Kylie Klein Nixon.

Author and property investment advocate Nichole Lewis is made of steely stuff. Not only did she make a property comeback after losing everything in the Global Financial Crisis (GFC), but she made her comeback money almost out of thin air, trading homes. Losing it all, rather than relying on family money or nous, was what taught her.

Now her guide to creating a passive income from property investing, Property Quadrants: The Passive Income Formula, which claims to help so-called mum and dad investors to ‘‘own your financial future through real estate investing’’ is a bestseller, and Lewis offers training and mentoring through her business, The Property Lifestyle.

‘‘This market, a down market, is the best time to buy a property to hold because it’s like properties are on sale,’’ she says.

Lewis does make buying and selling properties as investment sound like child’s play, but it pays to remember these tips come from someone with a castiron gut when it comes to property deals.

When she started again after the GFC, she started clawing her finances back doing what she calls ‘‘no money’’ deals – because she didn’t have any.

Like a property whiteknuckle ride, Lewis would find a property, usually in need of a renovation, and get it under contract. Then she would on-sell it to a property trader with a small markup – usually about $20,000 – filling out one sale and purchase agreement as the purchaser, and a second one as the vendor. Both would be negotiated to settle on the same day.

‘‘I’d own it [the house] for about five minutes. That’s called a contemporaneous settlement.

‘‘I started off doing those because I didn’t need any money [to do them], until I built up enough money to then do some renovations or flips myself. I was doing that using private lenders, because at that stage, the bank was like, ‘go away, we don’t want to know you’.’’

From there she was able to accrue enough capital to buy a rental property, and eventually to develop her concept of property quadrants – a way of deciding which property is right to buy as an investment, which are considered third and fourth quadrant homes in Lewis’ schema – and which are really emotion-driven, ‘‘first quadrant’’ family homes.

Inspired by Robert Kiyosaki’s Rich Dad, Poor Dad, and his cashflow quadrants, she remembers reading his books and thinking, ‘this kind of applies to property’.

‘‘It took a long time,’’ Lewis says, ‘‘probably a couple of years of thinking through what the quadrants mean.’’

The result was a concept designed to help investment buyers get the most bang for their buck when hunting for a property to make money from.

First quadrant homes are family homes, the ones you buy with your heart; second quadrant homes are ones you think you’re buying as an investment, but your feelings are still in play, so they may end up costing you money.

‘‘That’s what we call cashpoor property, which is where the large proportion of investors buy, simply because that’s all you think about, it’s all you know. They buy it with that same emotional mindset, rather than thinking about it as a business. And buying it on the numbers.’’

The third quadrant is ‘‘active income’’ property, where you have to put in the hours in order to make money. The fourth quadrant are the so-called ‘‘passive income’’ properties.

‘‘They’re cashflow positive. After you pay your mortgage, your insurance and your expenses, you’ve got money left over, unlike quadrant two, where the money’s going out, out and out.’’

Quadrant four homes, the multi-unit properties that might need cosmetic fixes are, ‘‘a very different mindset to quadrant one’’, which is all about the right street.

‘‘That’s all irrelevant. It’s really about what the numbers are, and doing a good due diligence as well.

‘‘It’s a buying formula. There are four criteria that you’re looking for. No 1 is a multiincome property, so not a normal house. I quite like a block of units.’’

The next step is searching for a deal, not the location.

‘‘Where most people go wrong is they go, ‘oh, I live in Auckland or I live in Wellington, so I’ll look closer look local to where I live.’’

In fact, she says it doesn’t matter where the property is any more, as long as the ‘‘numbers add up’’.

The third criteria is to ‘‘look for something quite tired’’ but that only needs relatively inexpensive cosmetic touch-ups to add huge amounts of value.

‘‘There are two things when I look for a renovation, one is doing it quickly – this one I’ve just finished now took me three weeks. If you need to do something that needs council approval, because it’s structural, it takes you months – and it’s got to be only cosmetic, so paint, carpet, kitchen, bathroom, and I mean an existing bathroom, not adding a new one.

‘‘Throw what you like out the window,’’ says Lewis.

‘‘When you do a renovation in an investment property, what you’re doing is you’re keeping it all neutral. You don’t know who’s going to buy it. I might think that a pink wall is fantastic, but my buyer will be put off because of it.’’

The key is to buy quality items that will serve the homeowner well, but not the top of the range, to keep costs down.

‘‘You don’t have to go and buy marble counter tops, you’re wasting your time and money. I work it out purely on the numbers. I’ve got a spreadsheet of every single possible cost – not every cost is relevant to every renovation, but I know what they all are.’’

The other major thing is not to do the work yourself.

‘‘A lot of people are handy and they think, ‘oh I’ll do the work myself’. That’s where you can lose money because it takes you a lot longer.

‘‘The market can change and you miss your opportunity. Your money isn’t turning around quickly and getting on to the next one.’’

Finally, she looks for ‘‘future potential’’. ‘‘I like to buy two or three units on one title. That means it’s not as expensive with the rates because I’ve only got one lot of rates instead of three. But 10 or 20 years down the track, I can subdivide it onto separate titles and sell them individually, which means I will make more money.’’