Case Study: I Read About Property Investing: ‘I Can Do This!’
Ilse Wolfe started investing at 23. Now she owns NZ$11m worth of rental properties.
18 October 2021
JUNO Autumn 2021
When Ilse Wolfe was a little girl, she used to phone 0800 numbers to ask for brochures for James Hardie and Gib. She spent hours looking at their products and then integrating them into floorplans she mocked up by hand.
Now this inspirational woman’s passion for architecture and design has led her to a fulltime job buying rental properties, renovating them, and renting them out.
Wolfe started investing when she realised getting a salary wasn’t the fastest way to wealth.
“I started my first graduate role at Microsoft and the first realisation I had after a couple of monthly salary cheques was that it only lasted two of the four weeks. I was frustrated that I was working so hard and it just didn’t seem the right formula.
“I thought, there has to be a better way.”
In her next role at Westpac, as an analyst, she worked with top businesses in the Waikato, many with property investments.
“I couldn’t believe how quickly the equity built within my clients’ portfolios every quarter when I reviewed their performance. This was the beat I realised I was missing.
“After I showed an interest, an accounting client director kindly took me through a property tax profit and loss statement. I saw the benefits and was enraptured instantly. I don’t know if he realises to this day how he changed my outlook on life.”
Some clients had more than 20 rentals. “I was so amazed by how these numbers were increasing from these properties. I decided I really wanted to get into this, to give it a go.”
“I hadn’t been exposed to investing. And I realised then that the rich invest and the poor save.”
At 23, within a year she’d bought two home-and-income properties, the first with NZ$18,000 deposit for a 95 per cent loan.
“That was in 2007, at the peak, just pre-GFC, when Westpac was giving out 100 per cent loans. It was exciting, but being a young woman had its own challenges.
“I found that trying to manage those properties directly didn’t work. My very first tenant took over both the main house and the ancillary dwelling for his teenaged daughter, but he stopped paying rent.
“The middle-aged tenant in arrears wasn’t intimidated by me, so I fell to the bottom of his long list of creditors. He really took advantage of me and ended up about $5000 in arrears.”
Wolfe finally discovered she could take him to the tenancy tribunal, where she got back her NZ$5000 – at NZ$100 a fortnight for a couple of years.
A big set-back
“As a young investor, that set me back. I knew that from then on, I needed to hire the professionals and make some changes to do it properly.”
The catalyst for her deciding to go fulltime into property investing was a tragedy in the family.
She and her partner, Taylor Green, were working overseas in 2015 when her mother passed away unexpectedly.
“I had a crisis. I had seen that my mum had just turned 60 and worked Monday to Friday, then died on Sunday. I just thought that’s not a fair life. It was a real eye-opener for me. I just didn’t have the heart to go and work for someone and give them all my time.
“I picked up an investing magazine and there was a ‘flip’ case study with a P&L [profit and loss statement]. I read it and thought, I love project managing, I can do this!
“I showed Taylor and said, I’d love to give this a go.”
To get started, Wolfe leveraged her properties to buy another, and Green sold a half-share in a property he owned with his sister to pay for the renovations.
“That enabled me to work fulltime on the properties in 2015.
“It was a huge step for me to move away from a global brand director salary into an industry which, in hindsight, I had almost zero experience in.
“Investing the NZ$120,000 deposit into our first renovation was terrifying. But I did everything I could to mitigate the risk.
“I calculated the first renovation to the cent by photographing price-tags of any item I planned to use, input every item into a spreadsheet, and then scoured retail websites to ensure I had my budget close to 100 per cent correct.”
She’s now been a fulltime investor for five years.
“Rather than talk with investors about number of properties, I find it far more useful to discuss portfolio value, net worth and yield as core measures. And more importantly, cash-on-cash return.
“In terms of our portfolio, we’re over the NZ$11 million mark now.”
Her strategy is ‘BRRR’: Buy, Renovate, Rent, Refinance, Repeat. She’ll only invest in properties offering more than a 14 per cent yield, within two hours of Auckland.
She’s buying three or four properties a year, investing 10 per cent of their value into the renovations. She aims to add about 40 to 50 per cent to a property’s value by renovating.
“On top of the asset gain from buying the houses, our goals are to manufacture an additional million dollars of equity and NZ$100,000 passive income a year, through renovations.
“I need to be able to add immediate, significant value. Every dollar I put in; I expect to get back at least NZ$4.”
For a lifetime goal, the pair worked out what they wanted out of life. They liked Tony Robbins’ advice that to live the life you want doesn’t require ownership, but access to whatever you want.
Their best life
“We worked out the all-encompassing cost of our best life and worked backwards to how much annual income we would need to provide it for our family.
“Knowing the annual income we needed, we could calculate the value of freehold assets we needed to generate that much money.
“Our goal is NZ$40 million of freehold assets producing at least 5 per cent of income.” That’s NZ$2 million a year to live on.
Rather than selling properties to repay debt, the pair invest in forestry.
“Forestry assets are our repayment plan. I have a proven formula for how many hectares of forest will repay each million dollars of property debt.
“The forestry matures 10 years ahead of the mortgages and gives us an ideal timeframe to monitor market pricing for a while.”
The couple have a toddler – and a baby on the way – so they’re looking forward to a future where they’re free to enjoy family life. Their ultimate goal is FIRE – financial independence, retire early – and that goal’s in sight.
Wolfe has multiple income streams now, including a salary, an e-commerce business, Aglow Organics collagen and superfoods, but she also has the freedom to rely on passive property income.
“The goal is to have our entire lifestyle covered by property income, so that we can live a full-time, world education for our family through travel and experience.
“I’m in full control of my diary now, so I guess you could say that it is semi-retirement, but because I love property,
I don’t see it as work.
“I want us to be able to provide that freedom for Taylor by time he’s 40. Then we’ll have 100 per cent control over our time.
In the meantime, Wolfe likes to help aspiring investors get into the market.
She’d like to formalise that by doing property coaching, particularly for women.
Add value: “The key areas I would invest in are creating an additional bedroom within the footprint, and a new kitchen and bathroom, because every potential tenant walking in sees the immediate impact of a great new kitchen and some cosmetic touches.”
Take a fresh approach: “I try to zig when people zag. I ask other investors how they’re searching and then do the opposite.”
Be the weakest link in your investor circle: “Find a mentor, network and become friends with people you want to be like. Surround yourself with those more established than you are, but always have value to contribute.”
Know your numbers – and your goal: “Every investor should know their numbers inside and out, how each potential new deal is going to get them to the end goal. Each purchase should be driving you towards that big picture. If it doesn’t, it doesn’t fit.”
Review your balance sheet every year:“Cull your most unproductive asset to reinvest more efficiently.” For example, Wolfe sold one property and used the same deposit to buy two multi-income sites that generate four times the income: this same deposit is still actively rolling forward now into further purchases.
Pay the professionals: “I find my most important allies are my property managers. Through strong relationships, they now innately know my position on matters such as maintenance, so I give them the autonomy to make decisions on my behalf. This lets me focus on renovations and project management.”
Think walks: “I walk daily to both clear my head and to focus on a particular challenge. This has solved many financial matters for me, including giving me the clarity to make the many incremental changes we needed to move from a negatively geared portfolio to a profit-making one.”
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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.