Margaret Lomas - 20 Must Ask Questions for Every Property Investor

CONTENTS

First published 2008 by Wrightbooks

an imprint of John Wiley & Sons Australia, Ltd

42 McDougall Street, Milton Qld 4064

Office also in Melbourne

Typeset in Granjon 12/15 pt

Margaret Lomas 2008

The moral rights of the author have been asserted.

National Library of Australia Cataloguing-in-Publication data:

Author: Lomas, Margaret.

Title: 20 must ask questions for every property investor / author, Margaret Lomas.

Publisher: Richmond, Vic. : John Wiley and Sons, 2008.

ISBN: 9781742168715 (pbk.)

Subjects: Real estate investment Australia.

Real estate investment.

Dewey number: 332.6324

All rights reserved. Except as permitted under the Australian Copyright Act 1968 (for example, a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission. All inquiries should be made to the publisher at the address above.

Cover design by Rob Cowpe

Author image Fairfax Photo Library/Louie Douvis

Disclaimer

The material in this publication is of the nature of general comment only, and neither purports nor intends to be advice. Readers should not act on the basis of any matter in this publication without considering (and if appropriate taking) professional advice with due regard to their own particular circumstances. The author and publisher expressly disclaim all and any liability to any person, whether a purchaser of this publication or not, in respect of anything and of the consequences of anything done or omitted to be done by any such person in reliance, whether in whole or in part, upon the whole or any part of the contents of this publication.

To Reuben

My partner in business, my partner in life, and the partner of my soul.

About the Author

Telstras 2006 NSW Businesswoman of the Year, Margaret Lomas has a diploma in financial advising, a certificate in investment property advising and is a Senior Associate with FINSIA. Recently, she has been appointed as the Chair for the Property Investment Association of Australia, a not-for-profit association set up to represent investment property professionals and to bring about much-needed regulation in the property investment industry.

Margaret is also the founder and a director of Destiny Financial Solutions, which has 14 branches across Australia and is expanding. This company, whose managing director is her husband, Reuben, assists people to acquire successful property portfolios through comprehensive education, support and mentoring.

Margaret is a best-selling author and a regular commentator in the national media on real estate investing and financial planning.

Acknowledgements

Writing a book can be a mammoth task, and when you are also trying to operate a business and raise a family, it is something that is impossible without support and input from so many people.

The team at Destiny is a strong and committed group of people who help Reuben and I bring alive the dream of assisting as many people as possible to achieve their financial goals. We are blessed to have so many people to share our vision, and I thank every one of them.

My beautiful children are growing into dynamic adults and support me every day. They never make me feel guilty for sometimes failing in my duty as their mother. Mark, Kristy, Belinda, Michael and Rebecca, I love you all so much.

Reuben continues to shine for me through thick and thin. Never has a man given so much of himself for the dreams of his partner. I hope I can do the same for him when his time comes.

Part I

Chapter One

They Call Me Lucky

EACH AND EVERY time I write a book, I tell myself afterwards that I am all done, and I have nothing else to say. Two years after my last book, however, I once again find myself sitting here bursting at the seams with information that I simply cannot wait to share. It seems that as our economy changes and evolves and property becomes more and more popular, everyone and their dog has jumped on the bandwagon, and are hoping to make their fortune by calling themselves property advisers. I realised that the best way to stop them was to keep telling you all I know in books that you can buy at your local bookstore at an incredible value for your money! If I keep telling the secrets, revealing the strategies and breaking the silence, no-one will be able to take advantage of you they will have nothing to add!

I have recently begun contributing to a property investment blog hosted by < www.realestate.com.au >. In addition to airing my thoughts regularly, I receive questions and comments, which I do my best to answer. Perhaps the most common questions I get asked are, What do you think the growth is going to be like in this area? and Should I buy in that area? Equally, at seminars and expos, people always want to know specifics about areas: most investors want someone they perceive to be an expert to tell them where to buy next.

Sadly, my crystal ball broke a while back, and so I cant usually answer these questions unless they are about an area that I have researched myself in the last month or two. I cannot possibly know about every single area in Australia, so it is a little unfair to expect me to be able to roll out stats and information on demand! Also, even if I do have valid and current information about an area that I and others perceive to be a good opportunity, it is likely that by the time you ask me about it you will already be too late to take advantage of that information. Property everywhere typically has quite a short window of buying opportunity before it is discovered and mined to the point that it is too late, for a while at least, to buy there.

I always believe that if you are hearing about an area from others, or reading about it in the popular press, then you have missed it. By the time you get back to your home and begin your search, most of the good buys will be under contract, prices will have begun to rise, and the cost to you of entering that market will be much greater than if you had found it a few months earlier. If you are being told about an area by a spruiker at a show or workshop, or via a glossy brochure, it is most likely because they want to sell you property there!

So, over the past year or so, when people have asked me about where to buy, or asked for my opinion on an area they have heard about, I tend to answer with I cant tell you, but the 20 Questions can! You see, a couple of years ago, in an effort to clarify the most important areas of research to undertake before I made a purchase, I developed the 20 Must Ask Questions. Since then, I have found that reference to these 20 Questions has become my standard (and very relevant) reply to almost every property-related question I am asked! Will it provide growth? Will I get a tenant? Will it continue to deliver good yields? The response Ask the 20 Questions! answers these and almost every other question you may have about a property you want to buy, or an area you are interested in!

More importantly, the 20 Questions will equip you with all you need to be the person who discovers the next hot spot in which to buy. Since investors tend to read magazine and newspaper articles and follow the crowd in terms of where to look, at any one time many of the property investors in this country are looking in the same areas as you are. This can result in two possible outcomes. On one hand, a false demand can inflate prices temporarily in a kind of self-fulfilling prophecy enough people talk and write about a suburb or town that they produce short-term demand and lack of supply, with prices rising unsustainably. After the frenzy is over, the market returns to normal and you find yourself with a property worth less than you paid. On the other hand, if the area has characteristics that mean that buying there is a legitimately good idea, by the time you have heard about it too many people have already entered that market, and you will have to pay much more to get the same rental returns that the lucky people who were first in are getting. How much better would it be for you, the investor, if you were always the first in?