Jess
Kia ora, it's Jess here from the external communications team here at the FMA. And you're joining me for another episode of Jess learns to invest. I'm really excited because today we're gonna be talking all about property as an investment. I'm thrilled to introduce today Vanessa Williams from realestate.co.nz. Vanessa, you're the GM of marketing and media. And when I was doing a little bit of research, you guys have been around since 1996, which is quite a while. It's like before I was born. So you guys have been quite a long standing property website here in New Zealand for people to buy and sell and rent. And so I'm really excited to have you on today. We're gonna talk about all things property investing. To kick us off, can you just tell me a little bit about your role, how long you've been there and then we can get into a little bit about how your own property investing journeys been going.
Vanessa
Absolutely. Hey, look, thanks so much for having me here, Jess. I'm really excited to be here today and share all of my years of wisdom with you and your lovely listeners. So you're right. Realestate.co.nz has been around since 1996 and that's actually two years before Google was even around.
Jess
Oh my gosh, that's a good point. Yeah.
Vanessa
I always like to say we had a website, but nobody could find it, so you know, that's always my wee joke there. But look, we have a long standing property portal. And so the beauty and the benefit of that is we have all of those years of data information store. These right back to when you couldn't really upload a photo to a website. You actually just scan it in and upload it in that way so.
Jess
Is it bad to say I cannot remember those days.
Vanessa
Unfortunately for me, I remember it very well. But look, I have been at realestate.co.nz for coming up 10 years next week.
Jess
Congratulations.
Vanessa
Thank you. And so I have a real passion for property, which is why I love doing what I do and I look after, but not only the marketing area of realestate.co.nz, But I also manage the media relationships and the likes of the podcasts and things like we are doing today informing and helping and sharing with Kiwis out there who are looking to buy a house looking to invest, looking to rent, looking to perhaps look into the commercial market. So sharing our insights and what we have at realestate.co.nz for New Zealanders to utilise in their journey.
Jess
Ohh. Awesome. Because you’ve got a lot of good information on your website and I'm sure it must feel quite nice that you get to like, kinda educate and help people with something that is most of the time exciting, even though scary and hard sometimes. The process of buying a house is exciting, right? So. Yeah, that's really cool.
Vanessa
Yeah, absolutely. And I think it's, it's a real privilege and a pleasure that we have here at real estate. You know, it's very few things in your life are as big as buying something that's probably over half $1,000,000 in real, some half a million.
Jess
Yeah. Big decision.
Vanessa
Huge decision and look, you only probably do it a handful of times in your life, so it's not something you're typically going to have all this information, understand it or keep on top of everything and you know, because you're only talking a handful of time. So if we can take that opportunity to utilise our skills, our information and our knowledge. To make that process easier, more thoughtful, more thought provoking and supportive for those who are looking to transact, that's kind of what what we love to do.
Jess
Yeah, awesome and I'm keen to know a little bit about your journey with property investing. Yeah. How how's that been?
Vanessa
Yeah, that's it's been a. It's been a bit of a long journey with my property investing. I have always had quite a passion for property. We not only did I used to take the property priests, which some people, some of your listeners might remember, others might not, but I used to used to like, be a book of property that I used to sit in a cafe. My parents and go, Oh my gosh. When I'm older, I'm gonna buy this house. I'm gonna buy that house, and I'm gonna buy.
Jess
Bye.
Vanessa
This House and I. Stumbled them with the piece. And you know, and it's so interesting how I I didn't ever really do that with our youngest. And I say that she's now 15. But. She did the exact. Same thing you know, I think just properties been a bit in our DNA and I was unfortunately lost a significant family member. In our family in about 2014, which left some inheritance for myself and so therefore I decided to utilise that to purchase my first property. Now, I didn't own a home that I lived in at that point and and so and I also, I lived in our biggest city in Auckland and wow, the prices are really expensive.
Jess
Yeah.
Vanessa
And so I decided that we would take that money and actually rather than purchasing my first home to live in, I actually purchased an investment property with a family member. And so that's sort of how I got into the property journey. As I said, I started at realestate.co dot NZ in 2015 and that probably just enhanced my love. For the property journey, I think. That since then we've bought I've I've purchased a we've purchased a home for us to for us to live in, and then we've purchased a couple more investment properties just utilising the equity and over and time is just such an amazing thing. You know, I think we will underestimate or think well, it's gonna be a really how will I. How will they make this work? How will it all happen and time just kind of gobbles up the the mortgage or parts of that mortgage and makes things easier. The market shifts and grows, so you have more. Equity in a property which allows you to make different decisions and so you know I think you know, especially for our younger listeners who are going, I don't know if I can ever get there or you know will it ever happen. You know it certainly can do if that's something that you really want and it's on your list, you will absolutely make it happen. It's just about you know there's so much.
Jess
Yep.
Vanessa
Information today that I just certainly didn't have 1012 years ago to be able to make these decisions and I'm I love how much it's more of an open conversation now around how we actually get into that area.
Jess
Yeah, I'm keen to touch on that a. Bit later of. It because it even for me like it does feel a little bit like it's never going to happen, right. But as you say there is lots of awesome tools and information out there. So as I was doing some research for this episode, I came across quite a lot of jargon terms, some that I can't. I can't even tell you off the top of my head cause it just went straight over my head. So. Could you talk through some of the like most common terms that people will find when they're doing some background research about property invest?
Vanessa
Absolutely I can. So I'll start at the top.
Jess
Always acronyms, always acronyms.
Vanessa
Oh, Oh yeah. And they can be. Quite confronting, right, you're seeing maybe a release or a news article that says Ohh DTO's are changing which is gonna really impact the OCR and you think my goodness, what is this?
Jess
Should I know what that means?
