got noticed by a couple of people in their
marketing team being like, well this is very very interesting.
I got an interview, didn't get the job, but that's
okay because they are very nice about it. And I

(10:55):
got I got a bit of press, and I got
job offers from quite a few different companies. So that's
how I kind of progressed within my career. But I
think what that was all about is graduating with some
economics qualifications and some music qualifications. I think certainly the
start of my career is a bit jumbled because nobody
really knew what to do with me, and so I

(11:15):
kind of had to find my own way, and eventually
I stumbled into what I'm doing now. I've been doing
it for the last five years, and the amazing thing
is those skills have come in handy, just simply because
you know, we've done the daily podcast for the last
five years. It's a lot of presenting skills and I
didn't know it at the time, but the opera singing
helped me do what I'm doing today.

Speaker 1 (11:38):
So tell us what you're doing today.

Speaker 2 (11:40):
Just give me the app shot of the company that
you're worth and what your role is.

Speaker 3 (11:43):
Yeah. So I'm the economist at Opu's Partners, and I
was really lucky i joined. I was when we were
only fifteen people as the company, and over the last
five years, I've just had my fifth anniversary here, we've
grown it to a team of about ninety people. And
because of that growth and because I was part of it,
I was really lucky the own the business decided to
cut me in as a business partner, and so I'm

(12:04):
really lucky because I was just working on some like
techtop content before I came on to talk to you,
you know, and I was reflecting that when I was
twenty four, I was in a lot of debt. I
had a lot of credit card debt, well over fifteen grand,
and just to put that into context, because I wasn't
earning a lot at the time, I would have had
to work from the first of January to about the
sixth of June to pay off that debt. Now that's

(12:26):
just working, paying tax and paying off debt, not paying
my rent, not paying for groceries or anything like that.
It's my own fault. But I got myself into the
wrong situation, and from being in that situation standing in
the shower thinking how did I let my life become
like this when I was twenty four to sitting here
at thirty one, seven years later. You know, I don't

(12:48):
feel like I've made it yet. I don't think I'm
some guru, but I think that, you know, twenty four
year old me would be pretty proud of the progress
that's been made.

Speaker 2 (12:56):
Oh that's extraordinary, and I think it's a big story
to tell as well. End I think that you're going
to have some very good advice for us. So let's
take a quick break and then you are going to
get all the advice you need around the property market
and investing in.

Speaker 1 (13:10):
Property with Ed and me. Thanks for coming back in now.

Speaker 2 (13:25):
You are a big investor and believer in property investment,
so let's start there. Why is investing in property such
a good idea in your opinion?

Speaker 3 (13:35):
I think the main reason is the only thing that
makes property special is the fact that you can borrow
money against it. Right, So a lot of Kiwis they're
out there, they want to grow their wealth, but they
might not have a lot of money spare that they
can put into shares, Keiwi, saver, term deposits, all of
that kind of thing. But what a lot of people
realize don't realize, is that you can buy a house

(13:58):
without having a lot of cash. I just walk you
through my situation. Bought a house when I was twenty six,
it went up in value, paid down some debt, and
then I thought, okay, well I want to go and
buy another house. Well, I didn't have the deposit, I
hadn't saved it up, But because my house had gone
up in value, I borrow some money against that house
as the deposit, and I take that money that I

(14:20):
borrowed from the bank, and I go put that down
as the deposit on another investment property, and I borrow
some money from the bank to purchase that, and I
was able to buy my I guess second investment property
with no cash. Now we call that the no cash
needed method. It is a pretty classic way that a
lot of care we start investing in property. Now, if
you've invested in property before, you know this, and it

(14:41):
sounds really basic. If you've never invested in property before,
it can be pretty mind blowing. So I often say
to first time investors, you're effectively using your house or
houses to go and buy more houses, and then as
those increase in value or you pay off some of
the debt, that's where you start to earn more of
a return. But it's the idea of being able to

