Bouncing back: Q&A with Margaret Lomas

My husband and I got to a point where we had paid a fair amount of money off our own mortgage and we were in a reasonably good position, but we wanted to do something for the future. We knew we would not have enough money in superannuation so we started to look for viable ways to invest. Property caught our eye first.

At that stage, my company Destiny had a lot of clients who were ready to invest and were looking to us for a bit of guidance. Property became something that interested us.

Back then, there wasn’t much written about property and people really didn't commonly invest in property as a means of developing an income for their retirement. For us, it meant going it alone. We had to pioneer it, find out what to do and make property investment work for us without any help from anyone. We were completely in the dark.

Q. What was the first investment property you bought?

The first property we bought was a lemon and still is today. It was a two bedroom unit in Cairns that we purchased off-the-plan.

We paid too much for it. We didn't do any kind of independent research and took the word of the person selling the property. We bought it purely because it had good cash flow. That was the only thing that really saved us and kept us in the market, because it was at least paying its own expenses.

We have kept that unit as a way to remind us what not to do again in the future. We really cut our teeth on the first investment property. After we bought it, we looked back at what was good about that purchase and what was bad about it, and started to work on making better decisions for the next purchases.

In hindsight, we realised it never had the underlying growth drivers needed to make a good investment. We have held that property now for fifteen years and it is still worth what it was worth the day we bought it.

However, I hold on to it because it's not holding me back. It's not eating into my equity. It's always had very good rent returns. I am hanging in there hoping that one day it will start to grow. I would definitely sell a property that has not worked out well for me if I thought it was holding me back in any way.

The first property we bought was a lemon and still is today

Q. What was your greatest investment mistake?

I think if you invest often enough and long enough, you're going to have more than one problem. I don't believe anyone who invests gets it right every single time. The key is that the mistakes you make seem more inconsequential when you invest often than if you only have one or two properties.

We bought a block of land that we still own today that we've never put a house on. Basically, we paid too much for that and its value went backwards. Then we couldn't offload it because we were in negative equity territory.

We have had the occasional mistake but in the main, I'd say 85 per cent of our decisions have been good ones.

Q. What factors help you choose which area to buy in?

There are a number of growth drivers I consider and any one of them will not be enough on its own.

That includes things like a population growing faster than the national average, a median household income growing faster than inflation, an area that is receiving the right amount of infrastructure to support that growing population, and a council that is active in creating services to keep the population where it is, as well as a diversified industry base.

Areas with only a single industry are notoriously volatile. They go up and down with the fortunes of the economy. It is important to ensure you buy in an area where, if one industry becomes threatened, there is plenty of other work so people don't have to move away from the area.

I think a common misconception is that property in the CBD will always be a better investment than properties in the regions. In fact, we've proven that very often property in the regions or the suburbs can be just as good, if not better, in terms of its growth.

It's not necessarily about geographical location. It's about the presence or absence of growth drivers in an area. Growth drivers can be found in the city or in the suburbs or the regions. It's just about having your finger on the pulse at the time when you're buying.

Q. What are your long-term goals?

To be honest, I think I've achieved all the goals that we have ever set. My husband and I have recently started to talk about our exit strategy. We’re considering what we're going to do in the coming years to start to enjoy what we've been working so long to achieve.

I still very much enjoy my job, being able to comment on the property industry and hopefully helping other investors avoid the spruikers and the scammers. That will probably be my lifelong work.

For now, our property portfolio has really given us everything we set out for it to give us.