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I wanted to throw another aspect to Coogee’s opinion on +VE cashflow property. I have sold property with a 33% increase in capital based on a buying price vs my end selling price within 15 months(ownership) due to cashflow not due solely to capital growth. There is a strong demand in market for properties that yield high so if you can build in the yield from creative ideas you can unlock capital due to the demand for +VE cashflow properties. I have done this and I use rental yields to determine the value of my properties and the market demand for my properties. I think this is a strong way (not the only way) to build capital if you are willing to sell because I know that in this current market you can sell 7% rental yield properties all day long almost with complete disregard to the quality of the property.
If you can build value into a property to create a 8-9% yield you will be able to cash in on the value difference between a 6.5-7% and 8-9% yielding property upon sale in market. Valuers will never accept this formula for identifying bank valuations but market values seem to support the sale of a 6.5-7% rental yield on the basis the property is in a low risk area ie; cities and surrounding suburbs.
Thanks for the replies. I only have $19k on the existing property I own for equity. Has anyone taken out a business loan and borrowed against a new business as start up capital for investing in IPs? Based on the strategy I’m using I can service the additional loan while still staying cashflow positive on the basis I can keep an Interest Only loan for the first 5 years.
I haven’t hit any blockages with the banks yet with this idea.
Hi Aleks
I’m in a similar situation and have found that the best possible direction to take now is hire the best possible team by being honest and clear to them about what you want. They are going to have a collective knowledge that should continue to be insightful and incredibly helpful. Ask for recommendations for the team and qualify them. This method of figuring out obstacles has helped us a lot.
Good look :)
I recommend contacting a kit home specialist and asking them what some of their existing clients have paid for with full installation and associated costs in your local area. I went through this process and that was the most accurate forecast on full costs that I received. Don’t settle for the advertised kit home prices. There are additional costs but someone in the business of selling kit homes has been exposed a lot to these projects. Good luck :)
