"I went from owning 60 properties, down to 35 and for a long time, I had negative cash flow of $70,000 a month.
"I broke many of my own investing rules during that time.
"After a long battle, I'm glad to be through it."
Graeme Fowler, property investor.
Money. It's the driving factor behind many life choices, but is it the be-all and end-all?
'Me and My Money' is a regular feature that investigates Kiwi attitudes towards money and what drives the choices they make.
Newshub spoke to Graeme Fowler, a property investor and writer of two best-selling books, New Zealand Real Estate Investors Secrets and 20 Rental Properties in One Year, about coming back from a year of selling properties following a close encounter with appendicitis.
Drawing from his knowledge and experience in property, Fowler says if the numbers make sense, it's always a good time to buy. He reveals he made a pre-tax profit of $120,000 from a property trade following the Government housing announcement and talks about why he now prefers investing in commercial over residential.
1. Are you a saver or a spender?
I've never been much of a spender.
I was a great saver up to my mid-'20s. After that, I became an investor which kind of makes saving obsolete.
Nobody is ever going to get rich saving, however, it's better than doing nothing - or being a spender and never having enough.
For me, being an investor and understanding money in a different way took away the need and desire to save.
2. What was your biggest financial lesson, success or failure?
The biggest failure by a long way was in 2005, just after having appendicitis.
After 48 hours of having a burst appendix (two days earlier, a doctor said it was stress-related), my system wasn't good. When I got to the hospital, they admitted me immediately, saying if I'd been there an hour later, I wouldn't have made it.
A few days later (after the operation), there was still a lot of infection. I was prescribed more morphine, antibiotics and other pills and got out of hospital ten days later.
Feeling better, within a few days, I went unconditional on a large, 19 unit motel in Hastings, bought numerous other properties, a Hummer and an Aston Martin. I organised a seminar for 100 people on property trading.
All was fine until my system started to normalise and the effects of all the drugs started to wear off.
Following that, I had to sell many properties to get back to even cash flow again. It was a very expensive year, costing me between one and two million dollars.
Many times, I thought I'd lose everything.
I went from owning 60 properties, down to 35 and for a long time, I had a negative cash flow of $70,000 a month. I broke many of my own investing rules during that time.
After a long battle, I'm glad to be through it.
3. In your opinion, is now a good time to buy properties?
When investing, I've always said, 'If the numbers make sense, it's a good time to buy.'
I've never been interested in what the market is doing and have never taken it into account when buying.
Nobody ever knows what will happen tomorrow. If it makes sense to you today, then go for it.
4. Give an example of a recent purchase that you consider was great value for money.
Nowadays, I'm only buying commercial/industrial property to hold: I haven't bought anything residential to hold for several years now.
However, we still do a bit of trading in residential, i.e. buy, renovate and sell.
The most recent one was a property we bought for $340,000 through an agent in January 2021. We spent about $60,000 on it, including holding costs.
Just before the Government housing announcement, we had the property under contract for $589,000 - $54,000 more than the final sale price. That offer fell through and about a month later, we sold it for $535,000.
However, it was still a very good profit: around $120,000 (pre-tax), after real estate fees.
5. What's your best saving tip?
If you're a saver or want to save, the amount you want to save needs to be put away first.
With saving, it’s not so much the amount you choose, but the act of doing it.
It's better to nominate a lower figure initially (an amount you want to save), so it's manageable. You can increase it later.
Like many other aspects of life, the important thing with saving is making it a 'habit.'
You have to create the habit of doing it every week, with no exceptions. Apparently, the Japanese are very good at saving: in general, approximately 30 percent of their income comes off the top of whatever they earn and goes into savings, or what I call 'the future.'
Many people spend in 'the past' (e.g. credit cards, hire purchase, etc), or spend in 'the now,' without regard for their financial future.
6. Does having more money increase happiness?
No, money itself doesn't immediately bring happiness.
Some of the poorest people in the world are the happiest.
But what it does do is give more choices in life, which can result in a happier life.
A lot of people have a very poor association with the word 'money,' whether it's learned behaviour or something else.
On one hand, they want more of it, but upon having it, I suspect at a subconscious level, they want to get away from it as fast as they can, so spend it.
7. What's your preferred form/s of investment and why?
Since my mid-20s, property has been my preferred form of investment.
I've tried buying shares, trading the forex market, investing in managed funds, but nothing comes close to property.
For many years, it was always residential, but now I'm more focused on commercial/industrial.
I don't see myself reverting back to residential - especially now with the low returns, the constant changes the Government brings in to penalise investors and the extra hassles associated with it.
8. What's the best money advice someone's ever given you?
Over the past 35 years, I've spent hundreds of thousands of dollars on courses, seminars and books.
The single best piece of knowledge was from Robert Kiyosaki in the early 1990s. This was well before he wrote Rich Dad Poor Dad, which made him a lot more well-known.
When talking about investing in one of his earlier seminars, he said, 'An investment is something tangible that you can touch, feel or see that somebody else will pay you to own.'
If I have to pay for it, I don't want it. That has always stuck by me and is the basis of investing for me.
When I buy any property, whether it's residential or commercial, I will put in some money (or equity from other properties), but the majority of it will be paid by the tenant(s).
Having owned a Mr Rental franchise for 10 years, we bought the appliances wholesale. The people renting them paid for them by hiring them (there are lots of other examples).
That is the principle: An investment is something that somebody else pays for - not you.
The views expressed in this article are personal and are not professional financial advice.
