The book appeared in our public library and I'm currently reading it.
- My impressions are that she is very smart in the renovation side. Stuff on tenants or buyers tastes with practical ideas is the book's big strength as it takes a different angle to other IP books.
- However she is very weak on the finances.
Consider this paragraph from page 28 (Refers to buying a little inner city unit for $200k and borrowing 90%):
Because you purchased in a good rental area for less than true market value, you are able to find a tenant and return 6% for 12 months. This means that the tenant is not only paying the mortgage off for you but contributing around 6% annually of calculated profit (a strategy known in the industry as 'positive gearing').
What tosh!
The 6% quoted won't even cover the interest. The reference to 'paying the mortgage off' implies a P&I loan, so there's another 2% or so for the principle component. Holding costs are another 2% or so. Add all that up and she's trying to say that her 6% yield will make it positively geared.
The talk of the 6% being part of any profit is also premature. All it does is contribute to a portion of (but not all) costs. A cashflow profit with 6% yield and a 90% lend on a small flat is most unlikely. If she's very lucky tax benefits and building depreciation might make it fairly close to neutral.
- I found the stuff on ethics, which made her sound like a goody two-shoes, a bit overbearing and vague. To me it seems as if she has a buck each way, though always to her benefit.
For instance in many parts of the book there is an emphasis on buying well below market value. This strategy opens all sorts of issues to do with the extent that one should take advantage of vendors in bad personal circumstances. Now there are varying (and legitimate) differences over this, but it's strange that when it comes to the pointy end, the ethics seem to be glossed over (even the much-touted win/win might be a 90%/10% split).
On the other hand, when it comes to selling (p35) she's apparently a saint, and wants to 'increase the affordabilty of the end product'. What's wrong with selling for a higher price, ie the maximum that a buyer considers is fair value?
To me this indicates a degree of inconsistency. Although note that a 'buy low, sell low approach' is less risky for the investor than a 'buy average, sell average' method.
(I've probably been a bit harsh here, but if I didn't detect a degree of sanctimony, and instead there was only a brief recommendation that investors behave fairly and ethically, then I would have commented less)
- Strange use of acronyms and jargon
For instance on page 33
Keeping ahead of the market, remaining market conscious and therefore enabling CJD to maintain the edge and make demands (Sale Price Achieved = Market Value Index).
A most unfortunate acronym. CJD is a brain disease, apparently related to Mad Cow! Had it been spelled out fully, and the reader not compelled to do a websearch, then they would not have had this unwelcome piece of info.
- 'The Characters on the Trash and Treasure trail' sections remind me of Peter Spann's $10m book, where he devotes each chapter to a seperate character. However Spann takes a more serious and comprehensive approach and doesn't have silly names like 'Bionic', 'Yes Man', 'Mr Manic', etc.
Overall it's full of ideas for the renovator and is a useful text for this purpose. However other authors cover other aspects much better.
Peter