(15:01):
borrow money against it that's what makes property really special.
So if I think about that specific property that I
bought with no cash, if it goes up in value
by ten or twenty k, which is pretty reasonable on
an average year, then that ten twenty k doesn't go
to the bank. I get to keep that even though
I borrowed all of the money to go and purchase

(15:21):
the property. But the thing that I'd often tell you, Paul,
is we often joke that if you could borrow money
against watermelons, and watermelons were ensurable, and watermelons went up
in value and you could earn a rental income in
order to be able to pay that mortgage, I'd be
recommending that we all go and vest in tropical fruit.
It's not that I like cowses, It's that I like

(15:44):
that you're able to borrow money against it, you can
ensure it, you can earn a rental income to pay
most of the costs. Doesn't You're not always able to
cover all of the costs with the rental income, especially
when it interest rates are high. But those are the
factors that I like about property.

Speaker 2 (15:59):
And then because you've got four properties, now did I
read that?

Speaker 3 (16:03):
Yeah?

Speaker 2 (16:03):
Yeah, Now, so how do you How hard do you
think it is though for those that are starting out
for that first home buyer, if you like, we're constantly
hearing how hard it is to raise that hundred thousand
dollars as the deposit. I know for me, and this
was many years ago, but I didn't borrow money off

(16:24):
my parents, but I convinced them to put their house
as a caveat against mine, and I had some deposit obviously,
and that's how I actually got into the market. And
within three years I was able or two years it
was I was able to get them off, but that's
they were prepared to do that. But it is still
hard to get into that first time, right.

Speaker 3 (16:43):
It certainly can be. And what I'd kind of say,
because I was on used talk set B the other
day talking about this and the government's changed the first
time grants or effectively gotten rid of them now, and
we were talking to people calling and saying, yeah, I
was about to use it from the first time, and
it might set me back a year or two. And
the thing I was saying to a lot of them

(17:03):
is just remember that the average age that somebody purchases
their first home in New Zealand is thirty seven years old.
And I think we sometimes get into this mindset that
if you haven't done it by twenty six, then you're behind.
No no, no, no, no no no. Only fifty percent
of first home buyers purchase before they are thirty seven.
Fifty percent of first home buyers purchase after thirty seven.

(17:25):
But one thing that I'd also like to change the
narrative around is just about you know, how many people
are purchasing their first homes. A lot of people don't
realize that in twenty twenty four, first home buyers are
making up a bigger chunk of the market than they
almost ever have. So in a standard year, somewhere between
eighteen to twenty percent of the market of the houses

(17:45):
bought are sold to first home buyers. At the moment,
we're well above twenty percent. I think we hit twenty
five percent recently. So it's a really good time for
first time buyers right now. So that tells me that
a lot of key is out there. They're not letting
high house prices or what they're reading in the media
get in the way of their first home dreams.

Speaker 2 (18:04):
But do you think that's because of the market, And
you know, what you are seeing is a smaller market
right now, not as many people buying, and as a consequence,
you could have that proportion slightly distorted.

Speaker 3 (18:19):
Oh well, that's certainly a part of it. That it's
a quite a market. Property prices are down and first
time buyers are therefore taking advantage of the market that's there.
But you I always think as an economist, you can
always find reasons to justify why, oh, that number looks good,
but actually no, it's not really good, or that number
looks bad, but actually it's not that bad. Like there

(18:40):
are always reasons for this. But the counter to that
kind of view as well, infrastrates are really high usually
that could scare a lot of first home buyers off.
House prices are still high compared to what they've been
over the last ten years, but first time buyers are
still being active and out there purchasing.

Speaker 2 (18:59):
Yeah, which has been testing right, because it is such
an opportunity to build wealth to give stability. Quite frankly
as well, I did quite a lot of study in
the States on that kind of asset building for the
poor and the difference it makes through the generations and
that sense of self worth and the ability to take risks.
But it comes with risks, right, you know, And there's

(19:21):
no ways about it.

