Blocked By Income, Then By Equity. How They Got Through [Case Study]

First, their income was too low to get the loan. They fixed it ... then the market fell, and suddenly their equity fell short, too. So, how did this couple finally cross the line into their first investment property? In this Case Study Sunday, Steve and Vicky share a 5-year journey of hitting wall after wall and refusing to give up. You'll learn: Why the bank turned them down … and how they changed their mind What it REALLY takes to save your way to a deposit How these investors are building towards $100k of passive incomeThe lesson? Sometimes you do everything right and still get knocked back. Getting there anyway is the whole story. Want to share your story on Case Study Sunday? Send us a message, email ⁠⁠[email protected]⁠⁠ mailto:[email protected] For more from Opes Partners: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Sign up for the weekly Private Property newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.opespartners.co.nz/newsletter-sign-up⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Instagram⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.instagram.com/opes_partners/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TikTok⁠⁠⁠⁠⁠ https://www.tiktok.com/@opespartners

• 0:08Speaker 00

  Hello and welcome all to Property Can Be Podcast. I'm your host Stephen Knight. And I'm Andrew Nichol. And this was a show that helps Kiwis go from zero to five investment property. So you could be financially free and stick around for the next 15 minutes because you're going to learn why the bank turned this investor down and how they changed its mind, what it really takes to save your way to a deposit and how these investors are building to 100K of passive income. And to walk us through it, we are joined by Stephen and Vicky. Welcome along to the show. Morning, how are you? Oh, we're doing good, guys. So guys, take us back to the very beginning. What made you decide to invest in property? It was probably a bit of a long journey to decide that we wanted to invest in property.

• 0:47Speaker 00

  And I guess the question for us was how do we get ourselves into a good situation in retirement? Where we can have a reasonable income, but also how do we help our kids have a better future? And whatever that looks like as well, you know, how do we support them in education? Buying their first home, whatever that looks like as well. And we were saving and saving just wasn't cutting the mustard. And so, you know, started looking at a lot of different options, what we could do, what the best thing was, listened to a lot of you two on podcasts, giving us a bit of, you know, background and knowledge there as well. So I think, you know, it was really just trying to understand what's good into the future looks like for us.

• 1:32Speaker 00

  And what tools did you use to kind of figure out how much you might need? This is the hard thing because there's not a lot of tools out there. Well, maybe there are, but I don't think they're necessarily that easy to find to figure out what you need. And honestly, it was probably the first time we had a meeting with one of your consultants back in 2021 and one of the spreadsheets that you guys had talking about, helping to understand actually what we wanted to live on when we retired and what we would need. And I think it was a bit of a shock actually, when it came back to say, wow, hey, this is, this is probably what you need to get to. And that may or may not be investing in property, but this is what you need to have what you're asking for. And at that point, we're like, hmm,

• 2:16Speaker 00

  okay, we're quite a way away from there. Yeah, we need to do something different. And I think also, you know, for me, I don't come from New Zealand. We still want enough disposable income and we're retired to be able to travel, to see family. Yeah. And I think we, we have family that, that are retired and not in a great position, you know, they're potentially still renting. And I think that was a bit sobering for us to see, okay, wow, if we carry on the way we're carrying on, we're not going to be in a good position and we won't be able to live the lifestyle, not that it wouldn't be lavish, but a lifestyle that we think is acceptable. And Vicky, if I, if I think about those people, the family members who are retired and perhaps

• 3:01Speaker 00

  not in the best position, what are the kinds of things you're trying to avoid in retirement? Living on the bones of your, of your backside, you know, you're fighting every week to pay the bills or Still renting? Still renting, or even, even, you know, trying to save enough money to pay for petrol to come and visit your grandkids, or now those that are overseas, Vicky's family overseas, just, you know, probably not in a position at all to travel to New Zealand, you know? So there's only, only travel can go one way. So it's, it's important to be able to do those, those types of things. And I think what, what we've both seen is a lack of planning from, from

• 3:43Speaker 00

  people that are in our family that are retired, that think, well, things will be okay when I retire. You've got super, we've saved in Kiwi Saver for the last 15 years of our life. This is not us, this is, this is our retired family and, and, and we'll be fine. But actually, you won't be fine because actually you don't get looked after to the level that you think you're going to. And the problem is at that stage, if you're discovering it, it's probably too late to do anything about it. And you said that you originally had a wealth plan put together back in, in 2021, I think you said, so five years ago. What's the journey been like since then? It's been a bit of a challenge. We bought our home 2018, which is, it's a huge do up

• 4:26Speaker 00

  property. And then in 2021, yeah, we met with one of your consultants. And at that point, we had quite a lot of equity in our house, you know, just going through COVID. There's a bit of a boom in property and all that sort of stuff. And so our house price went sky high. So we had quite a lot of equity, but we didn't have the income to support an investment property. So then, you know, the, we sort of got off that call, probably a little bit deflated going, okay, that's great. How do we actually earn more money? Because if that's your, if that's your gap, then you've got to do something about it. So we, three and a half years ago, both got new jobs, which meant we both earned more money.

