About the authors
David Faulkner General Manager Property Management for Property Brokers Ltd david.faulkner@pb.co.nz | pb.co.nz/pm
David Faulkner is one of New Zealand’s most respected and influential figures in the property management industry. With a career spanning over two decades, he has played a pivotal role in shaping professional standards, training, and innovation across the sector. David currently serves as the General Manager of Property Management at Property Brokers, one of New Zealand’s largest and most awarded real estate companies. In this role, he leads a team managing over 8,500 residential properties across New Zealand, with a strong focus on delivering exceptional service to both investors and tenants. He has also served as Chair of the REINZ Property Management Sector Group and is a sought-after keynote speaker at industry events, including The PMC conference, which he co-founded. His expertise in the Residential Tenancies Act and commitment to professional development have made him a trusted voice in the field. With his extensive experience and unwavering commitment to raising industry standards, David Faulkner continues to be a driving force in New Zealand’s property management landscape.
Ilse Wolfe Founder & Property Investment Coach at Wolfe Property Coaching ilse@wolfeproperty.co.nz | wolfeproperty.co.nz
Wolfe Property Coaching was founded by Ilse Wolfe, who remarkably scaled her property portfolio from a $5,000 investment at age 22 to over $20 million in rentals by the time she turned 40 After weathering the Global Financial Crisis and hitting what she calls the “Serviceability Trap,” Ilse developed a numbersdriven strategy called Cashflow Hacking™, enabling investors to forecast post-renovation equity and cash flow before purchase.
Kris Pedersen Kris Pedersen Mortgages Info@krispedersen.co.nz | krispedersen.co.nz
Kris Pedersen is the founder of Kris Pedersen Mortgages, established in 2007 to offer smarter, long-term lending solutions for clients overlooked by traditional banks. With a deep background in finance and a passion for property investment, Kris and his team have become the go-to advisers for serious investors across New Zealand. Recognised among the country’s top mortgage advisers since 2017, Kris is also a regular speaker at property investor events and a trusted voice in the NZ Property Investor Magazine.
Understanding your market
David Faulkner General Manager
Property
Management
Property Brokers Ltd
In this section:
Using Data to Forecast Rental Movements
Figure 1: Median rent all NZ 1993 to2025
Figure 2: Active Bonds in NZ 1993 to 2025
Using data to forecast rental movements
Understanding the property cycle is fundamental to successful property management and investment. One of the most powerful tools we have at our disposal is historical data.
Since records began in 1993, residential rents in New Zealand have increased at an average annual rate of 3–4%. This long-term trend provides a reliable baseline for forecasting future rental movements, helping investors and property managers make informed decisions.
But relying on averages alone isn’t enough. The rental market is dynamic, influenced by population growth, housing stock changes, economic conditions, and government policy. That’s why we dig deeper, using granular data to understand regional variations, seasonal shifts, and emerging trends.
In our business, we work closely with Valocity, a leading property data and analytics provider. Their platform allows us to assess rental values with precision, using realtime market data and historical trends. This partnership enhances our ability to deliver accurate rental assessments across our rent roll, ensuring our clients are positioned correctly in the market.
For example, by analysing bond lodgement and closure data from Tenancy Services, we can track rental demand and turnover. When combined with population data and
housing tenure trends, we gain a comprehensive view of the forces shaping rental prices. This is especially critical in regions where rental stock and population growth have fluctuated significantly over the past two decades.
Incorporating this data into our forecasting models allows us to anticipate rental movements, identify opportunities for rent increases, and advise on property upgrades that can supercharge rental returns. It’s not just about reacting to the market, it’s about staying ahead of it.
As we navigate the property cycle, data is our compass. It helps us understand where we’ve been, where we are, and where we’re heading. And with tools like Valocity, we’re better equipped than ever to guide our clients through the complexities of the rental market.
