Moan, moan, moan. Whenever I suggest ways for people to get ahead financially, the response from a vocal minority of readers is to moan.
"Where do you get your misinformation from every week?" moaned Concerned Mother from South Auckland.
She estimated that half of young people were unemployed or underemployed. "No room for disposable income, deposit saving, family building or any of the adult activities generations of NZers have taken for granted."
Well, I'm sorry Concerned Mother. The other half — and I suspect it's more — are doing all the things you say are impossible. I tracked down young people who are getting ahead financially and came across the Young Kiwis In Property (YKIP) group. It was started by former chef Kyron Gosse, 26, who bought his first property at 18 and is now well on his way to financial freedom, which he hopes to achieve by the age of 30.
Gosse set the group up "out of self-interest" to meet like-minded people. That is successful young investors who wanted to network and share their experiences. "It's hard to soar with eagles when you're surrounded by turkeys," he says, quoting a popular saying.
The group is aimed at young (under-35) property investors and first-home buyers. When I went to meet Gosse at Sylvia Park's Coffee Club he brought along group member Tamzin Letele.
Letele could be said to have it all. A husband, children, career and rental properties by the tender age of 26. She wasn't born with a silver spoon in her mouth. At age 14, Letele wrote a budget for her mother who struggled to make ends meet as a single parent.
At the end of 7th form, which she completed at age 16, she started work and within a year had saved the deposit for her first rental property.
On her 18th birthday, she settled on two Tokoroa properties — a joint purchase with her mother. The properties cost $82,000 in total. Auckland-based Letele bought them sight unseen.
The properties had a 14 per cent yield (return on investment), which covered the outgoings and mortgage. Soon after, she bought a $60,000 Eketahuna property.
You have to put in hard work sometimes.
It gives me a feeling of self-worth and I
feel more content when I am working hard.
Anyone reading this article will no doubt mutter that properties aren't available at that price any more. I checked on Realestate.co.nz and there are pages and pages of homes for sale in the sub-$100,000 price bracket. They're basic and some are leasehold, but they exist (see here).
Property listing #AS070514, a $70,000 leasehold bungalow for sale in Ashburton, would require a $14,000 deposit, which isn't beyond the saving power of most people. That's one packet of cigarettes a day for just over two years, according to Quitline's calculator. At the time of writing, bottom-end two-bedroom properties in Ashburton were renting for $250 a week. That's a good return on a $70,000 investment.
What sets Letele and Gosse apart from others their age is their attitude. Asked what the reason is that she has been successful, Letele sums it up in a word: "Gratitude."
"I have always felt myself grateful for my life and the opportunities I have had," she says.
A note for the Concerned Mother of South Auckland: Neither Letele nor Gosse had any formal qualifications when they bought their first properties. Both left school and went straight into the workforce, although Letele has subsequently studied for a National Diploma of Quantity Surveying and a Bachelor of Construction. What they had was a cup half-full and they can see opportunities in life, not barriers.
Letele juggles a marriage, children, rental properties, study and a full-time job as an estimator/quantity surveyor. She loves being busy and has always felt she was destined for big things. "You have to put in hard work sometimes. It gives me a feeling of self-worth and I feel more content when I am working hard."
Gosse describes himself as "hungry". "It comes down to that burning desire to better myself and just do well. I have a hunger to reach financial freedom so when it comes time to have children I don't have to work and I can be there with my child, I can travel the world and just have ultimate freedom."
His investment story began at an equally early age in Paihia. Both his parents were in property and when he was 18, Gosse's mother encouraged him to buy a two-thirds share of his deceased grandmother's house.
Gosse trained as a chef, then moved to Australia where he worked three weeks on, three weeks off in the mines and on an oil rig. The money was good at $125,000 a year. But Gosse learned a valuable lesson. It is easy to spend all your money no matter how much you earn. He saw men in their 60s with no savings even though they earned $300,000 a year.
When he came back to New Zealand, Gosse was ready to buy property, but couldn't get finance because he didn't have a job. He teamed up with a family friend who raised the mortgages and Gosse put the deposit and renovation money in.
The aim was for the properties to be cashflow-positive (return an income over all the costs) once the renovation had been done. The first property was in Otahuhu and the renovation was a learning experience. Since Otahuhu, Gosse has bought two house and income properties with his business partner. He makes additional income as a property finder through his business iFindProperty.
It comes down to that burning desire
to better myself and just do well. I have
a hunger to reach financial freedom so
when it comes time to have children I
don't have to work and I can be there
with my child, I can travel the world
and just have ultimate freedom.
Property isn't the only way for young people to invest. At least one of YKIP's members invests in shares, foreign exchange, options and other investments, but didn't want to be interviewed for this article.
Letele says young Kiwis are more inclined to buy property because that is what they were brought up with. "Shares are not the beast I know," she says. "[Share investors in the group] tend to be people who were brought up overseas and feel familiar with it."
Both Letele and Gosse have KiwiSaver accounts, although the former has more in her savings. She doesn't expect that it will play a major part of her retirement savings, but still sees it as a valuable way to save.
They prefer property because of the leverage. They make capital gains on both their own money in the property and the borrowed mortgage. Leverage amplifies profits — and also losses.
Letele's long-term plan is to buy 10 properties with her husband by the time she is 30, and up to 50 properties in total before they retire. Gosse aims to buy about 30 residential properties, then move into commercial property investing.
Young investors can make mistakes and both Letele and Gosse admit that they have. Letele ran her own property company from 2006 to 2012, but the income didn't cover the outgoings and she entered her marriage $30,000 in debt, which had to be cleared.
What's more, the Tokoroa properties weren't the best buy. "They brought me nothing but grief," she says. The tenants proved to be a nightmare and trashed one of the homes. Eventually the properties were sold — albeit for nearly double their value.
Gosse had to learn to spend less than he earns and to invest his savings. "This is a problem [and] most of our peers are not doing it. They save money but don't know why they are saving it, so instead spend it on holidays, etc." When Gosse is saving for a house he doesn't waste his money.
Other young investors sometimes buy too many properties too quickly. Having only ever seen the market go up, they don't plan for the inevitable falls in property markets. Some of a crop of young investors who I interviewed in 2006-7 did crash and burn. But they would have learned valuable lessons and have time to start again.
Another investment group on meetup.com is Cashflow Mastermind NZ. The members meet regularly to play Rich Dad Poor Dad author Robert Kiyosaki's board game Ca$hflow. The Auckland Property Investors Association has several meetings a month in Auckland.