A sad tale of positive cash flow property

There is a view that property investing is easy and making money is a given. Well a story today shows how it can all go terribly wrong.

Last year we profiled in the NZ Property Investor Magazine a young man who was doing some amazing things. The guy, Laurence Pope (22), basically bought a street load of houses in the Waikato town of Paeroa as an investment.

He became pretty popular with the locals as he transformed what was referred to by some as a “ghetto” into a much smarter street.

Meanwhile other property investors where pretty impressed with his deeds.

However, things have gone wrong. His parents who acted as guarantors are reportedly in some difficulty and the bank probably hasn’t done too well either.

Bayleys have sold eight of the properties in mortgagee sales to other investors across the region.

The homes sold under the hammer for between $64,000 and $90,000, yet Pope had paid around $120,000 for each of the properties and improved many of them.

It’s sad to see someone who made a difference in a town like this fail, but it also shows some of the risks involved in residential property investing.

On the upside the sale also demonstrates what we talk about in the May issue of NZ Property Investor magazine – that is the return to positive cash flow investing.

The article has a comprehensive table showing readers areas throughout the country where you can find cash flow positive properties. Not surprisingly many of them are in the provincial regions.

According to Bayleys Pope’s Paeroa properties sold on rental yields of seven to 10%. These are well above comparable investments in the likes of Auckland, Wellington or Christchurch, and show that by looking outside the square, there are plenty of excellent investment opportunities available in the residential sector.