• 5:09Speaker 00

  And then we had to go through a period of trying to save money to do the renovations in this house. What we didn't want to do is put any more money back into the bank by borrowing money to do our renos. So we made a decision that everything that we did to this house was, we had to save for it first, you know? So we were trying to save money to do this, but also get into a position where we can revisit this again. And I guess, gee, I can't even remember what it was when we spoke to Dennis again, maybe 12 months ago. And I think we, we sort of, through this period, you know, we had this boom back in 2021, we saw our property devaluing a little bit. When you look at, you know, homes and, and one roof and those types of things and your house,

• 5:52Speaker 00

  house value is going down. But we thought we'd, we'd reach out and Dennis sort of took us through the same process we went through in 2021. And we discovered that we had plenty of earnings now to support getting an investment property, but our equity had dropped to the point where we were going to struggle with the equity side of things. So we probably got off the call, actually we were on with Dennis was fine, but we caught up with Ed in the finance team. And after that meeting, he said, oh, leave it with me, we'll go and see what we can do. But at that point, we thought we'd probably fix the income, but had an equity issue. But the team was really, really great in

• 6:36Speaker 00

  coming up with solutions on what we could do with different banks, keeping our, our home mortgage with one place and investigating another bank, which you could have less of a deposit and investigating that route a little bit. But even then, we still probably were short on what we needed from a cash perspective, 16 grand short on settlements. So we've just gone hard, probably the last four or five months to save that 16 grand shortfall to be able to get to a position where, when we go live in what, three, three weeks or so, we're going to have the cash to be able to get us over the, over the line at the end of the day. And just before we talk about some of the savings as well, one of the things, you know,

• 7:19Speaker 00

  great tidbits in that story was about how you both realised that in order to purchase your first investment property, you were going to need to increase your income to get the mortgage approved. So you both changed jobs. And when you did that, I mean, how much extra were you able to earn by switching jobs? Off the top of my head, how much, how much more did you earn? I got a 25K increase. Yeah. And I was probably about 15 at the time, but my, I've changed roles within my organisation. So from the time that we both, it's probably about 30 or 40 grand a year extra when we first met Dennis. And then things have changed since then, which has helped.

• 8:00Speaker 00

  So often when you look at it and go, I need to earn more, you can't just necessarily earn more where you're at. And you can't just automatically find another job. You know, so it's, it's, I think it was really difficult at that time in 2021 to go, how do we earn more? Because it's, that's not just a simple thing to fix. It was hard and we both changed jobs within a week of each other. Oh, wow. Yeah. I found his job when I was looking for mine. But the, the change worked for both of us. You know, we both needed the change. So I think it sort of evolved quite naturally. And we just both ended up earning more. And then both getting promoted in our organisations to even better jobs. Yeah. So, yeah, I think you've just got to have it in mind.

• 8:45Speaker 00

  And the other thing is, obviously, twenty twenty one, twenty twenty two, the economy was running a lot hotter. Unemployment was a lot lower, the, the job market was a lot tighter than it is to now. So there is an element of well as of making hay while the sun shines or, you know, taking the opportunities when they appear. Because switching jobs to get that big increase, and I mean, twenty five grand is a really good increase. I'm really happy for you about that. That's awesome. Those opportunities aren't always there for the picking, right? So you've got to take them when they are there. One thing actually, on that note, that stood on your story is striking while the iron's hot, right? And you guys go and change the thing that's holding you back. And then you find that there's another thing holding you back now. I know how disappointing that probably was.

• 9:29Speaker 00

  So how did you keep yourself motivated to kind of still stick to the plan? Because I know that for a lot of people, if it kind of goes past six months of them, you know, having the idea to actually taking action, they're probably not going to do anything at all. I think it goes back, Andrew, to what we were talking about at the start, that I grew up in a household that we didn't have any money. And there was never really any view that we're ever going to own a home when we were kids. And it was always sort of based on paycheck to paycheck every week, you know? And I didn't want to be like, I don't want to be like that myself, but I also don't want my kids to be like that. And, you know, and I've, I've just turned fifty this year and, you know, so retirement gets closer and closer.

