Latest / The Curve / Property investing isn’t dead, you’re just doing it wrong.

Transcript

Property investing isn’t dead, you’re just doing it wrong. · The Curve

0:00
Today, we're speaking with Pete. Pete is someone that I've worked with for a couple of my properties. So, God, it's so weird to say that. I've got two investment properties, and I worked with Pete on both of them. We did a specific type of property investing. It was called the BRRRR approach.
0:15
In this episode, we are going to talk about all of the key things to think about when it comes to investing in property. There are so many different ways to buy and invest in property, but today we're really going to focus on some of the key things that you need to be across. Pete has worked in property for 10 years, so we're going to try and jam-pack as much as possible into this episode. Some of the things that we're going to talk about is the importance of who you're buying with, whether that's a partner or a friend.
0:43
And actually why the partner that you choose in life is a really, really important part of your property investing journey. There are different things that you think about with buying property with a partner. And I think just getting on the same page with that is super important. So we talk about that.
0:58
The idea of buying and having a high income is actually one of the secret things that you need to keep in mind when you're buying property. So we're going to talk about that and why it's so important. DD, due diligence, whatever you want to call it. Why this is one of the most crucial parts of investing in property and how if you get this wrong, you could have a total blowout. We talk about why you should be avoiding auctions, why this is actually important.
1:21
Really, it sounds fun and flirty to go to a property auction. Actually, there's very few times that you can be successful investing a property this way. Why flipping?
1:34
Actually, not a great suggestion. Probably leave that one for the experts. And why Pete, with all of the experience he's had, actually tries to steer clear of flipping. And why being cash flow positive is the secret sauce to be able to get a portfolio of properties and actually make sure that you can make as much money as possible investing in this way.
1:56
Buying property can feel like this giant, daunting, what the F am I supposed to be doing journey. And that felt like that. Oh, it was, you're up Schitt's Creek without a pedal. Anyway, this is why we're so excited to be partnering with BNZ to bring you this property podcast. Yes, it's...
2:18
Honestly, one of the things that I'm most excited about for this year is to add on the conversations about growing wealth with investing.
2:27
actually being able to talk about property regularly because it's such an important asset class and such a brilliant way to grow your wealth. And there is so much to learn and so many different ways that you can invest in property, which is why we're stoked to be partnering with BNZ because they know that there's no two journeys to buying property that are the same, which means that you kind of have to work together. You know, you're a little team. So whether it's your first flat with your partner, whether it's your partner,
2:53
dream home whether it's your next investment move bnz home loan experts are ready to guide you from the moment you start searching till the day you sign thank you so much to bnz for empowering this podcast and let's get into it pete this is really exciting you've flown all the way to london for a podcast recording good to see you again mate it's been a while i heard you've been on holiday
3:15
Oh, I just went to the Dolomites. I went to Italy. Who were you with? Oh, my boyfriend. So when I was last in New Zealand, Pete and I and his gorgeous wife, Michelle, who we love, went for – we love, obviously. He loves. Married. But I – she's so great. She's Irish. And just like, you know, when you meet people's partners and you're like, oh, no offense, this is actually going to be really offensive, you're like –
3:39
You're the brains behind the operation. You know, you meet their partner and you're like, oh, she's so clever. She very much is. She is great. Yeah, she's awesome. Not that you're not incredibly smart, but you know when you meet someone, you're like, oh, you're not just this passive side watcher. You're really involved in everything. 100%. I couldn't do the business without her. Yeah, she's awesome. And also, are we allowed to talk about...
4:02
I think so. When are you releasing it? True, true. I think so. I've got my, well, you tell them. Or should I tell them? You tell them. I've got my first on the way, which is pretty exciting for us. First baby. First baby. First baby. So she hasn't told work yet, so we might just have to talk about when you release this. But that's part of it. That's been quite interesting of how, I mean, maybe if you get to go through it, of how that process unfolds and how they feel about it as a woman and the experience.
4:28
psychology and thinking that she's going to be viewed differently in the workplace has been quite interesting to be a spectator for. I thought it would be straightforward, but there's a bit of, um, there's a bit more to it. Totally. I actually had a friend message me the other day. She's going through this weird, she's a presenter and she had to, she was in this weird position where she had to travel for work, but then she needed insurance. And then to get insurance, she had to tell her work, you know, it was this whole thing. And she was just like, I just don't want to lose jobs or not get opportunities because of it. And you kind of think in,
4:57
2026, that's not actually a thing, but it still very much is. And actually quite a good lead on because one of the things that I wanted to talk about before we get into today's episode, which is going to be 10 years of property wisdom in 40 minutes, no pressure. But buying property so often involves a partner.
5:16
Not always, but... Yeah, not in your case. And for me, obviously, I bought my first two properties with a friend. But I do think the ability to buy with somebody, whether it's a romantic partner, a friend, a parent, someone...
5:31
does open your opportunities in terms of what you can buy. And I think it's just because also the idea of putting 100% of your money into property can be quite scary. Whereas if you can have some money in property and then some in the stock market and some in your retirement, you know, it just feels a bit more diversified. But then when it comes to buying property with a partner,
5:55
Obviously, it's a whole new kettle of fish. I've never done that before. But one of the things that you speak about a lot is the idea that the person you choose to do life with is one of the most important financial decisions that someone can make and specifically in relation to property. Can we talk about that? Have you seen things go wrong? Has it been something you've always been aware of? Yeah.
6:18
Why is that something that, I don't know, is quite forefront for you? Yeah, I mean, it's, I suppose, generic advice, regardless of sort of property, obviously. I've sort of witnessed it. I mean, well, firstly, let's start off with divorce is an expensive hobby. You know what I mean? And I can say that my parents got divorced. I love that you do the jazz hands.