Vanessa
Let me start at the top and that's LBR, which is the loan to value ratio, which basically means have you got enough money for your deposit. So typically a retail bank in New Zealand will ask you to have around a 20%. Amount of deposit when compared to the full property price amount. So for the ease of my lovely mass brain, let's just pretend we're looking to buy $1,000,000 property. Typically you need around a $200,000 deposit. Gosh, that sounds a bit scary. Maybe we'll go $500,000 house $100,000. Deposit. Maybe that's a little bit more achievable. So when you think about that, that is what that's what your LVR is is typically around a 20% and when there might be some information in the news that's saying banks are able to loosen their LVR lending and what that really means is that they will be able to lend some homes rather than having a 20% deposit. They can actually have a 10% deposit. So the first thing you wanna know is have I got enough money in the bank before I purchase my house? And then finally you want the OCR. Now that is the official cash rate, which really governs the interest rates here in New Zealand. So in simple terms, this is the how much you're going to pay for the loan that you are borrowing from the bank. Now the official cash rate is what then? The retail banks, the likes of Kiwi Bank or your likes of the BNZ are then going to charge you an interest for the ability to have that loan. So those are the kind of the key ones that you sort of need to know. Have I got the right amount of deposit? Am I spending my money wisely? What is my household income? So I know how much I'll be able to borrow. And then finally, what is the cost of that money that I am borrowing so that I can achieve the repayment amounts?
Jess
I love how you worded it, it just it made it make a lot more sense. I don't know why they make it so complicated cause like the two sounds so scary. And I came to know why should people invest in property? Because there's there are so many different ways you can invest in property. To me seems the most overwhelming, the most exciting, that I'm more interested in. But I'm like there are other ways to invest where you just go online, do a few clicks. So I'm like why why do you reckon property investing?
Vanessa
Yeah, that's a great question. I think the property is part of our DNA here in New Zealand. You, you know, was talking off mic before. You know, you said to me it's on my list. I'd really like to do it. And I do think it's been sort of feed into us at quite a young age, no matter what age you are, they're sort of get your schooling. The way get a bit of a job and then look at what it is that you can. You can purchase a property and you know we have one of the highest home ownership rates in the world. So globally, 66% of New Zealanders own their own home.
Jess
Wow. That's awesome.
Vanessa
That is a phenomenal amount, so you know that's 2-3. People own the home that they live in, which in this way I think we do have such a passion for property. We are hungry for information. We do want to invest in property and interestingly, as well, I just heard this the other day that well over 60% of all investments that. Are done by Kiwis. Is also in property so. I think that why? Why would we invest in property? Look, I think you've really got to. Understand the market. You've got to have a passion for it. You've got to understand the risks, of course, like any investment. But I think the reason why we do as Kiwis invest in property so much is because it has been part of our DNA and prior to very recently.
Jess
I'm just.
Vanessa
We saw that as our retirement nest egg. There wasn't Kiwi saver sub 12 years ago. I think it's about 10 or 12 years old now, so we haven't. We haven't had a investment portfolio sort of option. There hasn't been a lot of information around it. I mean shares these only really as as one platform that that's kind of democratic democratise the ability. To purchase shares, you know that has only been something that's really recent, and if you look at my generation or my parents generation, it really was buy a house. Hold on to it for 30 years and sell it for three times the amount you bought it for and downsize. And therefore you've got your message of money and you've got a house to live in. So I think that's kind of why people have.
Jess
Yes.
Vanessa
Always invested. But I do believe that where we're going to invest in the future. Will. Grow and change as there are more options and there become more. There's more venues for Kiwis to look at.
Jess
I think it is great that we have Kiwi saver and that we can use it for our first time and that's sort of a lot of people. What I'm saying most people my age, that is how they're getting into their first first home, which is great because otherwise it's so it seems so hard to do. So really. Yeah, it's really great that we have Kiwi saver. And I was wondering it might come across like a dumb question but. Owning your own home, is that considered? Does that mean you're a property investor? Because my understanding, I think I know the answer, but I'm. Keen to know? What you're gonna say because it's not guaranteed that it's gonna go up in value, right? So I kind of want to go with it. No, but I'm keen to hear. Your thoughts on that?
Vanessa
And I will just say Jess, there are no dumb questions. I think every question is someone out. There's probably thinking about it so.
Jess
Because if I don't know the answer, then yes. Someone else asked me. Thank you.
Vanessa
Exactly. No, I think it's. The perfect question and a really good one, so technically. Owning your own home that you live in is not an investment because it's not technically giving you a return sure, and exactly what you had said. Sure, it might in 10 years time, but it's like I was having an interesting conversation the other day around Chanel handbag now is a Chanel handbag. Investment and I sort of said, well, it could be if you're renting it out because therefore it's generating you a return.
Jess
It could be. Good.
Vanessa
And so, technically speaking, you are right that the house that you. Are living in. And this is. Very much the view globally, which is why a lot of them, a lot of people come to New Zealand and they're like I do not understand why your Kiwis are so invested in property like what is, what is all the deal, everyone goes to a barbecue and all they talk about is traffic and property. What's going on? And you know, because for the longest time we have seen it as our investment because of how fast and quick the property market grows. We actually for an economy, it's actually better that more people live in their own homes. So you're dead. Right. Great question. And you are right. Technically the home that you live in, if it is not bringing you in and come then. Or return I should say then no. Technically it's not an investment, but look, you might have. You might rent out all your rooms then that. Hey, that's actually quite different.
Jess
Yeah, good point. Yeah, yeah. Interesting. Yeah, cause I like, yeah, put it into Google and I was like, I want to know what an expert actually says. And Google said the same thing. So there you go. So if owning your own home is not considered an investment, then what? What is property investing? What's the process and how do you even do it?
Vanessa
Great question. So whether you're purchasing your own home or a investment property, so that would and and the simplest terms would be a home that you don't live in or that you live in, that the idea is to make a return out of it. So you. Right, I've and what I have seen before is someone purchased a four bedroom home. They made the garage into a kind of lined the garage with a bit of job and some carpet. They lived themselves in the garage and rented the four bedroom home. Yeah, very, very smart.
