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March 11, 2015 - 12:33 am

mushirkhan wrote:

Hello Everyone,

I have read couple of Steve’s books as well and I see those calculations he made, ofcourse those calculation are from when he made his fortune. In today’s reality we have all these cost that comes with buying IP. Can anyone provide an example of Positive Cash flow Investment they have with the Ongoing cost I have listed… How does your calculation stack?

Thanks,

Heya,
I have a few that stack up in the way that you mention.
A 250k purchase renting for 400/wk, a 147k purchase renting for 250/wk.
Also a 425k development that’ll rent for 580/wk on completion.
Several others.
Most of these are in Adelaide.

Comes down to what you’re aiming for and how good you are at searching :)

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March 10, 2015 - 11:44 pm

DeanCollins wrote:

Uhm that’s exactly what I meant, there is a reduction in gross yields but that’s a compression caused by SLOSH its the same in every investment at the moment (which is why leveraged properties are as good as they are at 80%).

The fact that your gross yield percentages are coming down/compressing doesn’t mean that they arent following the capital growth increases it just means the percentage yield is coming down.

Didn’t you just contradict yourself?

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March 10, 2015 - 11:38 pm

CharlieX wrote:

I would agreed that capital growth is long term and cashflow is short term.
valuation is merely a value at a specific point in time, and influence by those properties in the surrounding of your property.

at the end of the day, how much a buyer is willing to pay is the value of the property to that buyer. it becomes a subjective variable.

personally, I would keep good cashflow properties.

I quite like this way of thinking. Capital growth is definitely where the wealth comes from.

Cashflow to keep the whole train on the rails though. This is why outer suburbs of Brisbane and Adelaide are handy atm, because they have both :)

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March 10, 2015 - 11:24 pm

What are your actual goals/plans here? The property is in Officer which isn’t that flash yet is nearly $400k. Why not skip the OTP idea and get a real house in a city that’s actually in growth phase like Adelaide or Brisbane?

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March 6, 2015 - 10:52 am

Rents must follow? They aren’t pegged together mate.

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March 5, 2015 - 12:51 pm

DeanCollins wrote:

If you see sale prices in your area have gone up 5% in a year……then rents be default should have the same movement. I never understand why landlords aren’t on top of this.

They aren’t on par with each other.

A novice economics 101 lesson for you –
Supply and demand affects the price of everything from petrol to houses to rents to milk.
House sale prices may go up and down in price due to a whole bunch of factors going on.
Rents may go up and down in price due to their own factors going on, sometimes together with the above or completely separate. Sometimes not even in the same direction.

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February 22, 2015 - 8:27 pm

Would only be deductible for yourself, not for the others that come along.
You also need to portion out what parts of your trip are legit

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February 20, 2015 - 3:36 pm

Wow this will be interesting.
I’d rather have an ongoing cost than an upfront one as stamp duty is expensive and restricts buying. This will allow me (and other investors there, not to mention cash-stricken first home buyers) to purchase more often thereby lifting Adelaide metropolitan prices up to match other Australian capitals.

I’m so glad I have a few cashflow positive properties Adelaide to take full advantage of the uplift :)

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February 18, 2015 - 12:07 am

Yes
If a property is doing well, why would you sell it?

It’s also complex for little gain. If I was to invest that much effort in finding someone who was willing to enter that arrangement, as well as understand all the legal and finance intricacies of it, I could have bought a few CF+ places by then.

Also, I think there’s one state where its not legal and another where its legal but not enforceable, ie other party can back out.

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February 17, 2015 - 10:55 pm

Most of metro adelaide is cashflow positive as are the outer suburbs of brisbane. Country towns in both Vic and NSW could present opportunities as well. I’d stick to mainland if you want some capital growth in the deal as well.

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February 13, 2015 - 12:53 am

Where you located Mike? Keep in mind that the strategy you propose involves buying in the same city you are even though better deals might be available in other cities.

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February 10, 2015 - 9:35 pm

That’s a terrible idea and your broker should be fired

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February 9, 2015 - 11:59 pm

DeanCollins wrote:

D.T. Why did you move over to CBA from Westpac?

Are you able to add additional properties with your CBA mortgage without “renegotiating” a whole new mortgage and the added expense?

What were the setup costs involved?

