The Freehold Property Model: A Smarter Exit Strategy for NZ Property Investors

How NZ property investors can use the freehold property model as a strategic exit plan for passive income.

For many NZ property investors, the goal is clear: build a portfolio that will one day fund a comfortable retirement. But while the entry point into property investment is often well understood - buying, leveraging, and holding - the exit strategy is where many investors get stuck.

What happens when you’re ready to stop working, but your properties are still heavily mortgaged?

How do you turn capital growth into actual income?

This is where the Freehold Property Model offers a clear, strategic pathway. It’s a model designed not just to grow wealth, but to convert that growth into passive, inflation-resistant income - the kind that can support you in retirement without relying on the volatility of markets or the erosion of savings in the bank.

What Is the Freehold Property Model?

At its core, the Freehold Property Model is about scale, leverage, and timing. It’s best suited to medium- to high-scale investors, typically those who are planning to invest in two or more investment properties.

The model typically uses interest-only lending to maximise leverage during the growth phase, though it can still work with principal-and-interest loans. The plan is to grow your portfolio, and then strategically unwind that debt to create a mortgage-free income stream in retirement.

Here’s how it works: an investor purchases multiple properties, let’s use two as a simple example. These properties are held for the long term, allowing capital growth to accumulate.

When the investor is ready to retire, they sell one property and use the proceeds to eliminate all remaining debt, leaving them with a freehold property that generates rental income without the drag of mortgage repayments.

Why Scale Matters

One of the key principles behind this model is the power of scale. A percentage gain on a larger asset delivers more value than the same gain on a smaller one.

For example, a 10% increase on a $600,000 property yields $60,000, which is double the return of a 10% gain on a $300,000 property.

That doesn’t mean higher-priced properties are always better investments - yield, ownership costs, and market dynamics all matter. But all else being equal, greater scale delivers greater dollar returns

This is why scaling up, owning multiple properties, is so important. It amplifies the impact of capital growth and gives you more flexibility when it’s time to exit.

The Role of Interest-Only Lending

Interest-only loans are often misunderstood, but they’re a powerful tool when used strategically. By paying only the interest portion of the loan, investors can reduce their monthly outgoings and free up cash flow to reinvest or acquire additional properties.

This approach prioritises growth over debt reduction, which aligns perfectly with a long-term capital appreciation strategy.

Crucially, interest-only lending allows investors to build scale faster. Instead of tying up cash in principal repayments, they can focus on acquiring assets that will appreciate over time.

The key is to pair this with a clear exit plan, and that’s where the Freehold Property Model shines.

Capital Growth: The Engine Behind the Strategy

New Zealand’s property market has historically delivered strong long-term capital growth, particularly in urban centres and high-demand regions.

While short-term fluctuations are inevitable, the 15- to 20-year horizon has consistently proven to be an effective way of building wealth.

Over the past 30 years, New Zealand has seen average capital growth rates of around 7% per annum. Many investors have heard the saying ‘property doubles in value every 10 years’ - and at a 7% growth rate, this holds true. In fact, a 7% capital growth rate would lead to house prices doubling every 10.3 years.

However, even at a more measured 5% capital growth rate, house prices would be projected to double every 14.4 years.

This growth is the foundation of the Freehold Property Model. It’s not about timing the market or chasing short-term gains. It’s about holding quality assets long enough for compounding growth to do the heavy lifting.

A Real-World Example

Let’s bring this to life with a practical scenario. Imagine an investor who purchased two properties for $600,000 each with an interest-only loan.

Over 15 years, those properties have doubled in value and are now worth $1.2 million each.

However, the investor still carries $1.2 million in total mortgage debt - $600,000 on each property.

Now approaching retirement, the investor faces a dilemma: the properties have appreciated, but the rental income, after mortgage payments, isn’t enough to live on. This is where the Freehold Property Model provides a solution:

• The investor sells one property for $1.2 million
  

• They use $600,000 to pay off the mortgage on that property, and the remaining $600,000 to pay off the mortgage on the second property

The result? They now own one freehold property, generating an almost unencumbered rental income - a reliable, inflation-resistant stream that supports their retirement lifestyle.

Investor buys two properties worth $600k

Over 15 years these double in value to $1.2m each

Sell one property and use the proceeds to fully pay off both properties

Why This Strategy Works

The beauty of this model lies in its simplicity and effectiveness. By leveraging capital growth and using interest-only lending to build scale, investors can eventually consolidate their portfolio into a single, debt-free asset that produces income.

This income is not only stable, but also resistant to inflation, as rents tend to rise over time; unlike fixed interest rates on term deposits or savings accounts.

Moreover, owning a freehold property in retirement provides peace of mind. There are no mortgage repayments to worry about, no exposure to interest rate hikes, and no need to draw down on savings.

It’s a sustainable, low-risk income stream that aligns with the goals of long-term financial independence.

Is This Model Right for You?

The Freehold Property Model isn’t a one-size-fits-all solution. It works best for investors who are committed to a long-term strategy and focused on building a scalable portfolio.

It requires discipline, patience, and a clear understanding of your end game. But for those who fit the profile, it offers a powerful way to turn property investment into true financial freedom, not just on paper, but in real life

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How Can We Help You?

We help Kiwis build wealth through property investment. Our advisors will take the time to understand your individual needs and recommend suitable investment properties to help you build wealth and set up your retirement.

What Does This Look Like?

We use a 3-step process:

1. We start with a Discovery Meeting where we learn about you, your goals, etc., and you learn more about us.
   

2. This is followed by a Strategy Meeting where we model your retirement plan, understand key investment concepts, and briefly touch on some investment choices.
   

3. Finally, an Asset Selection Meeting where we discuss investment options in more detail and make any recommended adjustments based on what we now know about you.

Who Are We Right For?

We help people make smart investment choices and set up their futures. From first-time investors to experienced investors, we can cater to a wide range of people and help set up their futures through research-based property investment.

How Much Does It Cost?

Our advice is free to you! If you choose to invest, we’re paid by the property developer. This developer-paid model allows us to provide no-obligation property investment advice in New Zealand, without charging clients directly.

What Do We Do, And What Don't We Do?

What We Do

We offer end-to-end New Zealand property investment advice, helping Kiwi investors grow wealth through smart, data-led decisions. Our focus is on quality new builds in strong locations, tailored to your goals, guided by a team that knows the NZ market inside out. What We Don’t Do

We don’t do KiwiSaver, shares, cryptocurrency, or broad financial planning. Thrive is not a generalist firm. We specialise in property investment in New Zealand because that’s where we deliver the most value. By staying focused, we cut through the noise and help our clients make confident, well-informed property investment decisions.

How Do I Start?

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