Jess
Ohh wow. I thought you gonna say the opposite. They lived in the. Home and they got someone in the garage.
Vanessa
Yeah, so now I've I've seen that happen before and they the intention of that was that, yes, they needed a place to live. But they actually wanted to purchase it to make a return from the property. So that is in. In simple terms, if you're investing in property, it's it's purchasing something that is going to make you a. Return. Now, how do you go about that? It's very, very similar to if you're going to purchase your own home. So you would, as we said before, you would do a lot of that. You would look at a lot of those with my deposit. And remembering that when you are investing in property in New Zealand that you're not going to. Live in your. LVR, or that loan to value ratio, actually double s. You need to have 40% either equity or money in the bank in order to be able to achieve an investment that you're not living in so. It does become a little bit trip. Here and there are a few more sort of legislative changes which actually have softened a lot with the change in government. More recently, July last year. But again, if there's something like if you sell it within two years, you are subject to tax requirements and the likes of the ability to write off interest. As an expense against the property is different than if you were to write off the interest of a business loan, we can get to that in a moment so. Purchasing a property is very much like what you would do with your own home. You would go searching, but what you would do is you probably buy a little bit more with your head rather than your heart. Yeah, because you can see people who are in the auction room that are purchasing their own home and there's a lot more emotion involved in it. There's a lot more. But I can see myself with that my couch and that living room, and I can understand my children could go up to that, you know, school up the road. Or we could play in that. They could play in that park up there or. Yeah, there's a. Lot more kind of emotion involved, whereas typically with an investment you wanna think a lot more with your head. So you would. Perhaps if you're very good with numbers, you might be able to do it yourself, but I highly recommend and and and I do myself. Is work with property experts who can help you out with these types of things, so the likes of an accountant. A lawyer you know, looking at the infrastructure that isn't around that area, is there a local train station or a local bus stop that makes it really easy for people to get in and out of what, in terms of your investment capabilities, what in that particular area is getting really good yields on on property? So what is the average rent in that area and how does that differ depending on 2 bedroom versus 3 bedroom with the amount of capital outlay that you have to put out there. So how much money you actually have to spend versus the return you'll get on the rent cause you might find? That you could buy a 2 bedroom home for $400,000 in an area, but you only get $200 a week rent. For that you up one more bedroom, go for 300. Sorry. You go 3 bedroom home. It's only an extra 100,000, so, half $1,000,000. You're purchasing, but automatically the rent double s because. That's more of, yeah. Yeah, exactly. It's it's more applicable to families or, you know, so there's lots of different factors that you would take into account. It's more like a mathematical equation than it is really a. I love this house. I can see my family here and I we want to move into this place.
Jess
Yeah. It's interesting to talk about that, cause that was gonna be my next question was do you need to worry about location and size of the house and things like that? If you're not going? To be living. In it, but it kind of sounds like those are still things you would think about. Obviously location if it's by school families, so that stuff all still comes into account even if you're purchasing. For an investment.
Vanessa
You definitely. Yes. You wanna make sure it is a very attractive place for renters to be able to rent your property as well. And I do work personally on this as well. I wouldn't. I don't purchase a property that I wouldn't live in myself. Well, I don't like we have purchased properties that are quite run down and we have. Got the much with standard where it's like, no, we would be really happy to live in this because our goal is to get long term tenants and we want them to make them their family homes and it absolutely makes a difference if it's in neighborhood that's got good schools that's also got or very close to a train line or a. Bus route or? Park and ride. So it's I absolutely would think through all of those things because what that means is that when you are looking to rent it out, your property becomes something that's very marketable. You can utilise that in your marketing when you're looking to find tenants and if people are thinking about renting your house or somebody elses that. Well, actually this is going to make it really easy. Because it's got what we need. It's got enough bedrooms, enough bathrooms. But it's also close to good schools and good ulterior routes or bus lines or train lines. So yes, location is important, but it's more around thinking about that from our returns perspective as well.
Jess
Yeah, really good tip there to. To would you living it yourself? Yeah, that's a great way to think about it. And what are the risks about property investing? Cause like you said earlier, all types of investment comes with risk. So what are those risks?
Vanessa
And again it's it's really around what it is that you are like. Any investment, what is it that you're hoping to do with this investment so? If there is. If you have a short term view of it and you think right, I'm gonna buy when the bottom of the at the bottom of the market or the perceived bottom of the market cause nobody even knows what's. Really gonna happen, do they? We have all sat here in the beginning of 20. 20 going it's gonna. Be a cracker of a year. Yeah, yeah. So look, I think you've got to be very clear with your goal and what you're aiming to achieve and that will determine what the risks are. So if you're thinking, I want to buy this, I wanna hold on to it for. 10/15/20 years. Well, there's less risk in that from a returns perspective. But there might. Be more risk in your ability to actually do that. You know you don't know what's gonna happen with your job. You don't know what's gonna happen with all sorts of things that come into account. So you know, you wanna think about all, like the types of income that you might have. Go up, go down. Sideways jobs for you, for your partner, for your investors, for anybody else that's coming in with you. Inherently, I think depending on again what your goal is, but you might go right. We wanna buy now. It's the bottom of the market. What we'll do is once we've made a 15% return, we're gonna assume it's over two to three years. We're going to sell it, take the hit on the tax. That will still mean we've got an extra 100,000 in our bank and we're gonna use 100,000 to buy a more long term. Investments. So I think what you've gotta do is. You've gotta be. Very clear on what your property goal is and what it is that you're hoping to achieve, and I really do say hoping because you just don't know what is going to happen, but if you're clear on the goal. And you understand what it is you're investing for and why that will help you to make the the perceived right decisions at the time that you're looking. If those shocks do happen, if the market suddenly changes or if something happens to your personal circumstances, that means you either can't or you know you might be. Able to. You might come into a windfall. And you can pay it off straight away, you know. And so there's there's lots of pieces that can happen, but but the real key pieces. To set out your property goals very clearly around what it is you're hoping to achieve with this and therefore assess the risk depending on whether you're going for a short term. Sorry, a short term goal or a long term goal.
