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Wealth Creation Through Property

April 27, 2022
Daniel Carney - Goodlife Advice

Something like 90% or more of Kiwis are not prepared for retirement. The ‘she’ll be right’ attitude spills over into retirement planning like you wouldn’t believe. If 90%+ of this nation are dead broke by the time they hit 65, it certainly stands to reason that they’ve never taken the time to even ascertain the amount they’d need to fund their retirement spending needs.  

Calculating Amount Needed for Retirement:

To give clients our very ‘crude calculation’ as to what we mean here, let me quickly run you through an exercise…

We normally start by asking clients two questions:  

  • By what age would you realistically like to be financially independent?
  • If there was no debt or kids to pay for, how much income would you need per annum to live a lifestyle you’re accustomed to?

The average age and income we see is 65 and $100K. Now, let’s say you needed that income to last until the ripe old age of 90. For a very basic calculation of the kind of nest-egg you’d need, we simply multiply $100K by 25 years

(I have to stress, this is just to give clients an idea of the amount they’d need to fund their retirement. We use very sophisticated software illustrations, utilising a number of variables specific to the client to arrive at a more accurate projection when presenting a personalised financial plan).  

$100K x 25 years = $2.5M

Whilst this is a crude method of calculation, you might be surprised to know that it will be very close to what you will actually need as a nest-egg to fund your retirement.

The question that tends to stump nearly everyone when we take them through the above exercise is when we ask them this: “How are you going to close up that gap?”

How would you close a gap of $2.5M needed to fund your retirement?

The blank expressions we tend to get back from rather concerned clients at this point speaks volumes as to where most are positioned in their journey to financial independence. Most never knew that was the destination, let alone have a map on how to get to there!

How Do You Plan Financially For Retirement?

Now that they have the motivation to do something about their retirement, getting there is a completely different conversation. How will they do it? Can they save their way there? Most likely the answer to that question is “no”…. Why? The average monthly amount that the people we meet would have to save, to reach their retirement goal, is around $10K. That is practically impossible for 99.9% of the average every-day Kiwi investors we meet…

So – What do you do then?  

We make no bones about it, if we see an opportunity for a client to leverage their position into investment property, we will recommend it, and we’ve been doing so for 23 years.  

Clients come to us to create a ‘Wealth Creation & Protection Strategy’ that will get them to a place in their future where they are financially independent. A place where they’ve grown their wealth position to a point where their investments work for them, not the other way around. They can choose whether they want to work, or whether they want to slow down, or perhaps move more into a volunteer space, or simply relax in a rocking chair on the deck sipping cups of tea and dunking Superwine biscuits!

Property Investment

An essential part of our advice surrounding residential investment property is what we call ‘Asset Class Comparison’. Don’t get me wrong, we are very pro ‘funds under management’. In fact, we have nearly $50M of client funds invested, which is predominantly made up of KiwiSaver. However, it’s this spot on the agenda where it becomes abundantly clear how leveraging into property (borrowing to invest), outperforms any other investment our clients can invest into.  

Property in NZ has grown close to 10% per annum over the past 50 years. Even if we halved that growth to 5%, on a $600K property for example, that’s growth of $30K in a year. Would you have saved $30K in the past year? Most wouldn’t and couldn’t.

It has become increasingly popular to turn an investment property into a bach. The good folks at Bachcare can help owners prepare their properties to be rented in the holiday home market. Once holiday homeowners are set up to receive bookings, that additional income can help cover property expenses, and in some cases even provide a better rental return than a traditional tenanted property.

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There are of course criteria to adhere to when it comes to bank lending for baches. The bank or a good mortgage broker can help here along with your mortgage structure. If you already have a bach, and wish to leverage off the equity that’s built up in it, it could be even easier to buy an investment property, or perhaps even another bach.  

Seek Advice from a Financial Adviser or Property Specialist Accountant

The good old Kiwi DIY Number 8 Wire mentality should not apply here. There are several reasons why homeowners considering this approach should seek advice from a financial adviser or property specialist accountant as they can:

  • Help you understand your cashflow position after all expenses are considered
  • ‘Stress-test’ the environment to ensure you can afford the above in the best - and worst-case scenarios
  • Advise you on how long to hold this asset for
  • Provide advice on how to structure your mortgages: principal & interest vs interest only; which debt to pay off first; what is good vs bad debt?
  • Advise on property ownership structure: a family trust; an LTC; a partnership? And how should money flow around these structures?
  • Help you calculate return on investment and weigh this up compared to other places you could be investing

Unfortunately, we have seen a world of mistakes when people have decided to ‘go it alone’ and get themselves into the investment property or bach rental space off their own steam. In short, get professional advice, and if it’s the bach rental route you’re taking, it’s not a question of whether or not you should involve expertise like that of Bachcare, it is simply a must.  

This article was produced by Goodlife Advice and is not intended as personalised financial advice. To discuss your particular situation, talk to a financial adviser. All numbers are meant as examples and not indicative of any property in particular.

Work together with Goodlife Financial Advice to build a ‘Wealth Creation & Protection Strategy’. Goodlife provide holistic financial advice around KiwiSaver, managed funds, residential investment property, mortgage structures, and retirement planning. They're offering all Bachcare owners a free Financial Health Check! Reach out via their website, email them on, or phone 0508 GOODLIFE and mention you're a Bachcare client to redeem.

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