Speaker 1 (19:22):
It is understanding the market it is. You know, we
had someone the.

Speaker 2 (19:28):
Other day who had bought a house that didn't have
full code of compliance because and it was when the
banks kind of couldn't lend enough money, you know, to
save themselves and so, and they are now being penalized
for it, you know what I mean, Like it's getting
really really.

Speaker 1 (19:41):
Tough for them.

Speaker 2 (19:43):
So how do you think people can get themselves better
edicated if they want to get into that property market,
particularly for an investment.

Speaker 3 (19:50):
I think the big thing is a lot of people
educate themselves through hearsay. So we hear a lot from
people who are close to us and maybe own our
property or maybe one or two properties, and we take
a lot of advice from them because we trust them. Oh,
they've bought a property before, so they must know what
they're doing. Often they don't know what they're doing actually,

(20:11):
So if the question is how do we educate ourselves?
There is some fantastic resources out there for people who
want to learn about property. And it's not just our podcast,
you know. Of course, we've done about seventeen hundred episodes
since we've done it almost every day for now on
five years, So there's a lot of stuff out there.

(20:31):
But the other thing that some people could consider it's
not just podcasts, but the Property Investor magazine is pretty
good as well. Full disclosure my company owns you see
on Property Investor magazine. But there are a lot of
resources out there if people want to learn. I think
the main thing just to be aware of is not
always to think that our parents or our friends know
everything about property.

Speaker 2 (20:51):
Yeah that's bloody good advice. Well you're here, dresser, you know, yeah, yeah, yeah,
you sitting there a while and everyone wants to talk property,
you know.

Speaker 3 (21:01):
Yeah. And what I've found a lot, Paula, is that
there are a lot of things that people repeat and
assume are true. And I'll give you a really good
example of this. So people always ask what goes up
in value the fastest, A house, a townhouse, or an apartment,
And usually what people say is, well, the money's in

(21:22):
the land, and so a house must go up fastest,
then a townhouse, and then an apartment, and it's kind
of in that order. One two three. So you actually
go out and you look out look at the data,
and what you see is that, yeah, apartments go up
and value way slower than a house or a townhouse.
Then you go and you look at the data and say, well,
what about a house versus a townhouse. You'd be like, well,

(21:44):
surely a house has way more land, and so should
go up and value faster. And it's true they go
up a little bit faster, but the difference is so
much more marginal than many Kiwis would think. And so
I think the lesson in there is not that everyone
should go buy a town That's not the lesson at all.
The less it is sometimes we hear things repeated, but

(22:04):
actually that's not necessarily true. Another example is with the
monies in the land, and I recently wrote a column
for One roof actually looking at that, and in some
cases we're actually found that just because a house has
more land, that doesn't make it go up and value
the fastest or faster might give you a few more
options if you want to develop it, but actually it's

(22:26):
kind of the mid sized sections that the average key
we can afford and the average key we can buy.
That's what goes up in value the fastest. Wow.

Speaker 2 (22:35):
And I was going to ask, which kind of leads
from that, is about maintenance as well? Or do you
buy you know, because a townhouse in an apartment predominantly
have less maintenance, right, And I don't think people, particularly
they're buying an investment that's going to be rented, really
give consideration. I've just spent six thousand dollars on new

(22:56):
heat pumps literally went in today, you know, into one
of my properties that just needed to be done right.
But you could spend that kind of money quite regularly,
quite easily if you want to keep your house up
to a standard. So how much do you kind of
do you budget a percentage of your income or the
home or how do you manage it?

Speaker 3 (23:17):
So the basic way that we usually do is say,
let's say you buy a new built property, so brand new,
you're probably going to get away with five hundred dollars
a year, and in fact, in the first couple of years,
you're probably not even going to need to spend that.
It's going to be really cheap. Once yet to that
kind of ten to twenty years old, maybe thirty years old,
you start to say about one thousand bucks a year
is what you're going to need a budget for maintenance.