Jess
That that's a great point to make, because what I've noticed throughout these episodes is no matter what type of investment we're talking about, that is the first thing everyone has said is, well, why are you investing? What are your goals? So that's quite cool to know that for some reason in my mind, I thought property investing was gonna be quite different, but it sounds like those kind of first steps when you're thinking about it stays the same as like. What? What are your actual goals? And then that will help you figure out what type of investment is right for you. And then you can get down to again why property investing.
Vanessa
Absolutely yes. I I completely agree with you. It's you know you don't want to go into property if you're like, I've got $10,000. I want to double it in two years, then probably's probably not your answer. Yeah, not sure what would be your answer, but it's a pretty risky strategy. But you know, if you're really clear on your goal that also, you know, I would get clear on your financial goal. 1st and then you decide which route you wanna go down and then if property does fit the mould you do a bit of analysis against all the other areas as well. Well, and then you would go, right? No, actually property is the right area. OK, then what's our strategy for a property investment as well? So I think you're you're dead, right? It's getting super clear on that goal as well. And I think what I would say especially around property is people can get themselves. A little bit. Because it's something that is spoken about so much. In our vernacular and you know, our sort of our love affair with property is Kiwis. Sometimes we can all think we have to buy a house. And you know, I'd really, you know, just challenge your thinking and go, is this me thinking this and my belief and what I love and what I want to do or is it me telling myself the story because property is every second news article and everybody talks about having their own home. Yeah, actually. Is that right for me? And do I want to do that and actually sitting with that decision? Sitting with that thought is really important because we do have, as I said, a very high. Percentage of homeowners. But is that just because you know, it's like everyone's right? Well, that's what we've been told. We go to school, we come out of school, we get a job, and then we purchase a home. But actually, is that right for me?
Jess
Yeah, Scott. I was going to.
Vanessa
So.
Jess
Say I totally agree with that. I feel like it's just kind of drilled into you right, like at a certain age, especially now I'm in my late 20s, it's like cool. What's the next? Step you either get. Married. So that's not gonna happen. We're doing my house. Like, that's what everyone is doing. Like, right now. It's like you've got Facebook and it's like someone had a kid. Someone's married. Someone bought a house. And you're so right. Like sometimes we just think we have to do it. Because everyone else is doing it. But hey, it might not be the right fit for you and. So OK, so I like. I love that you bring that up. Like, yeah, it might not be the right fit for everyone.
Vanessa
No, no. Yeah, and I I'm big. All the stories we tell ourselves. You know, I I think sometimes if you actually stop for a minute and just take a deep breath, spend some time with it. Actually do I wanna do this or is it TikTok was. Telling me to. Do this or whatever my my parents telling me.
Jess
TikTok I. Love to talk. And then you see some people like do up a house on talk talk. I'm like, I wanna do that. I'm like, no, I don't. I don't know how to do up. A house. No, you don't. Jess, you don't wanna do that.
Vanessa
Yeah, you're either. A Reno family. Or you're not? I'm certainly. Well, we are certainly not a Renault family. I admire those who are, but for definitely not for me.
Jess
Yeah, there's like a whole nother a whole nother story. I feel like. And you touched on a little bit earlier about someone that? You knew who. Bought a home and lived in the garage and then rented upstairs. Is that sort of another strategy with property investing? Is it so? Let's say someone my age similar to me doesn't have it. Their first home is thinking about buying a first home is worried about how much it's going to cost them and the strain on that. Is that kind of a good way to go about it because. I have seen a lot. Of people get get flatmates. Renters in. Yeah. Is that quite a common thing to do?
Vanessa
What I love? Is that we are, you know, Kiwi ingenuity is not shy even in the property market. The amount of stories. And I've had the privilege of looking across our Facebook page back in the day it was Facebook page and now it's Instagram page and now. It's TikTok page. And some of the amazing stories that come in. For Kiwis and how they are getting into their first property, I just love. They're like my favourite stories. I've seen everything from as I shared before. The person who did their garage up so they could live on that and rented out the four bedroom. House was, otherwise they would. Have not been able to. Purchase the four bedroom home in Auckland. It just was not gonna happen, so they rented it out at full price to a family. They lived in the carriage and so that made it. Able for them to purchase a four bedroom house that they later in 10 years or so wanted to then have so that they could bring a family up in it. We've also had actually someone who used to work here. He got together with three of his mates and they bought a house up and Fung at. So I think. At the time they all saved like 20 grand each. They purchased a house and. Found they had a door. Upper and they rented it out. And you? Know and they. All from the that was pre COVID and then they had this boom in the property market and they all had an exit strategy, but they were like, right, we're gonna do this, but this is just so that we can. Make enough money for us all to have our own deposits to then go into our own houses later on. So they were very clear on the. Goal. So there's to.
Jess
Yeah. Nice.
Vanessa
Drive up every. Weekend do some painting, put a, you know, build a deck or build a fence. So I used to love listening to his stories and ham and four of his mates would go up and do it, which I just thought was phenomenal. We've had people who've purchased a house in Thames and at the time houses in Thames were around $180,000 in Auckland. They were close to 800,000, so you can kind of see the difference and purchase the House and Thames waiting for that market to move quite a bit, sold it and then was able to get into the Auckland market, which was a very. You know, I was similar myself. I I couldn't purchase a home in the city that I lived in. So the first home that I purchased was in the Hawks. And with another family member, and because I knew that if I had the ability to knuckle down and pay that that would allow me equity to be able to purchase perhaps a home, I wasn't sure at the time, but perhaps a home that I could actually live in, which was, you know, had always kind of been my dream. Look, things are also people. Who have got found, you know, dual wrappers and have purchased what they call the worst house on the best St. So they might actually look for.