1:
Figure
Figure 2:
Super-charging your rents
Ilse Wolfe Founder & Property Investment Coach at Wolfe Property Coaching
In this section: The BRRRR Blueprint Why Choose BRRRR
Your level of involvement
Estimating Costs
BRRRR in Action
BRRRR Checklist
The Cashflow Hacking™ Blueprint
Combination of Cashflow Hacking and the BRRRR strategy (Buy, Renovate, Rent, Refinance, Repeat) is the go-to playbook for renovation-driven property investors.
It’s a hands-on approach that builds equity and boosts a property’s value through targeted improvements, rather than simply waiting for the market to rise.
Where a passive buy-and-hold investor might wait years for organic growth, the BRRRR investor manufactures both higher rental returns and increased equity - often in just months or even weeks. Sounds ideal, right? And it can be. The BRRRR strategy can deliver significant
The BRRRR strategy stands for:
rewards in a relatively short time frame. But it’s not without its demands. It’s more expensive up front, labour-intensive, and carries higher risks when more money is on the table.
In this book, we’ll break down exactly how the BRRRR strategy works, what it costs, the potential returns, and the type of investor it suits best - so you can decide whether it’s the right path for your property journey.
• Buy: Acquire an undervalued property suitable for cost-effective renovation.
• Renovate: Add value through targeted improvements.
• Rent: Secure tenants and increase rental returns.
• Refinance: Reassess the property’s value and borrow against increased equity.
• Repeat: Reinvest equity into the next property using the same method.
Why choose BRRRR
This strategy accelerates equity and rental yield within weeks or months, instead of years. A well-executed project can yield $2.50–$3.50 in value for every dollar spent on renovation. The key? Focus spending on high-impact areas - those that matter most to tenants and property valuers.
To execute this strategy, you’ll need two core things:
MONEY
Equity from your current home or savings. A minimum of 30% deposit for investor purchases in NZ
+
A renovation fund.
PEOPLE
Essential team members: builder, electrician, plumber - and a reliable property manager for rent appraisal and tenant sourcing.
Is BRRRR Right for You?
This strategy suits investors who:
• Want to fast-track wealth and cashflow.
• Have the capital to fund deposits and renovations.
• Are willing to be actively involved (or can afford to outsource).
• It’s less suited to purely passive investors unless they have the funds to hire a project manager.
Renovations – your level of involvement
There is a sliding scale of how involved you can be in your renovations. Contrary to popular belief, renovation-based investors do not always have to be closet painters and electricians in their spare time.
You are able to choose the level of involvement you have. But the less involved you are, the more money you must spend, which can mean lower returns on the other side. But paying the professionals will almost certainly result in a high quality, and faster, end result.
You have three main paths:
DIY:
Maximize sweat equity but be prepared for time commitment.
Manage Trades:
Oversee professionals—less physically demanding, still impactful.
Fully Outsourced:
Pay a fixed price for turnkey renovation—low effort, but returns may be reduced.
Estimating costs
A solid rule: renovation should not exceed 10% of the purchase price.
Example:
• A $600,000 property $60,000 renovation cap.
• Need ~40% of property value in total (30% deposit + 10% renovation).
Experienced investors might stretch beyond 10% when they anticipate substantial value uplift (e.g., subdividing the property, new build exemptions - but this is an exception, not a norm.
Hidden Costs & Timelines
• Expect about 5 months from purchase to refinance, with no rental income during that period.
• You’ll also need to factor in tenant turnoverrenovations often displace existing tenants (90-day notice required), and improved rent post-reno may attract different tenants.
Find an undervalued property.
Complete due diligence and secure finance.
Cosmetic and structural updates.
Kitchens, bathrooms, flooring, and curb appeal.
List property and secure tenants.
Get valuation and borrow against new equity.
Use released equity for the next property.
Example timeline
BRRRR in action
An Auckland investor turned a failing, negatively-geared property into a cashflow machine by:
Adding a bedroom via a floor plan reshuffle
Updating fittings and fixtures.
Revealing polished wooden floors.
Refurbishing the kitchen and bathroom.
Install
BRRRR checklist
1. Buy
Identify undervalued property with renovation potential
Complete due diligence (builder’s report, LIM, valuations)
Secure finance and pay deposit
2. Renovate
Plan renovation budget and timeline
Hire or assemble renovation team (builder, plumber, electrician, painter, etc.)