6:35
So obviously, if your marriage doesn't work out, that's going to have a pretty big financial impact of you in terms of splitting your assets in half. But let's just assume, regardless of if we put that aside, I think the partner you choose has a big financial impact on you.
6:52
If you've got different spending habits and values when it comes to money, it's going to be a bane of contention and it's going to potentially limit where you as a couple end up. I'm sure you guys probably speak about values and what you're willing to spend money on and what you're not willing to spend money on.
7:09
For example, with me and my wife, we've got a pretty average car. It's pretty cruddy. I use it for a lot of my work stuff. But that's okay for us. She doesn't need a new car. I don't need a new car.
7:25
In that sense, we can live with a pretty average car and use that to invest, which for us means we're going to have more assets down the line. Now, if you've got one partner who wants a new car and one partner who doesn't want a new car, there's obviously a bone of contention there. And then that's going to impact your financial future. In property, property.
7:42
if your values aren't aligned it can also have an impact obviously for example does one person want a really nice house straight away or is one person willing to keep living in a less nice house or maybe keep renting and so in my circumstance you know we were willing to keep renting whilst also then investing but that's if you've got one partner who wants to buy a house and one partner who wants to rent then there's going to be a challenge there for you so I think that all of
8:12
Okay, so let's talk more then about the partner alignment because I do think that it's quite an important piece. Whether it's where you're living, whether it's where you're investing, and obviously as you said, this is really relevant whether you're talking about property investing or actually just spending. There's so many parts of your relationship that link back to money and the importance of being aligned. How do you see or have you seen that tension play out when people aren't on the same page? And do you perhaps have any...
8:39
Questions, conversations, things that you might have had within your relationship that helped you get to a place of alignment. Because I, yeah, I, even the mention earlier in the conversation where you said, you know, divorce is an expensive hobby. It's so true.
8:54
Yet we all avoid those conversations. And I think whether you've been married for five, ten years or you're just dating someone, you can always re-get on the same page. Yet can we just talk about what you've seen tension-wise play out if people are not aligned? And maybe some conversation starters, should they want to approach that conversation and try and figure out from a spending, investing, saving perspective to be like, okay, cool. We want the same things and we're heading in the same direction.
9:23
Mostly what I've seen is it slows people down because there's maybe one partner who wanted to get investment properties, one partner who wanted to get a nice house, and let's say they went for the nice house. And so that just slows them down because they may need to save for another five years before they can then go and do something. And so that's where I've seen it sort of play out on what it looks like. And hopefully it doesn't get any worse than that. But that's as far as I've seen. It just pretty much slows people down.
9:49
In terms of how you can sort of front foot it, I think it's obviously easier to do it before you invest in a house or something like that. It's a lot harder to sell a house and say, okay, we made the wrong decision here, quote unquote, and backtrack and go back on what you've done previously. So it's a lot easier if you have those conversations before you buy a house. So questions like, would you rather have a nice house now and no money to invest, or would you rather...
10:14
a less nice house but have money left over to invest. Do some really binary would you rather's, I think. Would you be open to reinvesting? Or understanding why someone maybe wants to own a house? So when it comes to investing in property, we do traditionally, I think this isn't gender based either. I actually think men and women. Maybe more women, I'm not sure. But there's a lot of emotion tied up in the decision to buy or sell property.
10:43
How would you talk about this in a different way or try and give perspective on leaving emotion out of the conversation in a way where, you know, there's obviously some investment properties. Or if you're living in your own home, maybe it's not considered a quote unquote investment. It's actually a lifestyle decision. But if we zoom out in general on property and the decision making and how emotional we all get about it.
11:12
How can we reframe it and try and be less emotionally driven with the things that we decide to do or not do? Yeah, the first step, I suppose, is just acknowledging that it is an investment, first and foremost. Yes, you want it to look nice and be a pretty home, but you're not going to live in it yourself. You are buying it purely to make money. So once you've got that framework, I think it makes it a little bit easier to make decisions around should you buy this property or should you buy that property.
11:39
So perhaps the step before that is, are we buying investment properties or a home to live in? But are you saying that you don't think a home to live in is an investment property in the same way?
11:51
You're buying a house to live in. You don't get any rent from it unless you get borders from it. So it's not really an asset in that sense. Obviously, people treat it like an asset, and historically it's gone up, and people have made capital gains out of it. So yes, people have made money out of owning your own property from a home to live in, but you do need to look at it very differently. A home to live in versus an investment property, two completely different things in my mind. Right. So once you've decided either lifestyle, house to live in, or we're investing,
12:22
then it's trying to remove the emotion. Is that what you would say? Yeah, correct. Because, and I've never purchased my own house before, but that must be tough. Because like, how do you decide what you want to pay for the property? It's pretty much how much you like the property and how much you can afford, right? If it's a home to live in. If it's a home to live in versus an investment property, you've got a framework of, does it hit our KPIs? If it doesn't, cool, thanks, but no thanks. And you move on to the next property. So it makes the buying process a little bit easier in that sense. So in terms of,
12:50
how we keep emotion out of it. Because when it comes to investment properties, emotion is not your friend because you don't want to get FOMO and then start offering more money than you should. So you have your KPIs in terms of how much cash flow you want to achieve, how much net gain equity you want to achieve. If the numbers don't enable you to achieve that, then you just move on to the next one. I think it's a lot easier to remove the emotion if you're specifically thinking of your investment property as an investment. Yeah.
13:17
But interestingly, I would say there's a lot of people listening who think of their home as an investment. Would you argue that's kind of not true? Because what you would pay, spend on it, and the return you would make if the money was elsewhere is not an amazing investment. Correct. If you're living in it. Yeah, I personally don't.