Jess
Hey, that's quite a smart tactic.
Vanessa
Yeah, right. So you might. Actually get a house in a suburb or an area that you. Really wanna live in? But it could be, you know, have to do a lot of work in that. So you're actually thinking about your future self to go. Wow, I probably won't be able to afford a house in Mount Eden, but actually this one down the back. That's all over. On and, you know, got floorboards that all need replacing and everything actually for the amount that I can do myself over the next 5, as I said, if you're a Renault family, I'm not but you. Know you might look. At that and. Go right. This is a smart investment for me at this time. Time and I'm going to increase the value of my asset over the next week while because I've always wanted to live in Mount Eden and. I couldn't do. So if it wasn't a house, that's quite. Run down. So I think we we are very creative with what we do Granny Flats.
Jess
Yeah.
Vanessa
Are are massive things well either. You living in the. Granny flat or again renting it out to help support you with the mortgage or those interest. Payments. So you I think we're we're there's some amazing stories out there and you, you know, I'm sure if anyone's listening and has a really interesting property story, please share it because yeah, because it also gives people some other ideas and some other thoughts around how they might be able to look at property a little bit differently so love.
Jess
Yeah, it's nice.
Vanessa
To hear those stories.
Jess
Hmm. Yeah. Awesome and interesting. You mentioned Grey Flats because ironically, my parents, my childhood home has a green flat and and it's been awesome because I've lived down there and my brother, his wife lived down there when they were saving for a house. And it's so true. It's such a it's quite a cool thing to have. And I was gonna ask, is Grey Flats quite a common way to get into property investing and is it a thing these days? Because I feel like I haven't known anyone else with a granny flat. Like when I was a kid, everyone thought I was really cool because we used to have parties down there and stuff. And it's like it was fully self-contained, like attached to the house. That had its own front door, lounge, bedroom, bathroom, like it was quite cool and but I just remember being like ohh this must not be a common thing for people to have Granny Flats.
Vanessa
I think it's probably a bit more of a luxury item because the reality of it is typically you have to own the property and have room for the greenie flat, so it's probably less about the investing side of it that comes back to that. That gives you an opportunity to make an income off the property. Absolutely. Is it common? I mean, it's probably no less common than it was when you were a child. My mum still got a granny flat at her house. I grew up also in a granny flat when I was a teenager, which again so great. I used to love it. Mine was really a self-contained room off the back of the garage. But look, it's, you know, it's probably just as common today, but it wouldn't necessarily be a way to get into property investing, cause typically you have to buy the whole place. Yeah. And it would have a house on it. But again, if it's something that you think, well, if I can afford this with a view that I'm going to live in the grainy fat and perhaps rent out. The house that might be sort of a way in which you could look at that from an investment perspective.
Jess
And there was another term when I was doing some research that it came up quite a lot and I was like, I have no idea what. This means capital growth or capital gain. I don't know which is most commonly used, but could you explain what that means?
Vanessa
I certainly can, yes. So that is the money that you would make from the time in which you purchase the House to the time in which you sold the House. So I'll go back. To my wonderful. $1,000,000 example again just for my simple math spray that I purchased a house for $1,000,000 and. Ten years later, I sold it for $1.5 million. The capital growth in that house is at $500,000 that I made on top of.
Jess
The.
Vanessa
Price that I paid to purchase it. So that's really a lot of what we talk about in here in New Zealand, because we've had such strong capital growth over the decades here in New Zealand. Of course, there's different property cycles and the growth happens in different years. However, it's it's certainly something that we. Utilised as our nest egg, especially for the previous generation, our generation just older than me and that was something, as I said, we didn't. Have kind of. A Kiwi saver scheme or a retirement sort of fund superannuation they might, they might. Called it, but that sort of didn't sort of last here in New Zealand and so a lot of Kiwis would utilise their property and they'd use that capital gain, the capital growth that they had, which was what funded kind of their retirement. So there are, as I said earlier, bit of legislation that is going to kind of.
Jess
Yeah.
Vanessa
Mean that they're still going to grow as high as it perhaps it previously did, but it's certainly something we still have the luxury of here in New Zealand.
Jess
It's good to know. I feel like, yeah, all the terms and stuff is what puts me off the most. But when you say it like that, yeah, it's it's a little makes a lot more sense. And a little bit less overwhelming, yeah. And do you have any tips for buying tips? Should I say for people that maybe are listening and they're like, you know, I'm really keen to get to property investing, maybe that thought about it for a while. Do you have any tips for them in terms of getting? To that stage of buying a property.
Vanessa
Yeah, I do. What I would say is gather as much depending on we are, but gather as much knowledge as you can. So have a look. There's as I said, there's so much information out there in the market at the moment. And look, you can do a lot of reading online and what I would say is information is only good if you put it into action. So it's and there is so much so much information out there. And as you said, there can be actually very overwhelming and it's because there's more information than we've had ever before. It's actually worse than when you didn't have as much information as that we should have carried on.
Jess
Yeah, that's so true. Yeah. Sometimes you start and it's just like. That's too much. I'll just put it to the. Side and yeah.
Vanessa
Yeah, absolutely. One of the key it's if that is not your way of kind of retaining information, what I would say is go and have a chat to some real estate agents and some open homes on the weekend. You know, they're gonna help you to understand the market. So if you are looking at buying to people, if you're looking for yourself or you're looking for a an investment, an investment, you might wanna talk to someone like an accountant or you might wanna talk to someone like a financial advisor or perhaps a mortgage advisor. Like, do not be afraid. To go and talk to people. It doesn't cost you anything to talk to any of these. People. Well, maybe. A lawyer and accountant. It might do, but most of them will give you some. Time you know, if you haven't got one already, we'll give you some time for free as a sort of a initial area that you might say, hey, look, I'm looking to invest in property. Do you have any mortgage advisors that you could put me?