Complete structural and cosmetic updates
Enhance tenant appeal (kitchen, bathroom, flooring, lighting, curb appeal)
3. Rent
Engage property manager
List property with professional photos
Screen tenants and secure rental agreement
4. Refinance
Arrange registered valuation
Meet with bank to refinance based on new equity
Access released funds for next investment
5. Repeat
Identify next BRRRR property
Apply lessons learned from previous project
Rinse and repeat the process
Tips & Reminders
Keep renovation budget around 10% of purchase price (unless experienced)
Factor in 5 months holding time before refinancing
Consider your level of involvement: hands-on, managing team, or fully outsourced
Track ROI for each renovation to ensure profitable outcomes
How to finance the deal
Kris Pedersen
Kris Pedersen Mortgages
In this section:
Bank loan-to-value ratio (LVR) guidelines*
Leveraging home equity
Pre-approval tips for maximum leverage
Avoiding the one bank trap
Optimised debt structuring
Non-bank lenders
Test rates
Principal and interest v interest only
Bank loan-to-value ratio (LVR) guidelines*
Loan to Value Ratio (LVR) guidelines* are rules set by banks and the Reserve Bank of New Zealand that determine how much you can borrow relative to a property's value.
These guidelines* are especially important for property investors and home buyers as they affect deposit requirements and borrowing power. Understanding how LVR restrictions work and when exceptions may apply can help you make smarter, more strategic financing decisions.
80% 70% 80%
OWNER-OCCUPIED
Maximum LVR for standard residential properties where you live
INVESTMENT PROPERTY NEW BUILD INVESTMENTS
Maximum LVR for existing investment propertie
*Note these are the standard loan-to-value restrictions when you already own property. If you don’t own any you may be able to borrow more for your first home.
Higher LVR allowed for new construction investments
Leveraging home equity
Before purchasing your next property, it’s essential to understand how much usable equity you have and how to unlock it.
This process involves assessing your current equity position, determining how much of it can be leveraged under current bank LVR rules, and strategically approaching lenders to access the funds.
Below is a step-by-step outline to help guide you through securing finance using existing equity.
Assess current equity
Calculate the difference between your property’s current market value and your outstanding mortgage balance.
Determine Unutilised Equity
Banks typically allow access to equity of 80% LVR on your personal home and 70% for investment properties
Secure pre-approval
Obtain approval to get deposit funds released from first bank
Approach secondary bank for remaining funds
The second bank will take the investment property as security
Leveraging deposits - the right way
Current position
$450,000 in equity
$300,000 mortgage with Bank A
Raise deposit from Bank A
Secure conditional approval for
$300,000 from Bank A
Raise funds to complete from Bank A
$700,000 can be raised to complete the purchase of an investment property
Pre-approval tips for maximum leverage
1
Use Different Lenders
Diversify your financing across multiple banks to maximize borrowing capacity and minimize cross-collateralization risks.
2
Satisfy All Borrower Conditions
Ensure all personal financial requirements are met upfront to streamline the approval process.
3
Target Optimal LVR
70% for existing investment properties
80% for new build investments
4
Remaining Property Conditions Only
Signed Sale & Purchase agreement Rental appraisal documentation
Avoiding the one bank trap
As property portfolios grow, so too does the complexity of managing risk and access to funding.
A common but often overlooked danger for investors is the One Bank Trap - a situation where all lending is concentrated with a single bank. While this can feel simple and convenient in the early stages, it can quickly become a barrier to growth, flexibility, and financial stability.
What is the One Bank Trap?
It occurs when your personal home and all your investment properties are secured with one lender. This results in cross-collateralisation - where the bank holds security over multiple properties to support your entire borrowing. In this structure, selling or refinancing one property can become extremely difficult, as the bank may block transactions or require that sale proceeds be used to repay other debts. Even if the portfolio has strong equity, control rests with the lender, not the borrower.
