This article was published on 1 May 2004. Some information may be out of date.

QFour years ago I bought a two-bedroom unit in Auckland for $179,000. When comparing with nearby properties that have sold in the past year or so, it would now be worth about $279,000.

My fiancé lives with me and pays rent. We are to be married in July and it seems silly for him to go on paying me rent.

Option 1 is for him to pay me for half the house at the current valuation.

Option 2 is for me to charge him half of the original cost of the house plus half of the cost of the renovations I have done (about $25,000).

I’m trying to work out what would be fair for both of us. Of course I don’t want him to be lumped with a huge mortgage, but I don’t see why I should lose out as I scrimped and saved to buy a house and haven’t been as free with my money as him. Also, it was my good fortune to buy when I did and not at the height of the market.

Please help me to work out a fair way to split the property where neither of us loses out. And do I take into account the amount of interest I have already paid on my mortgage? Do we need to see a lawyer too?

AWhatever happened to the bad old days, when people getting married said, “What’s mine is ours”?

These days, though, with many marriages not lasting, it pays to think these issues through dispassionately.

Firstly, it seems clear to me that, if your fiancé does buy into the property, he should do so at its current value.

Why? Let’s assume you had bought 20 years ago for, say, $10,000. It would be ridiculous for him to get half the property now for $5,000, or even that plus half the renovation cost plus half the interest.

Just because your purchase was four years ago, not 20, doesn’t change that. The only fair way to value the property today is its current market price.

(If he objects, ask him to consider what would happen if property values had fallen over the last four years. I bet he wouldn’t then be willing to pay half your purchase price.)

But should he buy in? Lawyer Margaret Lewis has some interesting thoughts on this.

“As a matter of law, there is no reason why any of the writer’s assets should go into the pool if she doesn’t want them to, and the couple record their agreement in writing, as required by the Relationship Property Act, 1976.”

You might want to keep your property separate and not use it as a matrimonial home, she suggests, so you can make your own decisions about it. You could rent it out, and the rent would be your own money. The two of you could then jointly buy another property to live in.

It sounds to me, though, that you want to stay where you are, and the roles of landlady and wife probably wouldn’t harmonise.

So let’s look at what would happen if your fiancé bought half the house from you.

You would get about $140,000 in cash, which could be designated as separate property, not relationship property. And his mortgage could, likewise, be his debt, rather than relationship debt.

“However,” says Lewis, “his mortgage payments would be paid out of his income, which would otherwise be available to the relationship, so not a lot is achieved.”

She suggests that your fiancé doesn’t get a mortgage. Instead, you agree that you’ll own the house jointly and that, if you separate, you will get the first $279,000. Any gain above that could be relationship property.

That appeals to me. It seems silly for him to borrow money to give to you, which, presumably, you would then invest elsewhere. It’s quite possible that your return, after tax and fees, would be less than his mortgage interest. As a couple you would be going backwards financially.

Even if your net return was higher than his mortgage interest, the two of you have still added a whole layer of complexity, fees, taxes and general hassle to your lives.

On to your last question, about whether you need a lawyer.

“The issues she raises must be resolved by agreement, preferably before the marriage if they don’t want to own the property in the manner specified in the Relationship Property Act,” says Lewis.

“This Act stipulates that the home and chattels will be shared equally if the relationship (including the de facto period) is not one of short duration — which is usually accepted to be less than three years.”

Not only will seeing a lawyer set everything up legally, it should also make it clear to both of you exactly where you stand now and if your situation changes in the future.

That might be unromantic, but it’s got to be better than misunderstandings.

QThe somewhat bullish letter of a few weeks ago from Olly Newland could perhaps be countered by a request to “please explain” what happened to Landmark Properties some years ago!

AI asked Newland if he would like to explain. But, to put it politely, he declined.

Your letter is one of several along similar lines. I’m not in a position to make any explanation for Newland, but a quick summary of the facts may be of some help.

Property investment company Landmark Corporation was listed on the NZ Stock Exchange in 1982. It issued 9.4 million shares to the public at 50c each.

Newland’s investment management group, which ran the company, collected 7.5 per cent of the gross rentals on the properties owned by Landmark.

The share price reached its all-time high of $3.50 in 1986, but suffered badly after the October 1987 Crash.

In the year ending March 1988, Landmark reported a bottom line loss of $36.6 million, and the following year a loss of $45.3 million.

Newland sold his 23.5 per cent of the company in January 1989 and resigned from the board. Six months later, the company went into receivership.

Landmark’s share price fell to just 1 cent, and it was delisted from the stock exchange in July 1990.

QIn the matter of your correspondent last week comparing risk to the sun rising in the east, I think you might have missed his/her point a little.

I think the reference is to the fact that the sun doesn’t rise (or fall or anything else), it’s just that as the earth turns the illusion of the sun rising is created.

He/she wonders if the greater reward/risk argument is also an illusion. Buying a Lotto ticket should sort that one out.

On another matter there seems to be an endless argument over the competing virtues of property/shares/deposits.

I suggest that almost any prudent investment will beat, hands down, the other alternatives of doing nothing and/or hoping for a benevolent aunt/government/lotto win to provide funds when the realisation finally dawns (pun not intended) that both earning capacity and money are exhausted.

Finally I have never seen you refer to the book “The Millionaire Next Door”. It details thirty years of research that demonstrates that the key ingredients of wealth accumulation are thriftiness, hard work and time.

Most of the USA’s self-made millionaires have been consistently thrifty, worked in everyday businesses they own, have applied themselves to meeting their customer’s needs and avoided conspicuous consumption, especially branded product.

Unfortunately these virtues are completely at odds with the high consumption, find-the-easy-way-out, want-everything-now society our great Socialist state has produced.

I constantly recommend this book to people who want to be wealthy, and most understand its message. Sadly, few have the strength of character to apply its principles consistently.

P.S. The cynic in me says that it is just as well most people are wasters, as it’s their waste which finishes up in my pocket!

AI’m not sure about your postscript. Surely the better everybody else handles their finances, the better off we all are. The pie is bigger.

But on to your main points. You’re quite right that it’s easy to get so caught up in a debate about which investment is best that you don’t do anything, and that’s not good.

Generally speaking, a diversified long-term investment in either shares or property will perform pretty well. Even term deposits grow nicely over time — although they are rather too conservative for long-term investment.

But the main reason I ran your letter is because I, too, am a fan of “The Millionaire Next Door”, which is written by two American researchers, Thomas J. Stanley and William D. Danko.

As its title implies, the book says that many millionaires don’t flaunt their wealth. They might be quietly living next door to you.

My one criticism is that the authors perhaps push parsimony a bit too far. What’s the point in being rich if you don’t have at least a bit of fun with your money?

Still, as you say, most people these days err too much the other way.

I think “The Millionaire” is much better than the more popular “Rich Dad, Poor Dad”, by Robert Kiyosaki, which encourages readers to take considerable financial risk. True, that’s the way most really rich people got that way, but it’s also the way many have ended up bankrupt.

Stanley and Danko’s book is less exciting, but what the authors advocate is more suitable for the ordinary person.

One last point: I agree that people generally need thrift and time to get wealthy — unless they are unusually lucky. But they don’t necessarily have to put in hours of hard work.

If you invest a regular amount into, say, a couple of index funds, your savings can accumulate beautifully over a decade or two with little input from you.

No paywalls or ads — just generous people like you. All Kiwis deserve accurate, unbiased financial guidance. So let’s keep it free. Can you help? Every bit makes a difference.

Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.