Jess
Hey.
Vanessa
In touch with. Honestly, your local real estate agent will know so much about a market, especially if they are local, or especially if you're thinking about an investment in that area. If you're thinking of buying in an area, I would suggest go to every open home possible. Get an understanding of what types of houses are built in that area, what types of prices they are selling for, how long they're sticking around on the market, and and again, those local real estate agents. You'll start to get to know them and you'll start to sort of ohh, so yeah, this is a pretty good house. Well, that house last week went for 500,000. Do you think this is gonna be about? Every thousand is. Oh, well, I'd say yes to that. But this one's gonna double garage, so I'll probably get 600,000 for the. So you start to kind of gather that information and you're putting it into more action. You're. Kind of learning. More about it as you're going because you can look at spreadsheets and numbers on a page until you're blue in the face. And as you just very rightly said, yes, very, very overwhelming. So what I would recommend is start to think about those key areas that you need investing in. There are plenty of experts out there who will help you if you're looking at a pure investment property and if you're looking for yourself, start to get to know the area. Start to drive around first thing in the morning, see what's going on. Take a look over around lunch times, you know, and then also take a look in the evenings and you know and and sort of go for a drive. Then go for some. And homes do some viewings. Perhaps, you know, speak to the real estate if you got a house that's sort of on your mind, maybe go and ask if you can do a viewing at, you know, after dinner at 7 o'clock, 8:00 at night, just so you can sort of see what that neighborhood like at night time or what it's like when the sun goes down you. Know. So there's certainly. I would say don't be afraid to ask lots of questions. Don't be afraid to engage. Experts, experts have done this time and time and time again there are. People that have. Gone before you who do this every day? And they will know so much more that you then you need to know that gathering all of that information and putting it into practise and action is is, I would say is a is a great way to start kind of understanding more about the properties in the property market.
Jess
I love that saying talk to experts, cause mortgage advisors, some of them like you say we'll chat to you for free, which is like. Yeah, yeah. Go and do go and do that. Use use that to your advantage. Like, yeah, that's awesome. And I'm. I'm curious to know. So if someone's got a property right now and they're looking to sell or they're moving, whatever the reason is for them looking to sell, would it be a good idea to hold on to that property and rent it out? And then buy wherever you're going to move to like, would that be a tactic that you would recommend to people?
Vanessa
Again, I come back to what is your property goal. So I personally purchased a home and then chose to then rented out to purchase another home, but I was able to do that, whereas if I go back to the guy that used to work here, he bought a house with four of his mates.
Jess
Yeah.
Vanessa
And their goal was. To get it to a position where they could. Sell it so. They'd all have their own deposits to own their own homes, yeah. So it really. Genuinely depends on what your property goals are, and again, I'm not saying they can't. Change because what happened with that guy I was speaking about? Who they there was four of them that went in and they wanted to all get their own deposit. What ended up happening is one of the guys. Ended up buying. Out the other three. Ohh so.
Jess
Yes, you hear about that long.
Vanessa
Yeah, right. So they thought they were. Gonna sell it? Then, actually five years later, when they did go to sell, they went well. Actually, I'd be keen to move up here and. With it and then they agreed on a price because they all had in their mind what they wanted in order to be able to get the deposit. They they were able to sell it like, you know, he was able to buy them out and therefore 3 of them one got their his own house, the one that he just pulled the blood, sweat and tears in and doing the renovations. And then the vice versa. The other three had the deposit. To be able to purchase their own home. So again, I go back. To you and. Just need to get really clear with what your property. Goal is and. And as I said, doesn't have to stay the same. You can. Adapt it. But if you're continuing to head in that direction, then that that would be I. I would. Of course you know, consider that as an option, but if you like, well, actually I'm gonna need to sell this in order to be able to. Make my next. Step then you know be open to that as a suggestion as well.
Jess
Yeah, that's a really good point as well as sometimes, yeah, you have to sell it to have the money to then go for that next. Step anyway, so yeah. And how do you pick your loan term when you're looking to start and getting into investing and then before you answer that, what does that mean for anyone who's thinking? What does long term mean?
Vanessa
That is a fantastic question. So that is typically the amount of time that you are going to take your mortgage. What what, how many years you gonna take your mortgage over? So isn't most of the time you would take a 30 year mortgage depending on your age, some people might not be able to get a 30 year term. Mortgage or loan for over 30 years. The other thing so that So what would you what would you typically do? You would typically do it over about a 30 year period. For most people, there's a pretty common term. The other thing that I would suggest looking at is actually how you cut up your loan in terms of what interest rates are happening at the moment. So the other way you could you could say I'm gonna take a I'm gonna take my mortgage out for 20 years or I'm gonna take it out for 30. Years. If you have come into a windfall of money or you've just accelerated in your career and got a really juicy pay rise and you might go. Actually, we're gonna talk to the bank and we are going to reduce the term of our loan from 20 years to 10 years, which will mean that your repayments will. More than double. But well, actually my salary is just worked out so fantastically that what we're gonna do is we're really gonna chop out this mortgage as quick as we possibly can. And then that might be a time that you would change your loan term. But again, really working with your mortgage advisor on this to go. We recommend that for your age and your income that this is what you should do. This is what you should try and achieve, because you've gotta remember as well as that at the time you'll also lock it in for a certain period of time. So that that there might be right. What am I your interest rates, as you'll see on the wall of any good retail bank in New Zealand that you could take a one year loan, you could take a two year, you could take a six month loan right up to five years. And so that will again, I would really chat to an expert could be your a bank that you might have a personal banker, it could be a mortgage provider or mortgage advisor. It's really around what is happening in the interest rate market at that particular time that you take the mortgage, what is happening with your personal. A natural situation, so it could be anything from. Look, I've been in my job for six years. I can absolutely see myself having another two or three years here. We're feeling really solid about the industries that we're in, right? We want to take. We wanna split our mortgage into three and we'll pretend go my $1,000,000 mortgage. Then I'm gonna split 333,000 into a six month loan because that's looking we really wanna get a better rate in six months time and we think that OCR official cash rate is gonna come down again. So interest rates are gonna come down. So we might put a third of our mortgage into six month. We're gonna put a third of it into a year's. Time because that's. Will be a. There will be a smaller interest rate than the 6th. But again, we want to have a bit more certainty. And then we're gonna put. 1/3 and for five years, because we just want to really have some stability and that we know that those repayments on that third of our mortgage are gonna be the same for the next 5 years. So there's so many ways that you can cut that. And my biggest piece of advice for that. Has talked to someone who has got who is able to give you financial advice based on your personal situation based on the current market and what's happening with the OCR and interest rates and that will be able to help you to find different options for you and your personal circumstance.