The Risks:
• If your servicing ability changes (e.g., reduced income or changing bank criteria), the lender may refuse to renew interest-only terms, forcing a shift to principal-and-interest repayments, potentially doubling your monthly payments.
• A sale of one property may not release any usable cash if the bank decides to retain all proceeds to pay down other loans.
• Tightened lending criteria could halt further investment, as all equity and security are tied up with one institution.
Case study:
A client approached us seeking alternatives to her current setup with one bank. She had $3 million in lending across five properties including her home, valued at $6.5 million, putting her in a strong LVR position. Her loans were all interest only at approximately 4 percent, costing $120,000 annually, while her rental income including a minor dwelling brought in $175,000 per year, comfortably covering outgoings.
However, after easing back on work, her income no longer met the bank’s stress test criteria. With her 15-year interest only period ending in two months along with fixed rates, the bank declined to extend interest only or re-fix her rates, pushing her to a 5.65 percent floating rate. What she hadn’t realised was that 15 years of interest only left only 15 years to repay the full principal. Her repayments were about to jump from $10,000 per month to nearly $25,000 per month, almost $300,000 annually.
Lessons:
1. Split your lending up with different banks
2. Understand that the longer you have interest only, the less time you have to repay principal
3. Review your interest only terms and expiry dates
4. Extend your loan terms if this is suitable for you
Optimised debt structuring
Stage 1 | Securing deposits
Bank A Personal Home
Common mortgage structure
$500k property
$400k equity
$100k mortgage
Bank A Personal Home
Stage 2 | Arranging preapproval
Recommended mortgage structure
$500k property
$400k equity
$300k deposit and renovation funds pre-approved
$100k mortgage
Bank B Investment property
Preapproval
recommendations
Different lender to Bank A for preapproval
Maximum approval ideally organised – 70%
Personal conditions all fulfilled, for example any payslip conditions, bank statements, etc.
• anything you can satisfy that relates to you as a borrower
Only requirements will be property conditions such as:
• Sale and purchase agreement
• Rental assessment
• Registered valuation (sometimes)
Allows purchaser to go unconditional quickly
To reduce risk and regain control, investors are encouraged to adopt a split banking strategy.
This involves allocating lending across multiple banks and separating your personal residence from your investment properties.
A typical structure might look like this:
• Bank A holds your personal home, ideally in a trust, and offers a revolving credit facility for deposit or renovation funds.
• Banks B, C, and D each finance separate investment properties, without cross-securitisation to the personal residence or each other.
This approach achieves several key benefits:
• Preserves flexibility to sell or refinance individual properties.
• Insulates your family home from investment risk.
• Spreads exposure across different lenders, reducing the impact if one bank changes policy or tightens credit criteria.
Once there is sufficient equity in your investment properties, Bank B, C or D can be approached to release this new equity.
The new equity is then returned to your personal home’s revolving credit facility. This makes more funds available for deposits and assists in more investment purchases. Your personal home is still not exposed to bank B, C or D If any bank tightens their lending criteria there is still room to move with other lenders.
Non-bank lenders
After years of cautious lending and tighter restrictions, a recent conversation with a non-bank lender signalled a major shift in the investment property finance landscape.
While updates from lenders are nothing new, this time was different: for the first time since the market downturn in 2022, a funder is actively targeting property investors with bold, investor-friendly solutions. And for some who have been sidelined by traditional bank lending rules, this is nothing short of a gamechanger.
90% Lending on Existing Properties
Traditionally, banks are capped at a 70% loan-to-value ratio (LVR) for investment properties, requiring investors to front 30% as a deposit. But this new non-bank option flips that script, offering lending of up to 90% on existing investment stock.
A Two-Stage Strategy
Yes, non-bank interest rates are typically higher. But this can be seen as a stepping stone, not a long-term solution. Many investors are now adopting a two-stage approach:
1. Buy and renovate using the non-bank facility.
2. Refinance back to a bank once the value has increased or income has stabilised.
This strategy enables progress when the banks say "no" and positions the investor for improved terms down the line.
