Amazing opportunities

- Caglan Bagci, NZIJ Mortgages


This cartoon makes me think of Howard & Ann Woolston, a Wellington couple who see opportunities in a property market that most are finding challenging.  Howard and Ann run a property company called Cn-The-Light Investments Limited.  Their approach is to trade in residential property by buying well, adding value and then selling at a profit.  They pay tax on the capital gains and are careful to ensure that they pay just the right amount of tax.

While property trading is not unique they have a focussed approach that has proven to be highly successful.  Firstly they aim to buy properties below $400,000 and then add value to sell above $400,000. 

They feel that this portion of the property market will be least affected by external pressures.  Furthermore they aim at buying 3 or 4 bedroom New Zealand homes that they feel the average New Zealander is looking for as this part of the market has more sustainable demand and more proven consistent results year after year.

They aim to buy well by looking for properties with solvable problems.  Their formula is Problem + Solution = PROFIT.  Sometimes they will look to add a carport, garage or bedroom to increase value or upgrade the property with paint, carpet, drapes, and landscaping.

In some cases a property will have an ‘access for sale’ problem.  A property that has a fixed term tenant occupying it can only really be sold to another investor because it’s not available immediately for an owner to move in to.  As the number of buyers is a lot smaller so is the price.  If the tenancy is below market levels and has six months to run the property may not be saleable. 

In one case the Woolston’s purchased such a property and told the tenant that the lease would not be renewed.  They also told the tenant that if they wanted to move out earlier that they would have no problem with that and consequently, they got access to the property much earlier than would otherwise have been expected.  They then tidied up the property nicely and on sold for a handsome profit.

‘Groundhog Day’ for the Woolston’s is where they buy a property for $350,000, do nothing to it and then sell it for $450,000.  However in practice it is more along the lines of buy for $370,000 and spend $20,000 on improving the property for sale at $440,000 after land agents and fees for a profit of $50,000.

The Woolston’s approach has been so successful that in addition to using bank mortgage funding for purchases they have a number of private investors who have invested with them.  They pay private investors a whopping 18% per annum paid quarterly.  They allow investments in multiples of $10,000 for a minimum term of 1 year.  They provide a debt acknowledgement and a personal guarantee to their investors.

So if you are finding the market a little challenging at this time, hopefully this article about the Woolston’s approach will give you some ideas about how you might make a profit.

As always I am happy to respond to any questions on this article or anything in previous issues.  Send your questions to mortgages@nzij.co.nz