13:36
Think of it that way. Some people do and that's fine. But yeah, when I started looking at the numbers and seeing you don't actually get any rent from owning your own home, but you've got all this cost going out the door. Yeah, it doesn't really make for a good investment unless there's obviously really good capital gains that you're achieving. That sort of offsets that, but that's sort of out of your control.
13:55
Do you think almost like if you buy a house for living in purposes, you kind of need to forget about the idea of it being an investment or do you think that they can still be sort of connected? There's more reasons to buy a home than just because you think you're going to make money out of it, right? There's the security and everything that –
14:11
enables you to be part of a community, enables you to go to schools that you want, etc, etc. So I never tell people not to buy a home. If that's what you want and that's important for you, go for gold. But if you're just doing it to try and make money, there's better options out there, which is maybe reinvesting or shares or whatever that may be.
14:27
There are things that are ideal for a house that you're gonna live in, for example, a garden. Most people want a nice garden. When you're renting that property out, you don't really want to go to, are the tenants gonna look after it? Not really. And so when you're looking at a property,
14:42
certain traits that you want for a house you're going to live in, they're not necessarily the same that you look for in an investment property. And so when people try to straddle the two in terms of, oh, this will be a house, but then I'll turn it into an investment property one day, typically there's a bit of compromise, as opposed to when you just focus on one goal, typically the outcome is a little bit better. I think it's also just so easy to get...
15:04
into a mode where you're like, oh no, this is an investment. As an example, you've got a really loud, you're on a loud street. So you put money into glazing the windows so that it's more, you know, enjoyable to sleep in, costs you 5,000. But it's not the kind of thing someone's going to notice when they come to view the house to buy it is...
15:25
they're either going to notice if it's super loud and therefore it's devalued. But if you're putting money into something that they wouldn't have noticed at auction or seeing the house to buy, kind of is not a good investment from a financial standpoint. Yeah, depending on what it is and what the condition is. I used to live in a flat in London where I used to have to sleep with airplugs. So I would have paid more for double glazing in that flat. But yeah.
15:47
If it's an acceptable standard of window, yeah, if you come and put a really nice new glaze window in there, it's probably not going to get a great return on capital for that in that specific example.
16:00
It's such a weird one, like the difference between home and investing property. I still feel like they're really blurred for me. But let's just talk about, because I think there's a huge piece, particularly when it comes to buying an investment property that most people try and skip. And it's definitely the due diligence piece. And I think because it's overwhelming, there's a lot of admin involved, but it's so important. And I know you talk about this a lot.
16:25
Firstly, let's just start with what is the importance of doing due diligence when it comes to buying a property? And to be honest, it could be for an investment property or a home. What are the key things? Yeah, so I'm going to call it DD. DD is quite fun, I like that.
16:39
I was on a trip over the world. Yeah, yeah, great. So DD. So firstly, yeah, you should do it. Absolutely you should do it. People sometimes, I think people sometimes don't know to do it. Like it's just a pure ignorance perspective. Really? Well, if it's the first house that you've ever purchased –
16:55
and you haven't been listening to podcasts and you haven't read up on it, you just maybe don't know that you should do it. There's that. I've certainly seen that. Then there's also where I've seen where people have chosen to ignore what they've seen because the fear of missing out, like in 2021, hot market, people just go, yeah, I know there's a few things wrong with it, but I'm willing to accept that because at least I've got a house, and that's better than not having a house. Do you know what I mean? And that is also really dangerous as well. We see lots and lots of things. Why do we do that?
17:23
do this so much we do it with everything the phone right yes i was gonna say just like red flag ignoring you know it's like with anything whether it's like buying something whether it's a relationship there and we're so trained or easily swayed into ignoring it i saw this meme the other day and it was like me ignoring red flags and it was this like swinging red like boxing thing and
17:46
like moving his head around, like moving and avoiding this huge red flag that's about to like knock him out. I don't know why we do it. Maybe it's just like a sunken cost fallacy in a way where you, or just ignorance. But it seems dumb, especially when it comes to property buying, because if it's an investment, you don't have to live in it. Why would we not just be more cutthroat on red flag? It's a no.
18:09
That power of FOMO. If you've been saving up and you think you're going to miss out if you don't take this one because you've missed out on three, four, five properties before, I think people just choose to ignore it. In terms of what are the most common things we see, unconsented works. So garages, people throw on garages, you need consents to put on a garage in New Zealand. Glass conservatories,
18:32
Almost always they're unconsented is really common. Or people converting spaces which you need to get consent to convert. For example, like a rumpus room downstairs or a garage, you can't convert that into a bedroom without consent. So we see that all the time. And does that mean if you see a property or a house that you want to buy and they don't have the consent, if you then purchase the house, you're the one that's kind of done the wrong thing, even though you didn't do it?
18:59
Yeah, correct. It becomes your problem from an insurance perspective as well. And then, of course, when you go to sell the house, the next person's going, well, that's not consented, so I want money off. And so there are ways in which you can rectify that through getting retrospective approval. But it's a bit of a process, and depending on what they've done and how they've built it will depend on how.
19:17
can you actually go down that route or not? So unconsented works. Then there's more the condition of the property, wiring, old wiring. They used to make it out of rubber, and so that's not a very good insulator. And so we see that all the time. So people buy a house and go, oh, it needs to be completely rewired. And that's maybe $10,000 right there. Hazards, asbestos is the most common one in New Zealand. Meth contamination as well.
19:41
I think mold as well is quite, I mean, it's probably not that expensive, but you know, from a health perspective, there's so many things that you don't even know. And I think if you've never really invested in property and you're approaching this purely as an investment, there's a lot that it's, it's almost like probably for you, but second nature where you do DD and you're like, yep.
