I recently had the opportunity to sit down and chat with Bill Guthrie, a seasoned Residential Property Investor, who has been in the property investment market for close to 40 years. Over that time Bill has built a large residential property investment portfolio and was happy to share with me some of his insights that real estate agents who are marketing investment properties could benefit from.
Bill advises when an agent markets a property to attract an investor, they need to apply the skill of assessing a property for the ‘upside’. In his experience, some agents just don’t understand this concept. Seeing the ‘upside’ could be as simple as playing with the floor plan and adding an extra room or another story to the building, perhaps a sleep out to gain the extra income, or is the land size a development opportunity? Some agents he had noted had gone to the next level with their knowledge of council zoning and ‘rules’ which added to their credibility. This would be important knowledge for any agent to have especially in a city like Auckland with complex district plans and also in areas that have clean air zones policy like Hawkes Bay and Christchurch. Wellington is different again as it has a relatively simple district plan but has issues because of the cities challenging topology and consequently sections with challenging access and often limited car parking. Bill advises agents to keep up to date with government and council developments as he expects to see significant changes to district plans going forward to allow for more inner-city housing developments.
Bill’s advice for agents who are looking at getting into the property investment aspect of real estate, is to firstly read Graeme Fowler’s book ‘Real Estate Investors Secrets’. It details how 10 New Zealanders first became millionaires from residential property, then 5 years later the same 10 people were re-interviewed with the same questions and the book was republished. Bill Guthrie is one of those interviewed in the book with one of his top tips being that an agent should buy an investment property as they will learn from that experience. They could also join an investor group and perhaps get a property investor mentor to maximise that experience.
For those agents wishing to learn more about property investment, another book Bill recommends is Sir Bob Jones’s book ‘Jones on Property’, with the main message being a very simple one. The trick is to simply get enough income from the property to cover all the outgoings. Bill says “if you manage to achieve that you should get capital gain and rent increasing over time while you are reducing the mortgage. After a while, this ought to provide sufficient equity and cash flow to allow you to leverage off the first property to purchase another and so on.”
When it comes to an investor doing the important due diligence before purchasing an investment property, Bill says “homes.co.nz is an ideal site to go to as it is simple to use and a good way to get an idea of the property’s value through the HomesEstimate, as well as a potential RentEstimate and estimated rental yield. It also gives access to the property’s council records.” Bill says the norm today is to ask the agent for a LIM report. 20 years ago they were less important and contained less information, but more recently government and local regulations are tightening, along with climate changes indicating flood zones, plus weather tightness issues. Also as LIM’s are now available electronically, having a LIM emailed to you by the agent and paid for by the homeowner is convenient for an investor saving time and money.
Finally, Bill suggests agents be aware when dealing with investors as it is highly likely they will have their team of tradies, including a builder and valuer to give them a personal assessment of the subject investment property. So, don’t be offended when an investor calls to bring ‘the team’ through!