Rahul and Alika Rai moved to New Zealand in 1990 with little experience in property investment and a dream of early financial freedom. Fast forward 25 years later, the Rais are proud owners of a robust portfolio that spans over four countries making them the masters of their own destiny. Having experienced first-hand how enriching property investment can be for the ordinary people, Rahul and Alika distilled their extensive knowledge into Buy & Hold - Simple steps to successful real estate investment in New Zealand published this April 2015. This quick read volume contains structured advice designed to orientate investors throughout the key steps of property investment. It is a road-map guide for new investors and a portfolio health check list for the experienced. We caught up with Rahul to talk about the book and his thoughts on investment.
APIA: Firstly,why did you get into property investment in the first place and how did you get started?
RR: We got into it quite by accident. We bought our first home within an year of coming in to NZ in 1990. It wasn’t easy we had to get 3 mortgages. One from the bank one from Housing NZ who used to do some kind of back up loan towards a mortgage and finally $4000 of vendor finance to reach the required figure. I remember the panic when the solicitor sent us an invoice for an extra $200 for drawing up the vendor finance document. We were at our final bits of money. And lets not forget the interest rates were around 14%
When we moved to Wellington with the job after about 4 years luckily we kept our house as a rental. That was the start to our property investment journey. Then we bought our home in Wellington and kept this when we moved to Christchurch. Once in Christchurch we started to buy rental houses as we could see the benefit of holding on to houses for the long term
APIA: What made you write this book?
RR: In our years of working in our careers we realised that many people have difficulty saving money and almost lived pay cheque to pay cheque. We could see that owning a house is an excellent way of making compulsory savings. And then soon after, one can buy the second and then third rental and so on. We wanted to tell people our story so that we could inspire a few people to do that same. We are absolutely convinced that this a very good path to financial independence and we wanted to try and make a difference and spread the word. Once you achieve certain milestones you had set for yourself you can help others during your own life time and also for a long time afterwards with perpetual philanthropy. That is a wonderful legacy to leave behind.
APIA: You were very clear from the off that this book is for the everyday run-of-the-mill ma-and-pa investors rather than the real estate moguls. Why is it important for you to speak to this audience?
RR: We wanted to help spread the message that this can be achieved by anyone who has a job or a small business to start off slowly on the side and keep growing it as a business. It is very liberating to think of your pay day as leverage day as I have often tell our kids. It is leverage day because you are using part of your pay cheque to leverage with the bank to grow your real assets. We want to try and help everyday mums and dads in accelerating their journeys towards financial independence.
APIA: In the property investment circle, the prevailing rhetoric is very much to use property to generate enough passive income as to free the investor from the 9-5 shackle. Yet you encourage investors to keep our day jobs and invest on the side. How do you see the day job add to the investors’ experience?
RR: We believe in growing a property investment like a real business so that you work towards a number of properties. Having just one or two is more like a hobby. We are talking about gradually having a number of houses, as many as you are comfortable with. But the process should be handled cautiously so that you don't over extend yourself at any time. To grow the portfolio your other stream of income is very important. It is a safety net. Lets not forget also that the net yields are quite low so just by having a few houses there will not be enough income to live comfortably. Moreover the banks want to see serviceability and you get that with your day job. It dosent mean that you have to work forever but you certainly should for as long as you can.
APIA: You seem to take a team-orientated approach to your investment strategy where you bring in a team of professional service providers such as property managers, valuers, accountants, financial planners and so on. In this competitive market how do you evaluate each service provider and determine the value they can add to your portfolio?
RR: We do take a team approach since we treat our property investment like a true business. We have been in the corporate world for a long time and have seen first hand how the best results are achieved in a team environment. I guess evaluation of each of those providers is based on your experience of the results you are getting from them. If they have saved you time which you can spend on something else more fruitful then it was worthwhile. Moreover there are a number of areas where one has to get professional advice and the cost of not getting it is too expensive.
APIA: How companionable has your property investment journey been? As a couple in life and in investment, do you recommend other investors to also invest with their partners?
RR: It is always great if you can work together and be on a similar wavelength. There will be sparks (like we have) but if you can complement the skills it has got to be useful. Plus you face the ups and downs of investing together without one blaming the other totally!
APIA: You invest in New Zealand as well as abroad. What are the biggest risks facing an absentee investor and how do you mitigate that risk?
RR: The important thing is to work on the business and not in the business. So micro-management is not an option. We talk a lot about property managers and their value to investors. Once you are comfortable with them managing your houses in your own town or country it is just a question of getting the right manager in the other country. But you have to do a fair amount of research as the tax laws would be different and the property cycle would be different. Investing abroad is achievable but do tread with caution.
Rahul and Alika Rai are the authors of "Buy & Hold - Simple steps to successful real estate investment in New Zealand" click here to find out how you can obtain a complimentary copy of this book. The Rais will guest speak at the November APIA Westgate meeting as part of #TheExpertsAmongstUs series sharing their investment ups and downs and key lessons learnt.