Expert Advice with Kevin Turner. 02/10/2017

Margaret Lomas will tell us that she has a portfolio of 40 plus properties but how many do you need to retire.  Margaret say “not that many” but you might be surprised with the number she nominates.

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Kevin:  A question I’m asked so often is “How many properties do I need in my portfolio to retire?” I know this is a question that my guest has had to answer on a number of occasions too. Margaret Lomas from Destiny Financial Solutions.

Hi, Margaret.

Margaret:  Hi there. How are you going?

Kevin:  Good. Nice to be talking to again.

How do you answer that question, when someone asks you, Margaret?

Margaret:  The difficult thing for a lot of people is that that they feel that the spruiker is talking about unlimited numbers of property, and whenever they read those investment magazines, they see expose̒s of people who have bought 20 and 25 properties, and they think, “Oh my gosh. That’s what I need to be able to retire on a good income for the rest of my life.”

But in fact, you don’t need that many. We’ve done a little bit of an analysis on this back at Destiny and discovered that really, if you could put together a portfolio of seven properties, you would be living a pretty comfortable retirement, and if you could put together a portfolio of say, ten, then pretty much that’s all you really need.

Kevin:  I guess it depends on how much cash flow you’re getting from those properties as well, Margaret, doesn’t it?

Margaret:  Well, see this is the thing. It’s really unreasonable to think that everybody can go out there and pop 20 or 25 properties into their portfolio, even though we have a pretty low cash rate at the moment and a lot of properties are at least evenly geared. There’s still that chance that that could go up, and if you have too many properties in your portfolio at that time, it could cause extreme cash flow issues for you and you might be forced into the sale of them.

When I first started my portfolio… And I know that I’m sitting here talking from a position of having 40 properties, but for me, it’s been built over a very long period of time, and it was more about the… I guess I got a bit addicted to buying property for a little while there.

But when you buy your first one, it’s likely to be a good year or two between the first and the second. Not a lot of people can buy any more than one in the first one. And one of the things that I really want investors to understand is that in that first five to six years, it’s all about the build phase.

It’s likely that if you’re going to buy seven properties, it might take you five, seven, and even eight years to put together those seven. And as you’re doing that, the first property that you’ve bought, by year seven, is more than likely to have started to become a little bit positive cash flow or at least evenly geared, if it was negatively geared to begin with, and it makes it a bit easier for you to keep adding to that portfolio. As those properties grow in value, as the rental returns go up, then you usually find that they cost less for you to hold and it’s easier to add to that portfolio.

But in those first five to seven years, it’s almost a like game of one step forward, one backward, because acquisition costs in Australia are fairly high. So, you tend to eat into your equity with costs, rather than with more equity that will grow for you, and you take a bit of a step backward.

For many people who are building their portfolios, after having bought five or six properties, they start to think “It doesn’t seem like I’m getting anywhere. My portfolio isn’t growing. When it does grow a bit, I tend to go backwards.”

But it’s really the second seven to eight years that become the phase where you’re actually starting to see the growth.

Kevin:  So, Margaret, it’s pretty much steady as she goes at the start of your career?

Margaret:  I don’t want people to think that this is magic and that you can buy a property and bang, you suddenly become wealthy. Anyone who’s invested in Sydney in the last three years might be thinking that, because Sydney’s just gone through a fabulous growth phase.

Interestingly enough, Kevin, I was having a look at the figures the other day, and I did a little calculation on the 12-year growth from 2005 between the median house price in Sydney and the median house price in Adelaide, and guess what I found?

Kevin:  What? What did you find?

Margaret:  I found that the median house price in 2005 in Sydney, when you measure it against the median house price in Sydney in July 2017, had grown 78%. The median house in Adelaide, in the same period, had actually grown 112%.

Kevin:  Wow.

Margaret:  The difference is that Sydney had a big bang for three years, but they had nothing pretty much for the nine years before that, whereas Adelaide does a little bit every year, and it’s the compounding growth that counts.

The big lesson from those figures, is that, you might think it’s taking too long. You might think that you’re not getting anywhere because as you get that equity, you’re borrowing back for your costs from the next property. But if you can sit on something for 12 to 15 years and let your portfolio grow, and as long as you bought well and used the 20 questions to make sure you’re buying property in areas that have really good signs of growth, you’ll find that once you get up around that 12- to 13-year mark, you’re going to start to really see some things happening. You’ll have a nice wide base of properties, and as they all start going up, you’ll be adding to your network in large chunks, rather than in those little amounts that you saw at the very beginning.

Kevin:  Interesting to hear to talk there about those 20 questions. That was the podcast that you and I did some years ago: “Margaret Lomas’s 20 must-ask questions for every property investor.” What I’ll do Margaret, is put a link back to that because we’ve still got that in our files.

Margaret:  That’s a great idea because people still think they can buy any property and as long as they hold it long enough, it’ll perform. And it probably will. But what you really want is to buy the right kind of property, so that over the long term it performs really well, better than your money could have performed in any other kind of asset. And you can only do that by buying properties with those strong growth drivers.

Kevin:  Okay, in the text version of this interview, just scroll down to where Margaret did mention the 20 questions. I’ll put a live link there that’ll take you straight to Margaret’s podcast where she and I talk about those questions.

Hey, Margaret, always great catching up with you. Thank you so much for your time.

Margaret:  No problem. I’ll see you next time.


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Kevin Tuner worked in radio as General Manager of various east coast radio stations. He started in real estate in 1988 and was ranked in the Top 10 Salespeople in the state until he was appointed as State CEO 1992.

He operated a number of real estate offices as business owner and was General Manager of several real estate offices in Christchurch.

He now hosts a real estate show on Radio 4BC and a weekly podcast at He is the host of a daily 7 to 10 minute podcast show for real estate professionals at

To hear more podcasts by Kevin Turner, click here

Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.