Debt-to-income: Investor Riyaan Mohamed with $7.5m portfolio welcomes rules limiting property borrowing

Riyaan Mohamed outside one of his properties in Christchurch. Photo / Martin Hunter

A young Kiwi investor who left high school early to wash dishes and went on to buy $7.5 million of property in eight years says new rules limiting how much debt home buyers can take on are a “great” safeguard.

Most investors can now borrow no more than seven times their incomes after new debt-to-income rules came into force this month.

Riyaan Mohamed owns 13 properties and has set himself the goal of continually accumulating rentals and businesses until he becomes a billionaire.

The 30-year-old – who migrated from India and washed dishes to save for his first deposit – believes the new rules won’t slow him down because he already keeps his income and debt in balance, he said.

Instead, they will put up a fence that may help stop inexperienced or risk-taking investors from burying themselves under too much debt, he said.

“As long as there is some sort of fence around it, then that keeps people more accountable from making silly decisions,” he said.

Investor Riyaan Mohamed put down the deposit on his fourth property just days before New Zealand went into its Covid-19 lockdown. Photo / Martin Hunter

The Reserve Bank introduced debt-to-income limits to reduce the risk of banks failing by lending too much money to home buyers who may be unable to repay debts during an economic crisis.

Some hope the new rules will also put the brakes on excessively risk-taking property investors.

In the past, some investors took on vast debts in order to buy as many properties as quickly as possible.

In such cases, they often paid only small amounts off their loans, hoping instead that house prices would go up and they could sell for a profit or use the increased value of their properties to borrow more.

Mohamed said he operated differently.

His strategy is to buy new properties regularly, aiming for an average of four new investment rentals each year.

He bought his first property when he was 21. He had four by the time he was 25 and 13 by the age of 29.

He focuses on keeping all his properties and paying down debt, having already paid off his family home’s mortgage, he said.

Each year, he pays banks as much as $200,000 in interest and principal payments, with a personal rule to always pay at least $10,000 per property per year, he said.

To generate income, he works as a real estate agent, having previously sold new-build homes for Williams Corporation before recently joining The Property Factory.

He and fiancee Paula Boughtwood turned some properties into holiday rentals because they can earn more cash per night.

Even so, Mohamed realised a few years back when doing budget forecasts that he and Boughtwood were close to hitting their debt ceiling – the point at which the banks wouldn’t lend them more money.

Riyaan Mohamed paid $410,000 to buy a one-bedroom townhouse in central Christchurch at the start of this decade.

They needed new income sources.

Already employing cleaners and staff to look after their short term rentals, the couple decided to start a business managing other people’s properties as well.

Mohamed claims it’s now Christchurch’s largest short-term property management business.

They also run a business cleaning warehouses and recently bought a laundromat, while another recent way they kept themselves under debt-to-income limits was by fixing a “mistake” investment made in early 2022 when prices were near record highs.

Paying $700,000 for an older home, Mohamed found it had “terrible cash flow”, generating about $550 per week income.

By renovating it from a three-to-five-bedroom house, he was able to increase its value and boost its income to $950 per week, Mohamed said.

Overall, he estimates his rentals generate about $400,000 annually.

He expects to always need new ways to make cash.

“I’ve no doubt there will be a day when we will max the [debt] ceiling again and we’ll have to figure out a different way,” he said.

It plays into his belief that, along with hard work, stress tolerance is a key to standing out from others, Mohamed says.

“The nature of a business is something is always going wrong,” he said, in reference to the challenges of looking after property owners, guests and up to 60 staff working at his new business.

“Every time I check my phone there’s always stress, always grief we’ve got to deal with. But it’s good because most people don’t want to deal with it.”

This sense of “survival” had been a regular feature of his life, he said.

As the Herald has previously reported, Mohamed moved to New Zealand with his family more than a decade ago. While aged 15 and 16 he worked picking fruit in the Hawke’s Bay to help his parents survive and pay bills.

At 17, he moved to Lower Hutt alone with $2000, where he eventually dropped out of high school to spend more time doing dish washing and retail work.

By age 21, he’d saved a deposit for his first home.

Riyaan Mohamed started with $2000 as a 17-year-old but wants to become a self-made billionaire. Photo / Martin Hunter

When the Covid pandemic hit in early 2020, Mohamed was 25 and still a relatively inexperienced investor. He had started selling houses for Williams Corp.

With pundits tipping the pandemic to cause economic crisis, he considered returning to his steady income job, rather than relying on commission from sales.

However, Mohamed decided to double down and “hit” the phones trying to sell homes.

They were the hardest calls of his life.

“The amount of rejection and abuse” he got from people fearful of losing their jobs because of the pandemic was “very difficult”, he said.

Yet he ended up selling five houses.

When asked about trying to sell homes at such a time, Mohamed said it was about “survival” for him.

Those who bought the homes also typically had steady “pandemic” jobs, such as pharmacists or supermarket workers, he said.

They were also able to secure a discounted purchase price – because developers were desperate to secure buyers – and then watched their properties quickly rise in value, he said.

For Mohamed, it showed the rewards of pushing ahead.

He said that often when he talks to buyers, they put things on hold because they might be renovating or thinking about having kids.

But for Mohamed and Boughtwood the foot is always on the gas, from running businesses and doing renovations to now planning their wedding next year.

“A lot of times it’s easy to back off,” he said.

“Whereas for us, we have all this happening at once and we are still pushing through.”