• 10:12Speaker 00

  And just really, I think it was just knowing that what we're doing is not going to be enough. Kiwi save is not going to be enough. And we could save and save and save. It's not going to be enough. Um, I guess it was always that in the back of our mind, well, we have to do something. Yeah. Doing what we're doing is not going to get us to where we need to get to. No, we, yeah, what are our options? And so the, yeah, the, the option in terms of what our reference is and what we grew up with is not an option. So even if it takes time, and I think it has taken time and we've had to be patient and we've had to just find other ways. But you just have to do it if you don't want to settle for the status quo, I think. And being you property investors, I'm always quite keen to know what concerns people before they invest, because everyone's different.

• 10:57Speaker 00

  Were there things about investing in property that made you particularly nervous and how did you overcome those? Yeah, because there's a lot of money on the line, I guess. It's a big mortgage, big mortgage that you're going to have to pay if someone isn't paying it. Yeah, yeah, there's, there's, there's always risk, but I think it's that risk cost benefit, you know? And I think there's always risk in everything you do, you know? There's risk, there was risk in us both changing jobs within a week of each other. There's risk of buying a, a house in two thousand and eighteen, which was probably the worst house on a, on a good street. You know, and there's risk in having to do these renos when you've got zero ability to do it yourself because you don't know how to do it, you know? There's. There's also a risk in doing nothing. There's exactly, always risk in doing nothing.

• 11:40Speaker 00

  And I think that was what we weighed up is, yeah, there's always can be risk, um, but what's the greater risk? And the certain outcome of doing nothing and having nothing. Exactly. Yeah, and, and it gives the risk now, when, you know, you read all this stuff and the news now of the, you know, the, the property bottoming out and all those types of things is, there's a risk in that as well. But I think, you know, one of two things, if you look at the research and what property does at a time, you've got to expect that it's gonna, it's at least flatting at some stage. But even if it doesn't, you're in a better position with properties that someone else is gonna invest into your, help invest into your future, um, with you as well. I think that's, again, it's, it's, it's what's the risk of doing nothing? I think it's greater than the risk of doing something.

• 12:24Speaker 00

  And before we hit record, we were talking about your guys' savings approach, which is, as you mentioned before, you have been able to save about sixteen thousand dollars over the last couple of months, which is awesome. And I wanna hear, how did you guys manage to do that? Because I know that one of you is a bit of a saver and one of you is a bit of a spender. Standard. Well, well, I, well, I think first and since it's actually recognising that one of you is a spender. Um, because if you're both spender, you've got a bit of a problem. So it's, it's how do you, how do you recognise it? And to be honest, we fell into a solution by total luck and chance. I'd love to say it was by great planning, but it wasn't. But we, we remortgaged our home a couple of years ago.

• 13:09Speaker 00

  And when we remortgaged our home, there were some technical issues that Vicky actually didn't end up being able to have access to, to our new home mortgage. Oh, yes, Steve, that sounds like a likely story. I don't know how that happened. Vicky just can't access it. New rule at the bank. New rule at the bank. So, and, and we could fix it, but we decided, we were going, we decided we weren't going to. I don't need more life admin and it's, it's better if I don't know the money that he's got in there. Because when I see money in a bank account, I see it as a target to spend it.

• 13:45Speaker 00

  So, yeah, it's worked out well to keep me out of it. And then I have our joint account, which I manage all our bills and groceries out of. And then all of his money, basically, he saves and I'm oblivious to what's in there, which is great. So, so, so incomes go into, into separate banks, not even separate, separate banks. Um, and my, my account pays for our home mortgage and then everything else on top gets saved. And Vicky's account basically covers everything to live on. Yeah, and it works. I think you've just got to find a system that works for your lifestyle, for your busyness and your personalities and your limitations.

• 14:26Speaker 00

  Yeah, and I think that's, um, if you can understand where your weaknesses are, you can, you can structure accordingly. I think that's a great system, just to not have access to an account. Hundred percent. Might try that at home. Good luck, Ed. Yeah, good luck. Hopefully she's as amenable as I am.

• 14:44Speaker 00

  She's not.

• 14:47Speaker 00

  Ed said it, not me.

• 14:51Speaker 00

  You didn't counter what he said, though. Yeah, yeah, no, no, no, no, he's absolutely correct. Ed, so tell us about the plan from here. What does the next stage look like after you settle on this investment property? Oh, look, I think there's still a few hurdles to get over the line. I mean, as far as we talk about risk and unease or, or nervousness or whatever, you know, we, yeah, we settle on, in about three weeks' time, which is, which is exciting, but obviously we don't have someone to rent the property yet. So we have to wait for that, the bill to finish and the settlement to happen. So I guess there's probably a little bit of nervousness there, but we've got the Opus team working on that. So, so hopefully in a, in a reasonably short time, we can get someone paying the money into that, which would be great.