Jess
Yeah. Good to touch on that cause everyone's circumstance is going to be different. Everyone's financial situation is different. So yeah, it's great that we have experts where you can just tell them your situation and they can give you the best option for you. Yeah. And I know earlier we talked a little bit about the risks, but I feel like we haven't touched too much on the returns. So what are the returns? Like if you wanted to get into property investing.
Vanessa
Yeah. So depending again, depending on your property goals. So you might have, you might be as an example in the middle of your career, you've got really healthy incomes and you're probably at the peak of your income that you go, right, we're going to purchase the property. But what we're gonna do is we're gonna do that based on capital gains because. At the moment we have the excess income to be able to top up a rental property, so it might be a bigger capital outlay. Let's just go back to $1,000,000 example, right. We're gonna buy a million. Dollar rental property. That actually the the mortgage on that's gonna be $1000 a week and we're only gonna be able to get $800 as a rental. So we're gonna have to top up $200 a week plus the insurances plus the rates. And plus the water. OK. But that's OK because we are, it's like full savings almost we are. Going we are at the peak of our earning our earning time and so that's OK to have that money and to top it up. Now you might be at the other end and going right, we're going into retirement now. And actually what we need is we need our investment to be able to bring us returns. So, well, I need cash in the hand at the end of the, at the end of the week or the end of the month. And so actually what we're gonna do is we're gonna do. A more cost effective property, but we know that that's gonna give us a a bigger return on the money. So we're gonna actually make money coming in each week per month. So something like that might be an. Cause an apartment is a much lower capital outlay or the cost of an apartment is is less than a house. But the capital gain you're gonna get when you sell it in however many years time is gonna be less than if you have a stand alone house which will cost you more In interim. But what it will then mean is that when you potentially. The seller, your capital gain will be better at the end of it. So again, it's really I know we keep, we keep talking about it, but it's really around what is. My property goal. What is my investment strategy and what do I need to happen from this investment?
Jess
I like how you brought up apartments cause I was gonna ask, like, yeah, when you're choosing your property investment property, yeah. What would be the difference between an apartment versus a house and you kind of already touched on? That but. I imagine they're quite different, but again, it's that thinking about location and. Size of the house and things like.
Vanessa
That, yeah. What? What type of tenant you want? You know what exactly that do you do? You have less money to outlay now, but you're open to having it. You know, the the rent cover, more of the mortgage, then that might be an apartment sort of situation. But yeah. Look, the reality of it is. The apartment. Capital growth is going to be slower than a stand alone house and then a townhouse that somewhere in the middle, it's not as slow as a apartment, but it's also not as fast as a standalone house. But again, it keeps coming back to what is the goal and being really clear, because the reality of it is some people don't have the capital. Outlay to be able to buy a stand alone house when they began and that's totally fine too. So you might go right. Do you know what? I'm gonna go for an apartment. I'm gonna keep it. And again, what's my property goal? I really wanna get a deposit for a house that I. 11 or I'm gonna buy an apartment today. I'm gonna hope that I'm gonna get a pretty decent return over the next five to seven years. If I don't, 10 years is OK, but then the idea is that I'll sell that apartment, take the capital gain, and then I'm gonna buy a house from that as well. So coming back to gotta think about your property goals and just being aware of the different types of property. And how they will grow, but in different ways.
Jess
And and I like how you touched on different strategies and I hear this come up a lot with all the different investment types, the, the when you're kind of planning. These kind of long term investing strategies in this short term and often from what I've heard is long term is sort of the way to go within investing. Is that similar with property investing? Is it sort of that long term where you're? Going to see.
Vanessa
Yes and no. It depends on what property cycle that we are in. So at the moment we're in a very down, if you had purchased in the past. Five years you might be a negative equity because we saw the absolute peak of the market at the beginning of 2022. So if you are looking at your property equity metre, if you purchased, but then you'd be thinking ohh my goodness. So you'd be willing to hold on to that particular property. However, if you had purchased. At the beginning of 2020 and you wanted to sell your house at the beginning of 2021, you would have made a 20% increase in a 12. Month period which is. Just unheard of in the property market, but was a output of the COVID IRA and our real focus on property. And some people might have gone. You know what? For the for the amount of money I've made in a 12 month period and the tax I'll have to pay on that. I'm still quids in. So I'm gonna sell it anyway. Is that a strategy? Not really a strategy. I think a a good fortune of a very rare type of market. But look, it's like anything. It comes back to your strategy if you're a property flipping, they call them. You might purchase your property, do it up, and then sell it within a two year period as long as you know that that is your strategy. And you have built in the fact that the property market might stay flat or potentially go backwards. It's not very common to see the drop that we saw during 2020 into 2023. It's just not that common. Yeah. So that would be a very unfortunate market to. Be in but. Look, you might again, it's coming back to that strategy and just accepting that risk as we talked about. Clear is that the market is unpredictable, but there's a certain element that you can predict, but if you're going for. A short term strategy. You just might need to adapt it to a long term if the market's not. Playing games for you?
