I have been an active property investor since 2002. However, my love of property started much earlier than this; a passion evident in the story of my family home. The first house I brought was developed and built by my grandfather, Alfred Englert, who built the house for his wife, my grandmother, back in the late 1920s.
My father brought the house off his father before his death, and from an early age, I aimed to do the same. Post starting OPRA, my one goal was to buy my parent’s family home and do it up, ensure that they could live in this until they died, thus giving them the money and the house. I achieved this outcome, and in doing so, I started down the track of being a property investor.
Simultaneously, when I was looking to invest in property, a book was published, Rich Dad Poor Dad, that revolutionalised my thinking about creating wealth. Through reading this book, I understood I needed a mechanism to turn my money into a system that generated wealth if I was to one day be unanswerable to anyone. I discovered the benefit of different forms of debt. I also understood how the system favoured property investment as an investment of choice for the conservative long-term investor.
In short, I began to see that property investing was my road to wealth creation. Along the way, I have learned many lessons, a small collection of which I recount below.
Lesson 1: Property investing is a doorway into the lives of many different types of people
As a property investor, I have experienced the good, the bad and the downright ugly. There have been tenants who have stayed with me since I brought the property. I have seen their children grow up. I have consoled them when their partners die. They have given me support when I have gone through hard times.
On the other side of the spectrum, I have had tenants who have skipped rent. I have tenants who have done thousands of dollars of damage, and I have had tenants who have made my life a misery through parties, mistreatment of themselves, family and friends and an inability to respect my property! I have experienced verbal and physical altercations, as well as plenty of hugs and moments of connections. Property is indeed a mixed bag.
Property investing invites you into someone’s life in a unique way. You are providing a service that most tenants appreciate, and at the same time, tenants experience the trials and tribulations of their life in the accommodation you provide. People have different reactions when faced with difficult times. For some people, this is an opportunity to take out their frustrations on you. Alternatively, the gratitude some tenants show for providing them with a home is one of the most rewarding aspects of property investing.
My underlying belief in the absence of free will has given me a unique ability to deal with the good, the bad and the ugly of property investing. I recognise that by the luck of the draw, I get to sit on this side of the property equation and therefore take people as I find them recognising that they are most likely to be going through their trials and tribulations. My job in such times is to be a positive force, and ensure, no matter what, that their home is indeed their haven.
Lesson 2: Money has a strange effect on my psychology
I have a peculiar relationship with money. On the one hand, I’m not avarice. I see little value in trading time for money so that I can consume goods. Material possessions rarely bring me any sense of happiness and even less of a sense of accomplishment. I don’t measure status by people’s material wealth. On the other hand, nothing causes me to lose sleep, experience stress, and get genuinely uptight like money.
Property investing is a tour de force in mastering emotional regulation. As an investor, you experience nervousness at the time of purchase, the thrill when an offer is accepted, the feeling of regret when the purchase does not eventuate as you would have liked. The pleasure in securing suitable tenants and the anguish when dealing with a tenant that goes rogue.
The common denominator in all of these situations is money. Sometimes you are making money. At other times one is losing money. But in both circumstances, the actual impact on my psyche should be minimal. If I don’t hold money in high regard and put little value on money, why does it affect me?
Put simply; money is how I keep score in the game. Money has made me realise the depth of my connection with status. I’m not too fond of this side of myself and would be better off without it. Still, property investing is a constant reminder that I’m far from immune to the stupidity of an age-old brain system that keeps track of my perceived place in society (even if unconsciously). Such a battle is truly a unique aspect of human experience.
Lesson 3: Banks are not your friends; they are umbrella salespeople for sunny days from who one learns the art of negotiation
To grow a sizable portfolio requires a person to leverage investment. Before recent legislation changes, such a portfolio was possible, but such wealth is likely less viable in the modern era.
Leverage brings one into direct contact with banks and bank managers. When the sun is out, the Bank manager wants to do little more than shower you with money and fill your desire for more property. However, when the rain comes, the Bank wants their umbrella’s back. Friends become enemies with an email or a call.