(23:38):
Once you get up over that thirty plus years old,
that's when we say kind of three grand a year
is what you need to budget ballpark, but it's quite lumpy,
So what I mean by that is it might cost
you a grand one year, then oh no, that hot
water cylinder that's gone that's going to cost another eight
grand to replace. And then oh no, wait, now we've
got a roof that needs to be replaced because we've
brought something that's fifty or sixty years old that's going

(23:59):
to be twenty to thirty grand or whatever it happens
to be. So I kind of do it on an
annual basis, and it's kind of the older the property,
the more maintenance. But just be aware that it's going
to be a bit lumpy. And that's a really good
point that you bring up with maintenance, because I wouldn't
do it as a percentage of the property. And the
reason is that sometimes, especially in small towns like out

(24:20):
on the west coast of the South Island, you've got
a lot of cheap houses out there, and actually they
get a really good rental yield, so they get a
lot of rent per week compared to the value of
the property, and a lot of investors look at that
and say, oh, isn't that wonderful it's got such a
high rental yield. But the issue is that to replace
a roof or a hot water cylinder kind of doesn't

(24:40):
matter what the value of the property is. It's basically
pretty much the same all around the country. And so
one of the issues is if you just buy a
cheap house that in a small part of the country,
when you do need to replace the hot water cylinder
or a heat pump or the roof, that makes up
a huge personage of the rent that you actually collect,

(25:03):
and so sometimes it can be a bit of a
false economy.

Speaker 2 (25:05):
Yeah, can you OK, I've got a few kind of questions,
one which you just led into quite nicely as well,
which was would you buy an investment property out of
the town or the city that you live in?

Speaker 1 (25:18):
This says me, confessing that I have.

Speaker 2 (25:20):
You know, so I've just recently, well recently in the
last twelve months, purchased something and I looked carefully at
the yield, which I was thinking you should probably explain
to some people, and really saw the benefits in kind
of getting out of the Auckland market, to be honest,
and spreading my investment more around the country.

Speaker 3 (25:38):
Yeah. Big fan of that, Paula. And I'll see the
reason why. So a lot of people look at like
New Zealand property prices and if you google it, you
zeal In property prices graph, it will look like almost
always property prices are going up, but that's not true.
That's the New Zealand average. But in Auckland you're going

(25:58):
to see periods we properly priced are quite flat for
a time and then they boom. So for example, between
about two thousand and nine ish and two thy fifteen,
property prices in Wellington were flat for ages, even though
the average price to property in New Zealand was going up.
And so the reason that I suggest diversifying around the

(26:19):
country is that if you've got a property in Auckland
and you've got a property in Wellington or a property
somewhere else, maybe the Auckland property market's flat, but that
one in Wellington's going up in value. Then the Wellington
market's flat, but the Auckland one's going up in value.
And so the purpose of diversifying or buying property around
the country is that you can more closely approximate the

(26:41):
New Zealand property market, and then you're going to see
your wealth grow a lot more consistently. If you only
buy in one specific town, you're going to have a
lot more flat periods where your wealth's not going up,
and then you're going to have these crazy boom periods.

Speaker 2 (26:54):
Yeah, that makes sense because of the changes that we're
looking at with the current government, with the landlords and things.
You know, there was an advantage in looking at new builds.
Do you still see that and do you have an opinion,
particularly for an investment property of new build versus established residential.

Speaker 3 (27:13):
Well, I should just say that our company only focuses
on new builds, right, So just before I tell you
what I think. Ye, why, I just want to put
that by it. Yeah, I just want to let everyone know, like, oh,
I've got a reason to be biased. Yeah. The truth
is that not everybody should buy a new build. There's
absolutely true. So the benefits previously were really around tax

(27:34):
and interesstructibility. Now there are still benefits to going for
a new build, which is that you need a twenty
percent deposit rather than a thirty percent deposit. And if
you think about your house going up in value, the
return is a lot higher if you put in a
smaller deposit because you put in less money, but your
house still goes up in value, so you can get
a better return. On top of that, the Reserve Bank