Jess
Interesting. I feel like I've learned so much today. It's so. Thing and I always love to kind of wrap up these episodes of of just asking you what your top tip would be if someone's listening to this and they're they're getting excited and they're thinking what I think I wanna dip my toe into property investing, I feel like I know what your tip top tip is going to be because you said a lot today, But what would be your one top tip if you could use all your years of experience? And could summarise it for our listeners.
Vanessa
Yeah, I I think my top. Tip is do you know? What my actual? Top tip would be. Get clear on your decision. So go. Don't go. Maybe I wanna dip and maybe I go. I'm gonna do it and then wrap yourself around. Wrap yourself with experts who are gonna help you. Who are gonna guide you and tell all of your friends and family so that when you're like.
Jess
Love.
Vanessa
You got your brunch on Saturday. No, no. You're saving for a house. I'll bring some eggs around to your house and. We can cook. An omelette and get everybody on that bandwagon for you, because what can be the hardest thing is you can be in that maybe bucket for 2 1/2 years. And in that time you could have actually significantly saved for your deposit. You could have been focused, you could have experts in your camp who are encouraging you, you could have your friends and family who are supporting you on this journey and you could have actually bought a house. Whereas if you're going, I'm I might wanna dip my toe and I might not. Once you know that that once you've sat with yourself and gone, actually, I wanna do. With this, tell everybody commit to. The goal? Write it down, write it on. A wall and it will. You will absolutely surprise yourself of what you'll be able to achieve in a relatively short amount of time to make that dream a reality. So there is so much opportunity is you gotta think about two and three. Kiwis when you walk past. Three people on the street.
Jess
It's a lot.
Vanessa
Two of them own their own house, yeah.
Jess
OK, that's crazy. There, I actually love that bit of advice because yeah, I'm I think I'm in that ohh. But I want to travel and like, yeah, I'll keep saving. I wanna save to buy a house. But like, you're right. I need to just. Maybe get the travel out the way and then once that's done, I can actually go. Yep, this is, this is the next goal and I'm a sucker for going out for coffee and going out for brunch. And yeah, sometimes it is literally just getting serious about it and just being like, no, I'm saving money and cut some of that stuff out.
Vanessa
Yeah, yeah. And your friends will be awesome. Like you'd be amazed at the amount of people. Will bring a coffee around to you or. You know that will will make you know, like they're like, right. We're gonna have a fancy brunch at my house, but I'm making it from supermarket stuff, you know, like, yeah, don't have to compromise. Well, like, rather than going for a going out for coffee, let's make a coffee at home. They're gonna go for a walk, you know, cause that's free and. So you know it's it's really once you decide. It will be amazing what you can achieve. But don't sit in that. Maybe I'm thinking maybe I'm not for too long, but make sure you've done that step, I said earlier. First, which is genuinely, is this something I really, really, really wanna do, or am I just getting influenced by TikTok? And if I'm not just getting influenced by TikTok, my parents and my friends and I really wanna. Buy a property, then go for it and just you can absolutely do it. There are opportunities for every single person in every market.
Jess
Yeah, it's so true cause and it's a big, expensive decision. So you totally wanna be sold on that? Yeah. And do not wanna regret that later. No, no, not at all. And for everyone that's been listening today and they want to find out more about you and what what they can expect if they go to realestate.co dot NZ, could you tell them? Yeah, how? Where they can find out more and what you guys have got on your site in terms of helping people either with their property investing or just with them buying a home.
Vanessa
Yeah, absolutely. So head to realestate.co dot NZ. Claim is in the title and we do. What we say. On the 10, we are all about real estate. So we have everything from homes for sale, homes for rent, commercial property for sale and for lease farms businesses, you name it. We've got it there. We also have our. Property Report New Zealand property report that comes out every month and. Our news section. Which is in the top of the. Menu bar on. Our website so you can find it there. If you log into our website, accept the marketing and say yes, I'd like some marketing we send, we'll actually send that property report to. Every month so you can get a hold of it there. If you're looking to sell, there's a four sellers section and if you drop down in that menu that market insights button, you can search any suburb in New Zealand and providing we've got the data on it, you'll find the median asking price and median selling price and median rent in that area. What's popular? What's not? You can look at what's happened for property prices over one year, three years and 10 years. It's super interesting and love going on there and that's and pretty much every suburb in New Zealand. So just go and have a nosey get curious, walk into some open homes, chat to some.
Jess
Wow.
Vanessa
Real estate agents and mortgage brokers. Those two are definitely free and just enjoy the journey. It is so exciting and it is really fun if it's the right decision for you and you love property and you're very excited to do it, I would say just go and do it and yeah, but start by searching or real estate. And yeah, I I it's really I use it as my tick tock. I don't have TikTok so I have real estate app.
Jess
I love this. It's probably much better than TikTok so.
Vanessa
Just.
Jess
Thank you so much for your time today, Vanessa. I feel like you have. You've made me get, like, excited about it. Like it's just it's been one of those things that's just, like, overwhelming. And I guess I haven't really committed, but your energy and you just make it sound so exciting. So I'm like, gotta gotta make that first step.
Vanessa
Ohh I'm I love to hear about your journey, Jess. And be super happy to chat. Any time and look if listeners have got any questions or they would like to know more super happy to help answer those as well. And thank you to everyone out there. Who's listening? And. Thank you for for your time to you. So really enjoyed our chat.
Jess
Yeah. Thank you so much. The content of this podcast is of a general nature and is not financial advice. The thoughts and opinions of guest speakers are not those of the FMA. The FMA recommends that our audience seek advice and respect to investing from a regulated financial advisor. The FMA does not accept any responsibility for loss that any person may suffer from following it.
