The key to financial success is to think of yourself as a business, Carey Smith tells Rob Stock.
Some people are entrepreneurs and some employees, says Carey Smith, the chief executive since 1997 of real estate company Ray White in New Zealand. Either choice is fine, he said, but to succeed financially, you need to invest in yourself and take some risks.
How did you earn your first pay cheque?
I was age 17 when I received my first genuine pay cheque for my job which was in real estate as a cadet. I did all the jobs no one else wanted to do like collect rents, help relocate tenants, wash the work cars, clean the office windows and mow the boss’s lawns (he owned a 5-acre lifestyle property). In those days it was cash in an envelope. I earned $68 each week and Thursday afternoon could not come quick enough.
How did you spend it?
At the time I was saving to buy a car which took me a year to save up the deposit. Other than that my pay was diverted to having a good time on the weekends, particularly after footy.
What were the family finances like when you were young?
I am youngest of five boys so I may have seen the better part of the financial cycle in our family. My Dad was part of a family business and he would tell stories of importing and investing in bicycles. Some bicycles would be a huge success, others not so.
What’s the best bit of advice on money you’ve been given?
In regards to investment assets “don’t be a seller”. (I hope none of my team read this!). I was given this advice on the basis that if it was good enough to buy in the first place, don’t fall for market conditions as that is a reaction to the market, not the asset. The general assumption is if the bank is willing to lend you money on it, then it is a shared risk, and a bank is a good partner. Because of this advice I have been able to leverage property price increases to buy other properties.
What do you mean by “you are a business”?
Each of us are in business and it just depends on the personal level of risk. Some work as an employee for an employer and are risk adverse but still are a business themselves with a job or career. Then you may have a contractor who backs themselves to get work through others, and then there are business owners who rely on their skill to lead a business with no guarantee. We are all a business, we just decide our level of risk and upside.
If a child asked you the best way to make money, what would you tell them?
Learn the value of money first. It is a good idea to have two money boxes, one for spending, one saving. Each week or month physically deposit the coins in a coin machine and divert to a KiwiSaver account – which at the current time is an excellent way to grow wealth with government assistance at the start. The spend box should be just that.
House prices in Auckland are just too high. True or false?
A seller of a property always hopes it could be worth more and a buyer of property always hopes it will be worth less – until they actually buy in. So it could be viewed that house prices are high but once you can afford to buy a home you want the price to remain at good levels so you can leverage and grow wealth through the capital gain.
Is there hope for the young when the median house price is over $400,000, and over $600,000 in Auckland?
Given that the current Loan to Value Ratio applied by the Reserve Bank is making available funds more difficult to source for first home buyers, then being able buy a property as a consequence is seemingly further away for some. KiwiSaver offers the ability to bridge the gap and will be more relevant as dynamics change in policy on lending and being to demonstrate the capacity to save. There are also options of buying further out or buying a section to get into the market.
Are you in KiwiSaver, and what kind of fund are you in?
I joined KiwiSaver in July 2007. I changed funds after the first year, given the GFC and the impact it was having on markets that KiwiSaver were exposed to. Primarily, KiwiSaver is a long-term saving option and I have a 75 per cent exposure to growth and the other 25 per cent in a balanced fund.
What’s been your best investment decision?
Investing in Ray White New Zealand as a part owner.
What was your worst?
I was an auctioneer at a charity auction several years ago in Rotorua and a golf glove together with picture of Tiger Woods was an item. So I started the bidding high thinking it was a popular item but it wasn’t. So I ended buying it for reasonable money myself. I thought it would be OK to sell on Trade Me and I would get my money back – not to be – I got 20 per cent of what I paid for it, but it went to a great cause.
Do you collect anything?
When I was younger I collected stamps for a long period of time but, unfortunately, someone broke into my childhood home and I lost an extensive collection. My interest subsequently faded given the collection extended back to the mid 60s.
Source: Sunday Star Times
Photo: RISKY BUSINESS: Carey Smith, chief executive of Ray White in New Zealand says to succeed financially, you need to invest in yourself and take some risks. Source: Michael Bradley