20:01
Yep, yep, no, it's a no. But for a lot of people that haven't got the experience of seeing either A, things go wrong, or B, how much things can cost. In hindsight, if you don't know about it, or make a decision, or get money off the purchase price because of whatever you find.
20:17
If we find these things, it's not necessarily a no. Firstly, you need to be aware of these things so you can then build in the cost to rectify that into your renovation budget. And so that's the purpose of DD, is finding out as much as possible about that property so you know how much you should offer on it and you know how much you're going to need to spend on that property to bring it up to the level that you want to bring it up to.
20:36
Yes, because I think when it comes to putting your budget together, to make sure that the numbers add up and you're actually going to be making money on the property, you need your budget or your renovation plan to be as close to accurate as possible. Because if you blow out by 30 grand, because there's a deck that's rotten and you need to replace it...
20:56
that's 30 grand that you're missing out on from a profit perspective. So the more insight or awareness you have on all of the things that are wrong with a property when you go in, it means that you can make that budget as accurate as possible. So it doesn't actually matter if you need to fix wiring that's bad or things that are rotting or if there is contamination. It's just being able to factor that into your budget.
21:18
So for anyone that doesn't know, I've bought a couple of properties with Pete. So we did the buy, hold, renovate, far out, I always F up the R's. But basically we bought a property, we spent money on renovating, we rented it out, we refinanced, and then we went again. And the biggest part for me where I felt really secure and grateful to be working with Pete was around this Deity piece. And I think it's because as someone that
21:46
hadn't bought property before the idea of missing something massive felt scary to me in the same way if I was going to buy a car I probably would send my dad to go and check it out because I would not know what I was looking for so I felt like I had help in the DD process where perhaps if you're doing it yourself it can feel a bit scarier but I'd love to know Pete anyone that you've worked with recently whether they're from the curve audience or just someone in general that is
22:12
did a property with you and either they had a great outcome from doing the DD properly or maybe a negative one, but just to show the importance of DD and how it can actually hopefully make someone either a better investment and more money or avoid a total disaster. Do you have any examples? Yeah.
22:32
Yeah, Deirdre and Dave, shout out. A couple of legends from The Curve who are big, big fans. Stop it. Wait, hold on. Deirdre and Dave, have we spoken about them before? I think we name dropped them last time. And so we've finished the project now. Oh, amazing. We just purchased the property when we last caught up, but it's all said and done now. This is so great. So they're from The Curve audience and they came and worked with you and did one.
22:53
Yeah, correct. So what happened? So just a really good example of the importance of DD. So firstly, we had two properties with them that we got under contract. So we said, yep, we're happy with this property. Started doing DD and we found a bunch of stuff on the first property, unconsented works, a bunch of stuff which we hadn't budgeted for before.
23:14
and so in that example we actually walked away from the deal we said thanks but no thanks the vendors weren't willing to give us the amount of money off that we needed to justify that decision and that's obviously sucks that's fifteen hundred bucks down the gurgler but better to find that out now than buy the property and go ah there's all this all this stuff and so
23:34
In that example, yeah, we walked away from the property. Second property, got under contract for them. Once again, found a bunch of stuff. Vendors weren't willing to move. So we walked away from that property. The third property, also we got under, I'll speak specific, we got under contract for $400,000. Very cute little house down in Levin. Looks beautiful. Timber weatherboard house looked perfect, right? And then we started doing some digging. There was an unconsented glass conservatory. There was an unconsented garage.
24:02
There was no insulation. The whole house needed re-plumbing. There was Duxquest plumbing. There was what? A type of plumbing which blows up, which is obviously not ideal for your plumbing bikes. Toilets. And then what else was there? Electrical wiring needed to be done. And so we negotiated off $40,000. What?
24:21
In that example, so we got it under contract for $400, ended up negotiating down to around that $360 mark, which if we hadn't done a thorough DD, we wouldn't have done. Because when you look at it, it looked like a beautiful little home, but you find all these things. The first two, we went back to the vendors and asked for money off, and they said, no thanks. And so we said, okay, cool, that's fine.
24:42
your prerogative but we just said we walked away from those two deals the the third vendor was more willing and they said okay yeah fair enough we obviously got quotes and showed them everything that we'd found this is how much we want off based on what it's going to cost to rectify these issues and so they said yep cool um you can have your forty thousand dollars off so then once you bought it and you got it for 360 you spent did you say 115,000 115 on the reno which is significantly more than our average our average is around that 75 mark
25:09
And then when it was valued, like revalued, it was revalued at $600,000, did you say? Yep. So we get a registered valuer to come through the property once the renovation's all complete. And that registered valuation came back at $600,000. Which means the gap between what you'd spent on buying plus renovating was $125,000.
25:27
Yep, which is enough then for a deposit for a second property. To go again. To go again. That is such a good example. That's exactly what I did with Pete. We bought our first one and then we used that same equity to then go again. I think that is just such a good example of the whole point with this type of investing is to make money. Therefore, if the numbers don't add up.
25:47
You shouldn't have emotion involved. You need to make sure it's cash flow positive. You're trying to actually make an active return. It's not just I'm buying and trying to make money. It's a really, it's an actual strategy. You need to do DD because if it blew out and you'd spent money on that house, you're going to have to do that.
26:04
you wouldn't have made that. You would have made an, you know, there would have been a huge difference in the return on that investment. I wasn't going to get to the auction, but let's just zoom through that instead. Cause I do think that it's such an interesting point. Cause when I was thinking about this particular question, I was like, I don't think I quite realized how lucky we were with the auction until knowing now in hindsight, that that's actually a really not ideal way to purchase properties. And interestingly, a lot of them, especially in the UK at the moment going via auction. So yeah,
26:34
Why is your view quite strong on the idea that auctions is not a preferable way to buy? And can you maybe explain it? Because I think as well when you see an auction, so for example, at the moment I've just been keeping an eye on auctions around London. And I'm really shocked at how low they are coming up for.
