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Hi Folks,
There are many places in the world where postive cashflow properties can be found. Right now in the US prices in many regions are severly depressed because demand to purchase has dried up… but demand to live with a roof over one's head continues. What's more, people who were home buyers (or potential buyers) are now renters, so demand to rent has increased. You can buy properties that are genuinely producing more cash than they consume, even with 70%+ LTV borrowings.
Japan is another place where the demand for rentals is much greater than the demand to purchase. I have seen many properties there – particularly commercial – with net returns of 15%+, even in Tokyo. I own several properties there, so I know the market well, although I have not been buying for development, not cash flow.
Malaysia is the only other overseas market I know fairly well and while they are closer to being neutrally-geared, it's still not difficult to find positive cashflow properties there.
Of these 3 markets, I'd say carefully-selected US properties offer the best potential because (a) it's relatively easy for Australian's to borrow USD, (b) the population is growing, meaning demand will recover when the economy does and (c) tax laws are favourable, especially if you decide to invest using a self managed super fund. I recommend Dolf de Roos as someone to watch and follow in the US – he has his pulse on the market and knows where to buy and where to steer clear of.
If Australia is the only place you want to invest, let's not forget that cashflow positive after tax is still cash flow positive. You may not make a fortune overnight – become a property developer and take bigger risks if that's what you want – but conservative 'investing' in real estate will make you wealthy over a 20 year period.
I've done many things in real estate, from passive investing through to active property development and I can say with hand on heart that passive investing is far easier and generally just as profitable over the long run as active development. And if you simply must be a developer (that includes you renovators out there), then I would encourage you to put your profits into passive real estate investments.
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Hope this helps someone out there. I'd also love your feedback about our approach to investment property analysis and selection.
Cheers,
Jim
