Ryan Spearman has come a long way since 2004 when he was sitting in a real estate agent’s office signing a sale and purchase agreement without even knowing the price of the Avondale house he was buying.

“I just followed what he said I should write down on the agreement. I was probably royally ripped off, but it didn’t matter at the time.”

These days he scours the country for blocks of under-rented and rundown units he can renovate and add to his portfolio of 19 units in Rotorua, four in Christchurch and four in Dunedin.

It’s a far cry from when the film industry assistant cameraman started out. It’s also good for his pocket as his main income has recently been from making television commercials and that’s drying up as the media industry struggles.

Spearman’s one gripe from his now successful investing is that he spent 15 years in the wilderness, not having taken courses or educated himself on how to find and establish cashflow positive properties. “If only I had known in 2004 what I know now,” he says.

He became involved in property investing after buying an Avondale, Auckland property with his mother who was moving overseas. She already had a rental and sold it and asked Spearman if he wanted to buy half of the new property.

“I knew it was something you were supposed to do because property goes up in value. I was in charge, but I had no idea what I was doing. It was a good exercise to be a landlord for a while and we had a property manager.”

Spearman had just started his freelance career in the film industry and while he was earning a bit of money, most went towards topping up the mortgage on the rental. “It wasn’t making any money, but it was a house and I owned it and that was exciting.”

The outlay of money was horrible, he says. It was about $2,000 a month. “It started out when I was flatting and seemed alright at first. Then I realised my mates were doing all sorts of stuff and although I had a decent job, I had no money at all. I was broke all the time.”

He admits he tipped all his money into property investment without much thought. “It’s only in recent years that it has started to actually pay me back.”

First Home

A couple of years later and now married, Spearman and his wife bought their first home – a two-bedroom house with a granny flat at the rear in Avondale. They intentionally found a home and income to help subsidise their mortgage. “It was rough and a super do-up, which we did immediately and then renovated our house over the next few years.”

Several years later and with two children, the couple outgrew the property. Spearman sold the property he had invested in with his mother but kept the house with the granny flat as an investment and bought a bigger family home nearby in about 2010.

“It was still massively expensive to own both properties, but I didn’t know any better. I just thought it was another house you owned.

“The granny flat tied the whole investment together and made it possible to own a bigger family home. I could also see it was going up in value,” he says.

It proved stressful paying two mortgages while working in an industry that is predominantly freelance or contract work. “Nothing is guaranteed – income is up and down. We managed to hold on to the house and granny flat for another five years.”

That is when Spearman became aware he needed education and advice about property investment.

“I got some generic financial advice, and it was pointed out the house and granny flat were costing a fortune, even though I had them both rented, and I should sell. While we had never considered that we ended up selling and clearing all our debt and became mortgage-free when I was 38. It was exciting.”

Then, the hard work began. Spearman began reading books on property investment and realised he had never grasped the concept he could own a property where the rent paid for all expenses, let alone make a profit. “I didn’t even think that was a concept. I heard it was possible to achieve that outside Auckland in the regions.”

Equity Boost

Six months after selling, Spearman had equity coming out of his pockets and realised he needed to capitalise on it. “Basically, I went to Rotorua a few times, made a list of every single property for sale and had private viewings to get an overview of what was for sale. It dawned on me the way to make investing work in terms of cashflow was buying units.”

At the time they were cheap to buy and essentially the rent per room was the same as a house. Spearman says in his mind there were fewer expenses because the units were small, but he would still get the same income as if they were a bigger property.

He bought his first unit for $145,000 after running calculations he had made on a basic spreadsheet. He also managed it from Auckland.

About five months later he bought another unit around the corner, essentially leveraging off the family home. “It was easy to get loans because we didn’t have any loans on our house and the film industry was still busy then and my income was reasonable.”

The rest of the block he owned a unit in came up for sale about six months after – more expensive, but still reasonable, with a property management company’s rental assessment that was much higher than he was charging.

He told the manager there was no way he could get the sort of rent talked about in the assessment. “I told him I was obviously doing something wrong and if he could rent the units at the level in the assessment, I was prepared to hand over the management of all the tenancies.”

Spearman bought the other three units in the block of four and that is when he enlisted property managers. Since then, he has never managed any of his portfolio himself.

He also realised that owning individual units in blocks was not the ideal way of owning property as there was little control over the rest of the title.

Targeting blocks of units, Spearman’s next investment was a block of four one-bedroom units in central Rotorua being sold by an owner who had inherited them from his father and had done little maintenance. He was not that interested, Spearman says. “They were under-rented, and I spent $160,000 in total renovating each unit.”

Distressed Property

He could see that buying a distressed property could yield a bargain and force him to do the work to improve the value and lift the rent. “The added bonus is I have an extremely nice property that is much less likely to need a lot of maintenance over the next decade and expenses are not going to be high. It’s always been popular to rent.”

However, after spending two years buying units in Rotorua and prices rising, Spearman felt he had reached his purchasing limit there and looked further afield, firstly Dunedin and then Christchurch.

After researching the Dunedin market and before the first Covid lockdown, Spearman was offered a block of four units, with three renovated and one needing work.

“That’s where the value was.” The owners never finished the project but didn’t want to sell during the lockdown. That gave Spearman time to negotiate with the agent before the property went on the market.

He did the deal halfway through the lockdown after the vendors slightly panicked, using a due diligence clause that the sale would depend on reports from tradies and inspectors, who he was able to line up as soon as the lockdown ended.

“I got a really spectacular deal, renovated the flat and got the units up to market rent. It was in profit from day one like my other places.”

He decided to do the same in Christchurch to spread out a little further. Following the same pattern, he found a block of flats that were “rough and quite disgusting.” Tenants stayed in two of the reasonable flats and the other two were totally renovated.

By then it was 2020, property prices were starting to boom, and he was tapped out at the bank. Spearman sat back and knew by early 2021 he couldn’t go much further with that same sort of strategy, so after a property trading course he did a couple of renovations and sold the properties.

Last year, after looking at interest rates and the property market, he started looking nationwide for blocks of flats again, found a 10-flat complex in Rotorua, negotiated on price for a couple of months, and got a deal.

After buying, Spearman realised the one-bedroom flats could be converted into two-bedroom units and while it upped the renovation budget the property has ended up being his most profitable by a big margin. “Even at 10.2 per cent interest on the non-bank loan, it’s still making a profit,” he says.

But he isn’t finished yet and wants more units in bigger cities. Preferably, he would buy them off-market. “Only a fraction of property for sale comes up on Trade Me and rundown blocks that need renovation often don’t make it on to the site because people don’t want to advertise them because there is too much work to be done.”

Lessons Learned

Ryan Spearman says new property investors need to move a bit quicker than he did.

“If I had educated myself, networked, and just been around other investors, it would have opened my eyes to a lot more possibilities and strategies. Doing it by yourself isn’t the ideal way.”

But, in saying that, Spearman says anything is better than nothing. “I didn’t consider myself an investor until 2018-2019, even though I bought my first investment property in 2004.”

By that stage he’d owned investment property for 15 years but didn’t put in hard work until 2018. He’s proud of his gains.

“I don’t think I would have been able to make those gains without 15 years of just sitting on properties and just feeding the mortgages. But the 15 years could have been shorter if I had educated myself.”