• 15:33Speaker 00

  But our plan is to continue to work really closely with Dennis, who's our consultant, um, with you guys to, to figure out what's next. So for us, the plan is not one investment property, because one investment property, yep, it's a good start, but again, it's only a start. So what does continuing this journey look like? And he's been great to map out in the tools that you guys have for our, our, our online account to be able to see what the future looks like. But, um, we know that we just have to keep on continuing down this journey and looking at, alongside him, looking at what our next opportunities are. How do we continue to do that?

• 16:13Speaker 00

  I'm pretty sure the plan was in two years' time, after this settles, to look at the next property after that and keep going, I guess. How many are you aiming for in total? I think it was four. Um, if memory serves me right, I probably should have, uh, probably should have looked at our, our Opus account before we jumped online. I'm pretty sure it was four by the time I'm sixty two, so that's twelve years. So that we can then look at freeing up some property at that point to clear down our mortgage on this house, uh, our home, so that we're mortgage free here. And then, so obviously our earnings at that point on our rentals are then earnings for us, rather than having to pay down our mortgage anymore.

• 16:56Speaker 00

  And in terms of the why, if you think about your first kind of year in retirement or whatever that looks like, maybe it's just working part time. What do you actually want to be doing with your spare time when you are able to live on your portfolio? Live rather than live for someone else, pretty simply, you know? I love that. And for someone who's listening to the show and, and they've been trying to invest in property, but they, like you, have faced a couple of hurdles along the, the way. What's your words of wisdom for them? I think being really clear what you want to do. And if you think that you need to do something, then don't give up. You know, this has been five years since we first met with someone from Opes to settlement. And so our investment journey has been longer than five years, you know?

• 17:40Speaker 00

  So five years is the first conversation that we had. But, you know, I think about the hundreds of podcasts that I listened to, the, the hours of research that we did, the time that we spent saving, because that's what we thought was the right investment opportunity, you know? So our investment journey's probably been, I don't know, ten, twelve, thirteen, fourteen, fifteen years maybe. And we're only just getting to the first investment property now. Yeah. Um, so I think honestly, if you, this might sound harsh, but if you give up after the first no, then maybe it's not for you. You know, I think you've got to be clear on what you want to do. You've got to go after it. And it's like anything in life, we always get knockbacks. If we don't get knocked back, then that's not life.

• 18:25Speaker 00

  And it's, it's how you get up and think about, well, okay, I got knocked back, but, uh, what's the next thing? And you might find that you're never going to get there, might feel like that, but you will. Hmm. I think actually that's such good advice because if people are realistic about the fact that actually this is hard, this is going to be a bit challenging. You are going to have to top up a rental property, you are going to experience some market downturns, you are going to have some vacancy, you are going to have a maintenance issue at some stage. It's not going to be easy and making money tends not to be, unless you win Lotto, nothing's easy. So you've just got to take the good with the bad and you can't expect to get anything out of something that doesn't require a bit of effort from you.

• 19:05Speaker 00

  I think for me too, and I think for both of us, is advice for others would be also just challenge your thinking. You know, we have friends who have the dream home, you know, they have their five bed, bed home and they're not looking to invest. But I think we're, we're not looking to find our dream home. We're, we're looking to find a space that's comfortable, that works for our family, that's also low maintenance, you know, that we can enjoy our lives. But we don't have to be like everyone else and, and invest all of our disposable income into this, you know, sort of dream home. That might also be a bit of an illusion. I think just think about what your earnings can give you.

• 19:48Speaker 00

  And I think we'd rather have, you know, maybe not the five bed, but the four bed, or maybe it's three bed with a little study or something, but still be able to have rental and investment properties. I think that's a much better outcome than trying to sort of keep up with our friends. So, yeah, I think you've just got to challenge your thinking about what your goals are. Well, Vicky and Steve, we're so grateful that you came on the show today to share what you've been doing in property and inspiring everybody else. And I know it can be quite scary when you come on and start sharing, you know, details about your life, because us Kiwis tend to be like quite humble on the whole. But I always say to people, if you've been inspired by Vicky and Steve's story, your story will inspire other people as well.

• 20:29Speaker 00

  It doesn't matter whether you're on your first rental property, your tenth or your hundredth, somebody's gonna get something from your story. So send me an email, [email protected], I want to share your story on the show as well. Over the last fifteen minutes, you've learned why the bank turned this investor down and how they changed their mind, what it really takes to save your way to a deposit, and how these investors are building towards a hundred thousand dollars of passive income. Right, let's wrap it up there, but please don't forget to rate, review and subscribe to the podcast. Really does help us get the message out to more people.

• 21:05Speaker 00

  Thanks for listening to the Property Academy Podcast. I'm your host, Steve Attenborough. And I'm Andrew Nicoll. We're going to be back here tomorrow with even more daily strategies, tactics and insights to help you get the most out of the news in the property market. Until next time.