(27:57):
put out some modeling and they said, if somebody currently
owns one investment property today how many could they buy
over the next ten years once the DTIs come in.
And what they said is if you buy just existing properties,
so secondhand properties, they're ones that we're all used to purchasing.
If you currently own one investment property today, over the

(28:17):
next ten years, we think you can buy three more.
But if you decide to go and buy new build properties,
we think you can buy another five more over the
next ten years. Now that's just one example in one
scenario with one property investor, but that kind of shows
you that if you invest in new builds, you're going
to be able to grow your portfolio much faster. Now,
those are the pros, but let me tell you all

(28:38):
the comms. The main con of a new building you
can't renovate it. So if you go out and you
buy probably what I call a secondhand home, one that
somebody's lived in before, you've got the opportunity to renovate
it and add value. So let's say that it's currently
worth six hundred K, and you decide to spend fifty
thousand dollars renovating that, So you're earned for six fifty

(28:59):
Maybe by the end end of it it's worth seven
hundred or seven hundred and fifty k. Now, all of
a sudden, you've made what we call instant equity of
fifty to one hundred thousand dollars, And so some investors
look at the hands say absolutely, that's what I'm into.
I want to be involved renovating properties because I know
I can actively grow my wealth really quickly. And if

(29:19):
you're that way inclined buying what we call existing or
second hand homes, that could absolutely be the right strategy
for you. If you're sitting there and you're saying, do
you know what, not really into renovating. I don't want
to get my hands dirty. I don't want to be
too involved. I want something a little more hands off.
That's generally when you go for the.

Speaker 1 (29:37):
New built asn't.

Speaker 2 (29:38):
Part of the problem with new building, and I suppose
my question is, as well as you know are the
companies that do this, is that you have to pay
more up front or borrow and pay, and you don't
get the rent until it's built. So you know, I'm
paying a mortgage off my new build at the moment
and it won't be finished until the end of the year.

(29:59):
I can do that, right, So I'm in a privileged
position that I can do that, but I was thinking
why that would be and that might be harder. But
then I've heard ads from companies that say, you don't
pay you know, we don't want any money until it's
until it's ready for you to turn the key.

Speaker 3 (30:15):
Yeah, that's actually a really good point, Pauler. So there
are two different types of new builds, right. So the
one that you first talked about, and maybe I don't
know your personal situation, but this might be what you've
purchased is what we call a progressive payments built. So
that's when you've probably purchased the land, you're paying a
mortgage on the land, and now you've hired a building

(30:36):
company to build that property for you, and so that
would have been in your contract. So you've probably borrowed
a couple of hundred k to buy the land, you're
paying the mortgage on that, and then you're making those
progressive payments as that property is being built. Now, that's
one type of property and the benefit to that is
that once it's built, you'll probably get some of that

(30:58):
instant equity. By the time bill it is probably going
to be worth more than the total amount that you've
paid because you're taking a bit on a bit of
risk there. You're making some payments, so that's the benefit
the connors of course that you're currently paying a mortgage,
but you're not getting any rental income. That's one type
of new build. The second type of new build, and
this is the one that we focus more on at
Opus Partners, what's called a turnkey property. So that's where

(31:22):
you just put down a ten percent deposit and then
once the property is built, you pay the rest of
the money. So effectively, you don't have a big fat
mortgage until you've got rental income coming in. So often
we talk about new builds as just one group, but
actually there are those two different types.

Speaker 2 (31:38):
Should you be concerned at the moment with the way
the market is on the company that you go in with,
you know, I mean we've seen developers going under, you know,
we read the stories. Not all of them are small,
you know, so you know there is some genuine kind
of risk there.

Speaker 1 (31:55):
We've seen well, particularly in Gosh.

Speaker 2 (31:57):
I live in Testa and Norkland and you're just seeing
so so many of the infil housing going up, which hey,
people have got opinions on it that I'm pro development,
So it'll be I have to be supportive, but you know, yeah,
how do you do your due diligence when you know,
when thinking about whom does that build for you?

