Posted by Good Returns Bookstore on 28th Apr 2006

Author Margaret Lomas is a young, enthusiastic and successful Australian investor who enjoys helping others to follow her example and build a sound property portfolio. She maintains that the only prerequisites a budding property investor needs are time, perseverance and courage.

Many people find it rather daunting to contemplate taking on many thousands of dollars in debt in order to build a property folio. Her secret it to limit your risk by only buying positive cashflow properties - which is not the same as positive gearing, as she explains. Together with a strategy for rapid mortgage reduction, calling for focus and dedication, this plan will speed up the process of property acquisition, your path to wealth.

The best places to find lower priced, good growth, positive cashflow properties are in areas with a reasonable population, economic vibrancy and little vacant land still available for development. A flourishing town will have new businesses, few empty commercial buildings and sustained population growth over the past ten years.

If such a town is not where you happen to live, you will need to move outside your comfort zone and buy (sight unseen, if necessary) on the basis of an independent valuation and an independent building inspection - after you have thoroughly researched the area where you are considering buying property.

As each area becomes popular, values begin to increase, positive cashflow properties become rare, and the strategy is to then move on to another area which is starting to flourish and which meets your requirements for positive cashflow investments. Although rents do tend to rise as property values rise, they rise more gradually, and any new purchase in each area would not enjoy a positive cashflow after a certain point.

To build a property portfolio which is spread about the country you will need to use property managers (who, Lomas recommends, should also be property owners) in the various areas where you buy property. She warns that you will need to manage the managers, at least at first. You can often check up on them on-line.

Margaret Lomas advises that it takes not only time and patience to find positive cashflow properties, but also a bit of wheeling and dealing as well. One tip is to raise the rent by $5 as soon as possible after purchasing a property, as few tenants will bother moving out for just $5. Another way to help the cashflow situation is to pay lower than the asking price. Negotiation is the key.

This book promotes some practices which are not usually endorsed by property advisers in New Zealand. One is that you don't need to spread your borrowings with different banks, as long as you keep your debt levels to a reasonable percentage. In fact, she says, "Cross-collateralisation does not have any drawbacks and can give you some great advantages." However, some investers in New Zealand have found that banks can suddenly recall debt from investors with exposure of more than a million dollars, because of a new directive in bank lending policies.

The section on ownership structures does not seem to apply to New Zealand. As always with Australian property books, there is a problem deciding which parts are relevent. Of course, investors should always consult local experts in property law and accounting. Interestingly, Margaret Lomas and her husband own all their properties in their own names, with one umbrella loan covering all their purchasing and property expenses.

This book has a clear, flowing style, and has some useful ideas which are particularly relevant now that the property market has slowed in the main cities of New Zealand. If you are finding it hard to locate positive cash flow properties in your own area, then this could be just the book for you.


Reviewed by Kathryn Dalglish on behalf of Good Returns Bookstore