26:54
And then I actually spoke to Vic because she went to look at a property that was on auction and they went for way higher than what they had registered. So I think that's obviously a common strategy. But what are some of the other reasons why buying at auction is not great? So we don't typically buy at auction. I think we did almost 19 deals last year and only three clients bought at auction, including yourself. So you're an elite club. Why is it not a good idea?
27:17
Yeah. Firstly, you've got no guarantee of outcome. So you invest a whole bunch of time, energy, and money getting ready for that auction. Because when you purchase at auction, it's cash unconditional. You don't get time to go and do your DD. You have to do that all before you go to the auction. Yeah, because you buy it and you own it. And you've done it legally at the auction. And you're like, oh, hold on. I'd really like to just check that there's no blah. It's like, nah. No, too late. You own it. Yeah.
27:40
And so there's no take backs. So childish. No take backs. It's all yours now. But it's true. So you're going to want to obviously do all your DD before you go to that auction. It takes time and money. As I said, if you do that a few times, you can get pretty annoyed pretty quickly. And then there's also the whole psychological component of it. I was just about to say that.
28:00
You're there bidding against someone. And I'm guilty of it. I've turned up to an auction. And I've gone with the mindset of like, I'm winning this auction. I want this property. I've got my hopes set on it. And then someone else has turned up to the auction on that day with that same attitude. And you know what happens. You just keep bidding. And thankfully, I've lost because there's been times where I've kept bidding an auction. And I'm like, oh.
28:22
If I had won that, I would have not hit my KPIs. And so thankfully, I've lost. But that's why I typically don't like auctions. And I've put some processes in place to make sure that we stop bidding. Ooh, like what? Hanging up the phone. Once you hit your number, just get off the phone. Because they can't be like, oh, do you want to chuck an extra $5,000 on? It's so psychological, isn't it? So you just go, okay, I've hit my number. See ya. Boom. And then it's done.
28:48
It's brutal, yes. It's a bit brutal, but rather that than overpay on a property. And so that's why we typically avoid them, but can get really good deals for the right property.
28:58
What you mentioned about having been in that position where you were overbidding, it's almost, it's like a way, way, way more extreme example of having a bit of a like blackout and spending money that you didn't plan on spending and feeling really regretful and anxious afterwards, but times a million, you know, like go and work that sort of stuff out on a dress you shouldn't have bought, not on a property you shouldn't have bought.
29:21
Yeah, because you're talking tens of thousands of dollars rather than – and when it gets up to that sort of level, I don't know, you just forget that it's actually $20,000. But imagine how bad you would feel if you overspent $20,000, I don't know, on dinner outs or clothes or something out. Do you know what I mean? You'd feel that pain a lot more than just $20,000 on a property. So you do actually have to remember that it is $20,000, you know what I mean? But when you're dealing at $500,000, an extra $20,000 doesn't seem like that much. Yes, and it's so easy. You're just like, we're so close. I'm just going to say yes to that.
29:49
It's almost like play money. Avoid auctions, if at all possible. Okay, avoid auctions, love it. Can we go back? Because I'd love to talk about one of the things that you really believe in and talk a lot about is the idea that your earning power is actually your most important asset as a property investor. What do you mean by that? Can you just explain the numbers around why that is such a key part of being a good property investor?
30:13
Yeah, I think most people, when you hear it thrown about, you know, that your house is the biggest asset that you're going to have. And fair enough, you know, that probably is in terms of the amount of capital put into it. But I think people overlook how important income is. The more you earn...
30:29
Obviously, typically the more you've got left over, which means the more debt you can service. And so that's really important because you can borrow more, means you can purchase more property, means you can have more assets, and more assets is ultimately going to result in a better financial outcome for you. And so just a little anecdote. I work with a range of people, but the high-end, really high-end earners can purchase more property than those who are a little bit on a lower salary. I'm working with a client at the moment, high-income earner,
30:58
Because she's a higher income earner, she can afford more debt. She's purchasing properties with only a 10% deposit with a second tier lender. So she's paying a higher interest rate, let's say 8% rather than a 6%. But she can afford that. Because she can afford that, she doesn't have to put as much money into the property. She can just do 10%. And so she's going to buy three properties in the next sort of 18 months or 12 months is the goal. 12 to 18 months. Whereas if she wasn't on such a big income, she wouldn't be able to service that debt and she wouldn't be able to get...
31:26
as much property. So that's just a really clear example of the more you earn, the more you can buy and the more debt you can service. Do you think there's an argument then for being in your younger sort of years to really focus on having higher paid jobs to be able to get property under your belt? Because...
31:43
I know that you're meant to notify the bank if you're earning changes or whatever, but if you've already bought the property, it's less of a problem. It's more if you're then going to get more debt. So for anyone that doesn't know, the idea of being able to service more debt and it being really positive is essentially just the idea that the more that you can borrow, the more money that you can amplify because the compounding returns from a loan or a mortgage mean that if the property goes up.
32:09
You only have to pay back the bank what you've borrowed rather than all the money that you're making on it. So really, really simple terms. The more that you can loan, if you're investing cleverly, the more you can make in property. Yeah, correct. So do you think there's an argument to say if you can get a higher paying job to be able to then leverage that to get property, it's a really good way to get ahead early?
32:31
Absolutely. And there's various things you can do, you know, ask for a bigger bonus, ask for a pay rise. Or one thing I personally did was actually go out contracting. So going from a full-time employee through to contracting to where you get a higher day rate as well. You do have to be able to prove your earning capacity over a period of time though, because even if you have like five really expensive days and then you don't have work for six months, no.
