1. Home
  2.  / Building Your Life Through Property
Building Your Life Through Property

Building Your Life Through Property

Almost anyone can achieve a comfortable retirement through property investment as Andrew Nicol proves in a case study.

22 August 2023

In modern New Zealand some people think that it’s too hard to become an investor … or that investing in property is “just for rich people”.

If that’s you, this case study is going to shock you.

I met Tanya when I was setting up Opes Partners back in 2013. At the time she already had two investment properties, which she’d owned for a decade each.

She was 57 at the time, and like most parents had one eye on her two teenage sons. They were both almost ready to graduate high school, and she wanted to help them get into their first homes when the time came. But she also had the other eye on herself.

She wanted to use property to build a passive income. In other words, she wanted to grow a property portfolio so she could then live off the rental income the properties produced.

That would mean she could look after herself in retirement, without needing to rely on her kids or the government superannuation.

Here’s what her portfolio looked like when we first met. As well as her own home, she’d purchased an Auckland-based property for $300,000. That was in 2002. The year after, she’d purchased another in Hamilton for $180,000. (Yes, those were the days!)

Need to grow wealth

So Tanya had already done some of the heavy lifting, since she’d been investing for over a decade. She was already partway through her investment journey.

But if she’d tried to turn her properties into a passive income at that point, she would have made only $23,750 a year from her properties. Not bad, but not enough for her to retire on either. She needed to continue holding those properties, waiting for them to go up in value.

What was the issue? She didn’t have enough assets. Yet. Her race wasn’t over. She needed to grow her wealth so that by the time she hit retirement she could have a half-decent passive income.

She set a goal to retire by the time she was 65, in 2021, which gave her eight years to increase her assets.

To do this through my company, Opes Partners, I helped her buy a standalone house in Christchurch for $400,000. That was in 2013. Then, four years later (in 2017), she bought an apartment in Wellington for $525,000.

At the same time she held on to her previous two investments. So over 15 years Tanya had bought four investment properties – about one every four years. And she spent a touch over $1.4 million in total.

Setting a plan

By the time she hit retirement her portfolio was valued at a whopping $3.5 million. Over those 19 years Tanya made $2.1 million by her properties increasing in value. (Though bear in mind she had a significant amount of debt held against these properties.)

What did she then do? She set a plan to sell her three standalone houses and use the money to pay off the debt on her apartment. She then bought another apartment, which had a high rental income.

She didn’t need a mortgage for this, since she still had money left over from the sale of her other properties.

Today, she’s retired. She owns two apartments, which she keeps as rental properties. She doesn’t have a mortgage on them, nor does she have a mortgage on her own home.

Together, these rental properties earn her $79,000 a year. That’s after paying all her costs, like rates, maintenance and insurance. This $79,000 is her passive income.

Without getting out of bed in the morning, Tanya can live off $1,500 a week (pre-tax), before even factoring in her New Zealand Superannuation. If you add that in, too, Tanya earns just shy of $106,000 a year. This will continue for the rest of her life, whether she lives to 82, 92 or 102.

Life to the full

But that’s not all. During this time she’s used the equity in her properties as part of the deposit for her sons’ first homes. One now lives in Foxton, and the other lives in North Auckland.

What does she do now? She lives life to the full. There’s no mortgage to pay. She spends the income from her rental properties without worry, knowing that there will be more next week.

She doesn’t have to worry about whether the money will run out, or whether her electricity bill will be too high during winter. She’s got choices. And while she’s not a “gazillionaire”, she lives comfortably.

She travels with her friends when she wants to. But she’s planning to stay in Auckland more, since she’s now got a grandchild on the way.

That’s the power of property.

This case study is an excerpt of Andrew’s new book, Wealth Plan, which is now available in all good bookstores.

Informed Investor's content comes from sources that Informed Investor magazine considers accurate, but we do not guarantee its accuracy. Charts in Informed Investor are visually indicative, not exact. The content of Informed Investor is intended as general information only, and you use it at your own risk.