The path to success... watch A Current Affair

Taking in my daily dose of comedy last night (A Current Affair), I came across a story about a woman who '5 years ago was recently divorced and debt ridden, but today is the owner of 71 properties worth $6.5 million'.

The story went on to show how over the last 5 years this woman has bought up properties all over Australia (and New Zealand if I remember correctly). She spruiked about how this property 2 years ago cost her $100,000, now it's worth $250,000. She claimed she was getting that much rental income that she didn't have to work, etc, etc.

A few problems with the story:

1. How did she find all these properties with such high rental yield? From what I have seen, average rental yields are around the 4-5% mark. Interest rates for borrowing are around 7.5%.

2. How did she find a lender that would keep lending to her? This woman's debts would be growing and growing, with income not growing. How did she find a lender that would lend her $6.5 million?

3. How did she find 71 good tenants? I hear plenty of horror stories about renters. If she owns 71 properties, at a total value of $6.5m dollars, this means the average price of the properties is under $100,000 (I think it must include a lot of units!). These would be low rent properties. Not to be stereotypical, but you would assume that when you get down to this level, you're more likely to have problems with tenants.

Thats just a few of the holes to be picked in the story. Unfortunately stories like this and books like Rich Dad Poor Dad make people believe this can be done risk free. The old rule applies. If it looks too good to be true it probably is!