Speaker 3 (32:17):
Yeah, that's such an important question, and especially if you're
going down that first avenue of progressive payments, because the
risk is, let's say you've bought that piece of land
right and you're currently paying a mortgage on it. Let's
say the house gets half built and then the developer
goes under. Now you're in a real pickle. And it's
not just that. Maybe you've got a master build guarantee
and so yep, they're going to organize somebody else to

(32:38):
come and finish off that property for you. But in
the meantime, you've already borrowed four or five hundred thousand dollars,
and while they're messing around trying to find you to
find you a builder to finish the property, you're still
paying the mortgage on that. So that's where it really
starts to become an issue. If you're in that contract,
If you're in a turn key style where you're only
put in a small deposit then pay the rest at

(32:59):
the end, that's less of an issue because even if
the builder falls over, you get your deposit back because
it's held but held by the lawyers. So in terms
of how do you do your due diligence, the first
question I'd be asking is who am I signing the
contract with? Because what we've seen a couple of times
is people might buy off one of those franchise builders,

(33:20):
people like a Golden Homes or a Signature Homes, And
I'm not specifically talking about any one company, but those
types of companies, and you think, well, that's great, I
am investing with somebody who is really reputable. But then
it turns out that you didn't sign the contract with
the master franchise of whatever that building company is. You
signed it with the local franchise and tot on it

(33:42):
or the local franchise in Hamilton or wherever you happen
to be in the country. Now, that's one single small
building company, and if they fall over, that's where you
can really come unstuck. So people can sort of sometimes
lull themselves into a false sense of security because you
think you're using a big company, but you're not using
a big company. You were using a small franchise, local

(34:07):
franchise of that big builder. So first thing I do
is see who am I actually signing the contract with.
The second thing I'd then ask is what are the
guarantees around that? So are they a master builder's If
it's master build and you're doing that progressive payment build,
that you're doing poorer, that's when you I feel like,
I'll give a free consultation here. Wh's quite lovely, it's

(34:29):
quite nice. And then if you've got a master build
and that that developer falls over, kind of okay, because
then sweet this person, they're going to organize another builder
to come in and finish the job, so that gives
you a little bit more security. Master Bold isn't the
only type of it's not an insurance scheme but a

(34:52):
protection scheme. There is another one run by a th
that's called Halo or New Zealand Certified Builders. But I'd
want some type of scheme like that. Some building companies
from those big franchise home builders that you hear about
kind of like what I named before, they might have
their own schemes. I'd want my lawyer to dig into
the details to protect me.

Speaker 2 (35:12):
Okay, I really that was I think really helpful, and
I think just thinking about getting into the market. You know,
I'm one of those people that always goes you know,
there's your cup half follow half empty. Who cares take
a sip? Because at the end of the day, if
you're not kind of getting in, then you know it's
never going to be easy because it's just not but
what you can do and how you can do it.

(35:34):
And as you say, you know, I've gone in with
a friend before and that worked for both of us.
We had it absolutely iron tight, and we just both
we would never have come out with forty thousand dollars each.
That would then set us off in a different direction.
So there's all sorts of kind of options. I suppose
I would just say to anyone that's doing this, I'm
definitely not a financial advisor, and so please get the

(35:57):
right advice and talk to the right people so that
you know, you know kind of what you're doing or
what you're eating up to. Hey, so, ed, this is
called ask me anything, and I've done all the asking,

(36:17):
So I now like to give you a bit of
an opportunity to ask me something if you would like to.

Speaker 3 (36:22):
Yeah, I do, Paula. So one thing that I'm really
interested and this is a good exercise for anybody at
home is you've started investing in property. So if I
was to ask you to think forward fifteen years in
the future, twenty years in the future, and you think
about your perfect day in retirement once you've stopped doing
they ask me anything podcast, what are you doing on

(36:44):
that perfect day in retirement and who are you with?