Hi Dean
I didn’t move over. I outgrew WBC’s servicability model, and started fresh with CBA (kept existing properties with WBC though).

By “adding additional properties” it sounds like you’re trying to cross collateralize, something heavily discouraged if you want to keep buying IP’s. You need to map out a way forward with your broker to avoid this.

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February 8, 2015 - 12:43 am

I did pretty well out of this.

I was on 4.74 at Westpac prior to the drop as @cjaysa; negotiated me a good rate. More recent properties are with CBA who also passed on full discount.

So 25-28 basis points will save me a few grand a year :)

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February 5, 2015 - 1:22 am

Hey Craig
Is it for your IP or PPOR?
If it’s an IP then your mortgage broker should have set you up with an Interest Only (IO) loan. If its your PPOR then it could be either IO or P&I depending on your strategy.

This affects how (re)payments are calculated.

• This reply was modified 9 years, 3 months ago by  D.T..

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February 3, 2015 - 11:29 pm

Catalyst wrote:

Can i ask how you are calculating cash flow in order to make most of Adelaide CF+. Must be different to the way i calculate it.

i.e outgoing(interest on 100% finance, rates, insurance etc) minus incoming (rent). Only counting 80% is not taking into account interest lost by using a deposit. ALL properties can be CF+ if you pay a big enough deposit but we’d be just kidding ourselves wouldn’t we!

Sure. I count 105% interest into all my properties because that’s how they’re all financed. That’s the only fair way as well when taking into account opportunity cost.

Just a couple of examples of my own recent buys if I may – $147k purchase with 250/wk rent in one suburb, $250k purchase of a duplex pair in another with 2 tenants totaling $400/wk , there’s many others along similar lines. These are in the northern suburbs, can do similar yields in the south except with slightly higher numbers. If you’re willing to do extra work like rehab / reno there’ll also be more reward available.

Part of what I like about Adelaide is that the costs are fairly cheap. The insurance and council rates on my Adelaide properties are far less than most Perth / Brisbane properties. Maintenance is also fairly cheap – it’s far simpler to find a repairman willing to do something for $100 than it is in other cities.

What’s helping it along at the moment is the low interest rates, but may as well make hay while the sun shines, right? :)

• This reply was modified 9 years, 3 months ago by  D.T..

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February 3, 2015 - 7:34 pm

I don’t think its very smart. I think there’s other (non RBA) ways that economy could be kept afloat.

In saying that, it saves me $3k a year. Not complaining :p

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February 2, 2015 - 7:37 pm

A long lease like that is quite likely to be either serviced apartment (avoid at all costs) or Defense Housing Australia, which can be OK if it suits one’s goals. I doubt bank really cares about the length of lease as long as it’s legitimate.

Your mortgage broker sounds correct though. There’s an amount that the banks calculators set aside each month for living expenses, paying existing debts , paying for the new loan (different to what the repayment actually is). They also deduct the rent slightly to allow for rental related expenses. Each bank calculates these things differently (which is why you need a Broker), but still needing an income source (from job or business) is pretty vital.

So a couple of ways of going ahead from here
A) Buy a place outright that doesn’t need a loan
B) Get a job / start a business to have income that can be used for loans
C) Put it in your name as well (I assume you’re employed or have a business).

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January 29, 2015 - 11:11 pm

Yep, it’s definitely changed. I doubt any 2 people will ever be able to do the same as each other. Opportunities come and go, there’s *always* something, somewhere, that money can be made from.

Buying cashflow postive properties is absolutely possible. Some suburbs of Brisbane, most regional centres in all states and most of metropolitan Adelaide is positive cashflow.

Strategy has never really changed. Find a method of making money that works and repeat until it doesn’t.

I’m pretty happy and comfortable with numbers 1 through 5 in your list except for #4.

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January 27, 2015 - 4:16 pm

First, you need to get hold of the PM so that you can find out whats actually happening to stop the guessing game. If you can’t reach the PM by email, try the owner of the company by email and/or by phone too.

Secondly, just because a lease ends doesn’t mean they have to leave – in some states the lease continues onto periodic automatically. It’d be useful to know if a letter had been sent expecting them to vacate on X date.

If your PM is smart, they’ll know which parts of that to claim on insurance and which bits to claim on bond so that minimal is incurred by yourself. Hopefully there’s both an ingoing and outgoing condition reports with photos as needed to back up those claims.

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