32:52
Like I say, it depends on everyone's situation is different, but if you can get regular contract work, which makes your income earning more than that, that's an option as well. So yeah, I think people should really focus on that because that then flows through to property investing.
33:06
Mm. It's such a weird sort of give or take, though, because in your younger years as well, when you're not attached to the idea of having kids or a family or you don't have any responsibilities. So it's sort of this like easy breezy free time in your life where a lot of people say make the most of that.
33:22
Tying yourself down with a lot of property and also being really leveraged from a mortgage perspective so you have a lot of debt. Great in terms of potential returns, but not great in terms of you actually can't afford to lose your job or make a decision on a whim to go and travel the world for you. Again, you just have to make a decision on what you're willing to sacrifice for.
33:43
It comes back to the values part and a little follow up comment on that around because you sort of, you know, you mentioned the burden of a large mortgage and that's a big difference between owning your own home versus property investing. You know, with property investing and the types of properties that we go for, it's cash flow positive. And so that property and that debt isn't reliant on your income. The property can tick over by itself and people overlook that. But I think it is really important because you don't have that burden of, oh, what if I lose my job?
34:11
If you lose your job, that sucks, but at least you don't have the pressure of servicing that investment loan as well because the rental property will pay its own way.
34:21
Can you explain that a bit more for people that don't understand? Because I think it's a really, really important piece. And another example might be, you know, you see a lot of people who want really nice expensive things, whether it's a really nice car or a really nice house or really nice clothes. And if you have those on loan, so you don't own them outright, you're having to pay to keep up with those payments, you know. So for example, let's say you want a really nice Audi, but you can't afford to buy it outright. So then you go onto a loan and a contract,
34:48
If you lost your job and you can't then pay those loans, it's quite stressful. You're really close and you're sort of up to your eyeballs in terms of what you basically have sort of built out your lifestyle and what you're paying for to keep up with, say, a $200,000 income. But if you then lost that, everything sort of comes crumbling down. Whereas the difference in what you're talking about is buying property that is not stretching yourself so that...
35:14
You're not constantly having to top up with your mortgage. But I do think that's still quite a foreign concept for people. So maybe just explain the difference between if you were buying a really gorgeous property and you were loaning a lot of money to buy a house to live in versus borrowing money or getting debt to then invest in property.
35:32
Yeah, well, the important difference is when you own your own home, you've obviously got your mortgage, and you're responsible for paying that off. You don't have any board... Let's assume you don't have anybody else living in the house. It's just you and your partner all by yourself. So obviously you have to service that mortgage wholeheartedly by yourself. But when you're...
35:48
buying an investment property, you've got tenants in there who pay you rent, and so that rent goes straight to covering the cost of your mortgage. And with the types of properties that we buy, that rent covers all the interest, so you don't have to tip any of your own money in there. I alluded to a mental burden, you don't have that because you're like, if I lose my job, it's cool, the property's going to tick over.
36:10
Not only that, the really important, well, in addition to that, it's important so you can continue to borrow because if it's not cash flow positive, if the property isn't cash flow positive, it's going to be really hard to go back and get an additional loan for a second, third, fourth property. And so that's why it's really important to make sure we get cash flow positive properties.
36:29
Because it basically then means in the same way that I've done, well, we've now done two. Because they're cash flow positive, it's not sucking any of my income. So I'm not having to top up. So if I then go to say, well, I want to loan more to then buy again.
36:42
they know I can afford that because the properties that I have, I'm not having to service. Whereas if you're tapping a huge amount of your pay into servicing a home that you own, for example, if you're then going to leverage more money to buy more property, you're not going to be able to afford to service it, especially in like banks are really conservative in terms of making sure that you have...
37:02
Ampoule amounts should, you know, interest rates go up and you have to pay a whole lot more. So it's just, it's a lot harder to sort of go again and again and to continue to leverage yourself to buy more properties if you're having to service those. Whereas if they kind of wash their face or they're cashflow positive.
37:18
then they're sort of ticking along in the background and you're getting that constant growth in terms of hopefully the actual property being worth more. But it's not also sucking out money that you would ideally want to spend on other things, whether it's lifestyle or it's investing in other stuff.
37:33
Yeah, and the challenge with property investing changes with time. Most people, the first challenge when they're starting out in their property investment journey is getting that initial deposit together, roughly $250,000. The money you need to turn up to the bank, the 30% if you're buying an investment property.
37:51
When you get later on in your investing journey, you know, you're on to property two, three, four, what then gets harder is actually the servicing component, being able to service that mortgage in the bank's eyes. Because there's often a difference between reality, what you can actually afford, and then what the bank says you can afford.
38:07
Banks do two things. Firstly, they shade the rent. So if you're getting $1,000 a week rent, they shade it by, say, 25%. And so in their eyes, you're only getting $750 a week rent. They'll also then use test rates. So test you, can you afford to pay this mortgage if it goes up to 2%, for example. And so the computer says no a lot quicker than if you can actually afford it. And so that's why if you don't have a cash flow positive property, the computer says no pretty quickly. And so that's where, I think there's a stat out there, 90% of property investors in New Zealand
38:35
only own one property and that's because people don't think of the cash flow implications quite early on in the journey. They may just go buy a relatively expensive home and think that it's okay but then when they go to buy the second property they can't afford it in the bank size.
38:49
Can we go into that in a bit more detail? Because that is what I wanted to talk about next is just the importance of cash flow. And yeah, I think that there's this awareness of the deposit and the amount that you need. And then a lot of people through this podcast have learned that, you know, if you increase the value in a property, you can then use that almost equity to buy again. So you don't have to constantly save up for a new deposit and a new deposit. But can you explain cash flow?