In 2009, post the GFC, I became acutely aware of how quickly Banks can turn. LVRs went from 85% to 60%, requiring investors to come up with a further 20% of capital. In my case, this meant close to half a million dollars, not an amount that was achievable through a sausage sizzle and my local Department store. With no means to raise that sum, there was only one way to deal with such a situation. I had to stall the Bank.
People often see the trait of agreeableness as a virtuous trait. However, there have been many times in my life where people would take advantage of any level of agreeableness. Only through aggressively holding my position (and I mean aggressively) have I overcome some of my biggest challenges.
I often read books on conflict resolution and negotiation. I wonder about these writers’ experience in the types of negotiations that would warrant a truly skilled approach. In dealing with banks and bankers, one needs to recognise the power imbalance and negotiate accordingly. Learning how to do this is not something that one can learn in a book and ultimately comes purely from the experience of being in the trenches. To write about dealing with conflict and negotiation is very different to experience such events. Property investing is the learning ground for negotiation when one has few cards.
Lesson 4: Professionals vary in their professionalism
The world of property introduced me to various professionals from different fields that became part of my team. As a property investor, I became acquainted with lawyers, accountants, mortgage brokers, and, as mentioned, bankers. These were people, who up to this point, I had various little dealing with in my life. Even in my business, my use of the likes of lawyers and accountants was at best vanilla. Most of my business dealings, initially, were done with a handshake. I rarely, if ever, required extensive documentation in my business dealings.
I have sued both lawyers and accountants. In both times, I was successful. In one instance, the defendant rose to the challenge, admitted their mistake and committed to fixing the problem and fix the problem they did. In another instance, the person recoiled from the situation and forced my colleagues and me to go the full none yeards. The cost was higher, but so was the reward.
More importantly, through this process, I learnt that there are different levels of professionals. As one grows in their business life, so will their need to change their support team to equip them better to deal with the changing circumstances. There are professionals, and there are professionals, and as the problems and structures get more complex, so does the need for a team with more professional expertise.
Lesson 5: Expect change
As a property investor who has lived through multiple property cycles, the one constant is change. When I initially started investing in property, one could depreciate the property, which made sense as the asset depreciates. However, such depreciation was seen as untenable by the day’s Government, which removed this tax deduction.
However, the loss of depreciation on the property was nothing compared to the tax treatment changes to come. Post the Global Financial Crisis (GFC), Reserve Banks around the world asked lending institutions to carry more extensive coverage for their debt. These changes flowed down to investors overnight. In New Zealand, investors had to reduce their exposure from 85% of the loan to value through to 60%. On a multimillion-dollar portfolio, this was an extreme level of debt to make up.
More recently, the removal of interest deductions on mortgages over investment property has had an immediate effect on how one looks at property as an investment. In a world where only the strong survive, not allowing deductions on an investor’s most significant expense is sure to be a stress test that will assess most investors’ metal appetites for this investment.
However, having gone through the GFC, I recognise that if there is one thing that is a constant in property, it is changing. Property prices will go up, and property prices will fall. There is a need for properties to be in reach of most people so that they can have a place to call home, and it is the Government’s job to make that a reality. In a country such as New Zealand, this will mean that supply needs to match demands and where that doesn’t happen, measures need to be in place to make sure that people are not unduly affected.
The one constant is change. Having a buffer and being prepared for the worst is essential if one is going to weather then change. One cannot rely on a bankers umbrella when one needs it and, therefore, prepare for the worst while hoping for the best. It is always an approach that will bode well.
Property investing has provided me with more lessons in life than I dare to reflect. In 20 years, I have had unique experiences that were only made possible through property investing and profoundly affected my personal and business life. I’m certainly a little harder around the edges due to my experience in property. I’m more assertive. I’m also more compassionate, recognising my good fortune and how I can create win-wins for my tenants and me.
Property has changed my life and is my investment of choice. I’m incredibly grateful for all that property has provided me, and these are lessons that I love nothing more than sharing with others.