Speaker 2 (36:47):
Well, I'm we'll go less than twenty years, because I'd
be happy to be dead in twenty twenty five years,
because I just think old age is a bit of
a bitch. But so yeah, for me, I want choices.
So hence why I am quite heavily invested right now
and working quite hard. I'm fifty five years old. So
for me, it is being able to travel if I

(37:08):
want to. It is being able to spend time with
my grandchildren, and I would like to be able to
take them on a trip and have really unique special
experiences with them that they will always remember and will
be part of that. So, you know, I don't need
the flashest car. I actually don't need the flashest house.

Speaker 1 (37:26):
You know.

Speaker 2 (37:26):
That sort of stuff actually doesn't really worry me that much.
You know, practical in works. But if I suppose what
I'm trying to save for and invest for at the
moment is so that I can have experiences that, let's
be honest, can be quite expensive.

Speaker 3 (37:43):
And if I was to ask you, Paula, so you're
traveling overseas with your grandkids and you want to give
them some unique special experiences, where are you traveling and
what sort of experiences do you want to have with them?

Speaker 2 (37:55):
Well, my very because you kind of go to suit
their personalities as well, and I think they're all going
to be different and quite frankly in twentye's time if
you have great grandchildren, so that's kind of cool. So
in that respect, you are kind of matching them. But yeah,
you know, I haven't done India. I haven't done you
know those places I haven't been, which I think they

(38:16):
could find really interesting. My boys at the moment are
just full and active, so you'd want to take somewhere
that exhausted them yet, nam I.

Speaker 1 (38:25):
Mean want to take them there.

Speaker 2 (38:26):
I promise them I'll take them to Nuway in the
next twelve months because I just think they will snorkel
and jump off rocks and absolutely love it. But I
think I want to be a bit more adventurous with them.
When they're a bit older and I'm a bit older.

Speaker 3 (38:39):
And so you're off on these cool experiences with your grandkids.
You said you wanted those experiences to be ones that
they would remember thinking about we start this off talking
about my grandfather and how I remember him. How do
you want your grandkids to remember you?

Speaker 2 (38:55):
Ah, they will, They'll remember me as a dominant, big
personality that and I just do as.

Speaker 1 (39:06):
I said I like to do with them.

Speaker 2 (39:08):
I didn't want to be that grandparent that was like,
oh my god, we have to go visit granny. I'm
going to sit around and it smells a bit and
she always makes those biscuits, and you know, and you
tell us off for our manners. So I wanted. I
wanted kind of I call it free chaos where it's
and I just you know, so we're and so that's

(39:30):
how I want to be remembered.

Speaker 1 (39:32):
Not necessarily always fun. You know. I love the deeper
conversations with.

Speaker 2 (39:36):
Them, you know, and I and I encourage that and
you know, and try and do that with them. But equally,
you know, I don't I want them to remember me
as being more fun, slightly chaotic and just full of love.
How beautiful yeah, all right, all right, well I'll keep
working on that, but I am I am really, really,

(39:58):
really lucky now. It has been absolutely fantastic chat to
you today. Ed. If people want to hear more, then
they can go to Property Academy podcast. I've been having
a bit of a listening and I just found it
on iHeart, but they can find it anywhere, I presume.

Speaker 3 (40:14):
Yes, Spotify, Apple podcasts where if you want.

Speaker 1 (40:17):
To yep, easy. That's good.

Speaker 2 (40:19):
And that's it for another episode of Ask Me Anything.
You can get in touch with me by emailing ask
Paula at zid me dot co dot in sid you know.

Speaker 1 (40:27):
You can find me on Facebook.

Speaker 2 (40:29):
You can find me on LinkedIn, you can instagram me
that I'm useless at getting back on that, but make
sure you just follow Ask Me Anything on iHeartRadio or
wherever you get your podcasts. I'm Paula Bena, Ask Me Anything. Goodbye,
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