39:17
with relation to the importance of what you're buying and therefore how much that can impact your cash flow if you're not buying the right property. A cash flow positive is a broad term that's used in the property space to describe an investment property where the rent covers all the associated expenses. So it covers your interest, your rates, your insurance, etc. And that's what we try and go for, cash flow positive property, for those reasons which you pointed out, so you don't have to top it up with your own money.
39:47
and so you can keep borrowing into the future so you can get your second, third, fourth property. And so depending on what type of house you buy and depending on how much you pay for it will depend on is that property cash flow positive property or not. And so when we're looking at property, typically the cheaper we can buy, the better. Why is that? So rent doesn't necessarily increase at the same rate as house prices.
40:09
So for example, in a large centre like London or Auckland, let's just say you're going to pay more money for that house. Let's say a million dollars or a million quid, and you're going to get $750 a week rent. But if you buy in a smaller location, maybe a bit further field, Birmingham, Bath, in a UK context, in a New Zealand context, maybe Whangarei, Tamaru, for example, and to get that same amount of rent, $750, you can buy a house for a lot cheaper, let's say $400,000 a week.
40:38
Therefore, you're going to have less interest payments on that cheaper property, and so it's more likely that that property is going to be cash flow positive, which is really important so you can continue to borrow into the future and can keep building your assets. Does that explain it? Kind of. Does it just mean in the same way that...
41:01
Well, does it basically mean almost the opposite to when you think about buying property, you think the higher the value of the overall property, therefore the better investment. It's actually not really the case with property because…
41:15
The way that you get cash flow positive is things like interest rates, rent, everything being able to be covered in its overall cost month to month. Whereas if you have a higher value property, it doesn't necessarily mean you're going to get exponentially more rent. So to get it to kind of like cover itself and be cash flow positive is actually a lot harder if you're buying in a big area like London comparatively to a smaller maybe countryside town. Yeah.
41:44
The investment or the cash flow positive piece kind of comes down more to all of the numbers adding up rather than just thinking, if I buy a really expensive property, it's going to be so much more valuable. It's actually kind of like changing your mindset around that and understanding the holistic numbers of how to be cash flow positive.
42:03
Correct. There's only so much you can charge for rent, right? Like, yes, if you've got a $5 million house, you can't just charge that much, like an equivalent amount in rent, you know, because it maxes out in terms of what people can afford to pay. And so that's where it's sort of diminishing returns in terms of how much the rent increases as house prices go up.
42:23
Whereas if you've bought a $5 million home, the interest rates are going to be huge. The repayments are going to be quite high. You're not necessarily going to get the return with rent, which is why a lot of people would live in those types of houses, right? Because it's almost like you're buying a house like that for the experience of living in it and you hopefully can afford to service it. Whereas when you're thinking about investment properties...
42:45
It's not about the total value of the property and it being in the most amazing location. It's actually like looking at all of those numbers, getting it cash flow positive. And that actually often means not buying in main centres. Yeah. And that's the exact reason why I don't look at properties in main centres. It's sort of centres which are a little bit further afield. So in a UK context, it would be sort of in the Midlands and in New Zealand context outside of Auckland. Yeah.
43:10
It's so interesting because I do think there's – and when I've spoken to people about my investing in property strategy, a lot of people say to me, oh, well, why haven't you bought in a city where there's going to be higher returns? I think that people focus so much on the overarching value of a property and the idea of really leaning on capital gains financially.
43:33
following the market and that property being worth more rather than the formula involved in understanding how to be able to get more and more properties and therefore how the amount you can make on property investing is kind of not so much about buying a property in a place that is probably like a really desirable place to live. It's actually not so much about that.
43:55
Yeah, I think we're probably seeing a bit of a change. You know, that's probably an old style of type of investing where you couldn't really go wrong. Yes, it's so true. A lot of people just think, oh, I buy in a big city and that's me sorted. And it's not the case anymore. And if you look at history, they've been right. You know, boomer generation, you couldn't really go wrong. It's not quite the case now. You still want to, yes, hopefully we're still going to get some capital gains, but you do need to be a bit strategic and think about cash flow as well.
44:21
What about flipping? Do you think that flipping is, because I guess there's a huge amount of noise around it, and maybe it's almost like the go-to choice for people when they think, yeah, this traditional property investment in terms of going to big main centers is sort of no longer guaranteed. Therefore, the go-to is flipping properties rather than thinking about how else you can do it.
44:45
I guess the idea of like, for anyone that doesn't know, flipping is just buying a property, renovating it quickly, and then selling it quickly.
44:53
What is your take on this type of investing versus the other two options? So sort of buying, holding something really valuable, having all your eggs in one basket. What I've done, buying smaller properties, they cash for a positive in lots of different areas. And then this, how do you see it kind of fitting in? Yeah, so I don't think it's a particularly good strategy for wealth creation. And I've flipped properties and I've also obviously done the bear method, buy and hold for long term. And so I can see it from both angles.
45:21
Pause. The Burr method for anyone that doesn't know is the second option that I was talking about where it's buying lots of little ones, which is what I've done. It's buy, renovate. God, I'm going to always forget the R's. Buy, don't tell me. Buy, renovate, rent it out, refinance, and then repeat, go again. So that's that property approach. Then you've got the sort of buy really expensive property and hold it for a long period of time. And then the sort of flipping is another kind of third strategy.
45:47
Yeah, correct. And so flipping isn't investing in my mind. It's just like if you're a share trader, day trader, you're not really investing in shares, are you? I don't know.