More Realistic Affordability Testing
Beyond the deposit hurdle, this lender is making waves with a far more pragmatic approach to servicing:
• No debt-to-income ratios
• No inflated stress test rates
• Assessment based on actual repayments
• 80% of rental income counted
• Broader acceptance of income sources
In contrast to the rigid bank models, this lender’s methodology aligns much closer to an investor’s realworld financial position—especially for those with complex structures or non-traditional income.
Non-bank lender enables larger purchases and easier affordability assessment
Traditional bank limits purchase size and requires stritct afforability testing
Test rates
Understanding Test Rates: Why You’re Assessed Above the Market
When applying for a mortgage in New Zealand, many borrowers are surprised to learn that banks won’t assess their application using the interest rate they’ll actually pay. Instead, they use what’s known as a test rate - also referred to as a serviceability or assessment rate. It’s designed to “stress test” your ability to meet repayments should interest rates rise during the life of your loan.
How It Works
If today’s mortgage rate is 5.5%, your bank might assess your loan application at 7.5% or higher. This means your income must comfortably cover repayments at that elevated level, not the lower rate you’ll actually start with. The result? Even if your real-world budget allows you to afford the repayments at current rates, you may not qualify for the loan under the bank’s test rate.
Why Test Rates Exist
Test rates are a tool used to:
• Protect borrowers from repayment shock if interest rates rise
• Enforce responsible lending standards
• Reduce the risk of defaults, especially in economic downturns
• Support financial stability in the wider banking system
They are part of broader guidance set by the Reserve Bank of New Zealand, which expects lenders to assess not just the present, but potential future financial scenarios.
This rate is deliberately higher than the current market rate, often sitting 2% to 2.5% above what you’d pay.
Interest-only mortgages: strategy or risk?
When structuring finance for property investment, one of the first questions investors face is whether to opt for interest-only or principal and interest repayments. While interest-only loans have long been a popular tool among property investors, they’re not without their risks—especially in a shifting interest rate environment.
Why Go Interest-Only?
There are two primary reasons investors favour interestonly mortgages:
1. Tax Efficiency
Investment mortgage interest is generally tax-deductible, whereas the interest on your personal mortgage (your own home) is not. For that reason, it often makes financial sense to prioritise paying down personal debt while keeping investment lending interest-only.
2. Maximising Cash Flow
Many seasoned investors suggest using the freed-up cash flow from interest-only repayments to grow your portfolio faster. The logic? It’s often more profitable to acquire more assets that appreciate over time than to focus on reducing principal on one. This strategy worked well during growth cycles—but it comes with important caveats.
Potential Pitfalls
Reduced Flexibility: Investors heavily reliant on interestonly loans may be forced to sell if interest rates rise and cash flow becomes tight. Conversely, borrowers paying principal and interest have the option to switch to interest-only if needed—creating a buffer in harder times.
Funding During Downturns: In recessionary markets, when properties may be purchased at significant discounts, funding becomes harder to obtain. Lenders tighten criteria, and those who’ve consistently reduced principal often have stronger serviceability profiles— giving them a major edge.
A Smarter Strategy: Blend Cashflow with Risk Management
To get the best of both worlds, consider this structured approach:
• Split Your Lending
Use a split banking strategy to isolate your home from your investments. Put your investment loans on interestonly, and your personal mortgage on principal and interest.
• Simulate Full Repayments
Work out what your repayments would be if everything were on principal and interest. Take the difference between that figure and your actual interest-only payments, and redirect that surplus toward paying down the mortgage on your personal residence.
• Use a Revolving Credit Facility
If you’re disciplined, direct that surplus into a revolving credit account. This not only helps reduce your personal debt but builds up a deposit pool for future purchases - or a safety buffer for lean times. This method helps you grow while improving asset protection. Your family home builds equity and remains outside the risk associated with investment properties (especially if it’s held in a trust and not cross-secured).
Summary:
Interest-only loans can be powerful- but they’re not a set-and-forget solution. Combining them with proactive repayment strategies and strong structuring can provide flexibility, tax efficiency, and long-term financial resilience.