45:57
Wow, that's a huge call. You reckon day trading is like flipping properties? Kind of, yeah. You're not really investing in the shares. You just see an arbitrage opportunity to buy this and sell it for that, and you do it. And that's the same with housing. At the end of the day, you flip the house, you sell it. You don't have an asset at the end of the day. You've got some money and you've made some money. So it's more like a job in that sense. You've got regular income coming in, and that's what I tell people. If you hate your job and you hate your boss,
46:24
Go flip property. It's not easy. I won't sugarcoat it. It's pretty hard. But it's a way to have a job versus investing. You can't buy one property and retire the next day. But it will build you wealth over the long term. And so that's how I see the two. Long term investing, that is investing. Flipping, it's a day job. I would like to delve into this more because I think –
46:49
Firstly, it's such an art to buy the right house at the right price, to know what to spend on for the renovation and then sell it at the right time. I think it's so, I feel like in the same way you just explained it, like day trading, it's so much riskier. You have to know what you're doing to make money if you're buying and selling and trading shares every day. In the same way, if you're doing that with property, I think people just assume you buy, you add value by renovating and you flip it on. It's actually so not the case.
47:17
Yeah, the amount of times I've heard people go really wrong with trying to flip property is in the same way when people try and time the market with shares in the stock market. It's often a disaster. Whereas if you think about the idea of flipping a property as a job, if you make a 20 grand return over, say, $1,000.
47:36
a three month period. Think of that as your salary instead of earning money in a consistent way, like you would with your job, you might get a lump sum and it evens out over a period of months. But yeah, it's, it's so much riskier. I love the idea of changing the mindset. If you know how to renovate, maybe you have the skills so you don't have to outsource heaps. So you can actually do a lot of the doing and,
47:57
Where I think people get so confused, it's like if you buy something and then you add value, but you're paying all these contractors to do all this work, very quickly, that margin of how much money you can make by flipping a property gets so small.
48:11
Yeah, it's a far more advanced strategy and you need a lot more knowledge to do it than long-term buy and hold investing. And so a lot of people come to me, say, Pete, I want to flip property. And I outline this, and they've never done property before, but they think, I don't know why they think it's accessible. They just say maybe it's a bit sexy, but I outline the risks to them. And I say, hey, maybe think about do a long-term buy and hold and then go flip a property, going straight into it. Yeah, I wouldn't recommend it. It's quite risky.
48:38
It's almost like you've never heard of stock trading or investing in the stock market. And rather than doing a classic buy and hold approach, like buying the next door, it's like going hard on stock picking with no experience. And trying to do it over a short period. Yeah, yeah. Being a day trader and you've got no experience, it's pretty risky. You wouldn't recommend that, I assume. And so it would be the equivalent in a property sense.
49:06
You heard it here first, everyone. Flipping is not the way to make money on property. And I've done both. And so I can speak from experience that, yeah, the buy and holds make you a lot more money.
49:17
Thank you so much, Pete. I think that hopefully, I mean, we touched on quite a lot in this episode in terms of like being cash flow positive and the importance, how much difference it makes if you have a high earning capacity. The idea of trying to change your mindset and not be emotional when it comes to purchasing property if your intention is to make money rather than have a lifestyle, you know, in a particular property you want to live in.
49:43
For anyone that is interested in this type of property in terms of actively investing in property rather than buying a house to live in, this is something that you've done with several people from the Curve community. You've done it with me. For anyone that wants to get in touch, we'll put the link in the podcast show notes. But, yeah, if anyone has any other questions or wants to find the work that you do, what are some of the platforms and places that they can find you?
50:08
Yeah, obviously I think on your website you've got a referral link or obviously you can find me and reach out to me. Yeah, I've worked with a number of your listeners now, which is pretty awesome. Love working with them. So yeah, reach out. Be great to help some more. Yeah, amazing. And if anyone's got any questions specifically on property investing, either comment when you're listening to this or let us know if there's another conversation that you would like us to have with Pete because I think when someone's had something
50:34
10 years in an investment space or an asset class. There's so many things that you know just by virtue of doing so many houses. So if you've got any questions or topics that you want us to cover, please let us know. That's the whole point of the Property Podcast. But thanks, Pete. Pleasure to be here. Come to see you. Come to London. Anytime. Did you love this episode? Yes. Have you got property front and centre in your mind? Yes. Yes.
51:01
Sounds like you're a five-year-old. I know. Now could be the time to take the first step towards what it is that you're wanting to buy. Whether that's your first home, whether that's a new flat, whether it's, I don't know, buying another investment property. And thankfully, BNZ has the expertise and tools to help you get started and their home loan partners are ready whenever you are.
51:22
You can book an appointment, you can ask millions of questions, trust me that is totally fine, and you can start turning the property dream that you have into a plan and hopefully soon into a reality. I know from experience that this can feel quite overwhelming, but when you're working with experts who can actually help you get there, it's such a burden off your shoulders to know that you've got the advice and the tools that you need to actually make it happen.
51:47
We know how hard it can feel and like overwhelming and just, you know, so like a fish out of water when it comes to buying property. So we're so thankful to BNZ to be helping us create and empower this podcast so that people can learn. And we just want you all to succeed. We want you all to succeed. We're all in your corner. And this is going to be such a game changing property podcast series.
52:13
yes and for anyone that is going through the process of either buying a house or a flat or whatever it is that you're trying to do please let us know because we would love to be cheering you on from the sidelines but thank you so much again to bnz for empowering this podcast
52:27
Okay, quickly, the Curve was created to empower and educate you about investing, but we are not financial advisors. Our platform exists for educational purposes only, and it doesn't provide personalized investing advice for your individual needs and should not be relied upon to make an investment or financial decision. And always remember to do your own research before making any investment or financial decision. We're here for any knowledge and support you need, but the final call is always yours. And thanks for being here. You got this. Yeah, we know you got this.