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No I am based in Sydney
Ryan McLean | On Property
http://onproperty.com.au
Email MeI run a myriad of online businesses. My most successful being cashflowinvestor. It’s a property finding service.
What type of business are you thinking of running? Starting part time is a good idea as there is less risk. That is what I did
Ryan McLean | On Property
http://onproperty.com.au
Email MeUpdate: I just visited their site and they offer a great deal of properties with growth opportunities. So it seems they don’t just specialise in positive cash flow.
Let us know how you go with them.
Ryan McLean | On Property
http://onproperty.com.au
Email MeI wonder if CashFlowCapital have properties in Sydney. I have never used their service so I don’t know. I know they focus on positive cash flow properties, and I know that they are hard to find in Sydney.
They have a very credible reputation online and they are extremely popular. Loads of people have used them. I would suggest googling “cashflow capital review” or something of the sort to find out what people say about them.
I would also send an email to them asking them some questions. Tell them where you want to buy and what you want to achieve and ask them if they can help you.
Ryan McLean | On Property
http://onproperty.com.au
Email MeDon’t worry. There are loads of people nervous about posting questions. Forums can be a hazardous place some times. But no question is too stupid. In fact you are only stupid if you don’t ask the questions.
In order for anyone to answer the ‘what should I do?” question, you need to first work out what you want to achieve through your investing. You stated that you want to own your own house in Sydney…and that you want to own properties as investments. How many properties do you want to own? Are you looking for passive income to fund your lifestyle or do you want capital gains?
You guys obviously seem like you are really good savers, which is good. This will help you achieve your goals.
I guess the question is, what is the next step. Are you getting pre approval to buy your house? Or to buy an investment property?
With 90k in savings you might need to borrow some money from your unit to get your LVR on your house at 80% (this will avoid the need to pay lender’s mortgage insurance). But if you move into your house then you can rent out your unit to help pay for the repayments.
If you are buying a unit to renovate then STUDY UP! Renovating and adding value is not as easy as people make it out to be. My wife is an interior designer, and it is amazing how people think what she does is easy and tries to do it themselves…and fail. Some people have the eye for it…I don’t. If it comes natural to you great…if it doesn’t then STUDY! You can’t just spend money on a house and expect to make money…you need to spend it on the right things….so find out what they are.
My wife did up a house recently. Spent $1,000 on it and increased its value by $75,000. I could never do that unless I studied a lot. To her it is her talent.
Anyway, what I am saying is to get smart. Get smart about what you want to achieve (funnily enough most people don’t know what they want to achieve when investing in property…they just want to get rich). Have a figure in mind, be it an income you want to achieve through rental returns or a figure you want to have in the bank (maybe $1,000,000). Then study up and only purchase properties if they will get you closer to your goal.
Ryan McLean | On Property
http://onproperty.com.au
Email MeWell me and my mrs just had a baby and have gone down to 1 wage.
My theory is that the more properties you own the more capital growth and rental income growth you can get. By selling you I/O you are going from 3 properties to 2 properties in order to buy a liability (a loan).Let me explain:
Money by itself is a liability. It loses its value every year due to inflation. $100 in the 1920’s was worth a hell of a lot more than it is worth today. I remember in the 90’s paddle pop’s were 65c now they are $1.30. They cost twice as much now, but they are still worth the same value. This tells us that the money has lost its value. A paddle pop is a paddle pop, but $1.30 in todays money is only worth $0.65 of money in the 90’s. Make sense?
When you pay off a loan you are indirectly ‘buying money’. This money will lost its value every year (around 3-5%). But property keeps its value, and as the value of money goes down, the price of property goes up. Money always goes down, so property will always go up over the long run.
If you can get your investments to pay for themselves (so then the 7% interest or whatever doesn’t come out of your pocket). Then I would stock up on properties instead of focusing on paying off loans.
I wouldn’t leverage to the hilt. Interest rates are going up and you definately need a good buffer…but I wouldn’t just pay off debt. I would want to buy a couple more positive cash flow properties while I was still working, and then let them pay off themselves and your land.
Bit of a long post. But basically if it were me. I would buy CF+ properties (if I could) before I stopped work and lost the borrowing power and I would keep the current properties.
Ryan McLean | On Property
http://onproperty.com.au
Email MeWorking for yourself is definately rewarding. I love working for myself. If you are smart it can also offer you a lot of freedom. I work about 2 days per week most weeks.
One thing to be careful of. I was confused whether your business was in real estate or whether you were starting your own business and then investing in real estate on the side. I have found that banks look more favourably on businesses after they are 2 years old or more. Brand new businesses can make it a little more difficult to get a loan…not impossible….but a bit harder. Just something to be aware of.
A piece of advice. Keep learning about real estate. If you want to make this a full time gig then you need to know as much as you can. Go to seminars, read books, study up. Because the more you learn the more you can earn
Ryan McLean | On Property
http://onproperty.com.au
Email MeI have been reading a lot of Donald Trump lately and he says to “think big”.
He said it often doesn’t take a whole lot more to build some units than to build a house. It is definately worth looking into, especially if you want to strata title them and sell them later on down the track.As has been said above…it depends on what you want.
One of the things to think about with building units is that you will have to knock down the current house. This means your rental income during construction will be $0. If you can afford the repayments then this might be fine, but if you need the rental income to afford repayments then you might not be able to do this.
Good luck with whatever you decide
Ryan McLean | On Property
http://onproperty.com.au
Email MeThe negative side of positive cash flow is that often the capital growth is less. The guys are right. Capital growth allows you to get rich, but cash flow is necessary to get there.
I would prefer to own 10 positive cash flow properties than 1 negatively geared property. Even though the growth may only be 4% instead of 10% I can afford more and therefore get richer quicker.Ryan McLean | On Property
http://onproperty.com.au
Email MeThe problem with anywhere is that it takes time to construct. Not just Perth
Ryan McLean | On Property
http://onproperty.com.au
Email MeWhat are the LVR’s on a no doc loan? How much more expensive are we talking?
Ryan McLean | On Property
http://onproperty.com.au
Email MeI didn’t realise that low doc loans required you to simply state what your taxable income was in the last financial year. I am not suggesting mortgage fraud in any way, just looking for ways to best get my loans approved. Banks have a lot of lending criteria which someone on a casual wage (even though I am permanent casual and have been there 5 years) can find hard to get around, thought a low doc loan might help in that case.
What are the lending criteria for no doc loans? Why would the banks lend no doc and how can they see if you fit their criteria?
Ryan McLean | On Property
http://onproperty.com.au
Email MeHi Brendan,
Firstly well done on buying your first property and building up such a good equity base. Everything Richard said is good (he know’s his stuff).
My suggestion would be to think about what you want to achieve from your investment portfolio. Yes you want to be ‘rich’ but break it down and define it more. For me my goal with property is for it to generate me passive income to fund my lifestyle. So I look for cash flow first and capital gains second.
I just see people stuck in the trap of capital gains and never getting to enjoy their money. For example, someone buys a house that costs them money each money to own, but they scrape by and in a few years sell and make a whopping $200,000!!! They think “this is awesome” and they go and buy a bigger property that costs them more to own. They are getting rich, but in the meantime they are living off baked beans.I want to enjoy my riches and I grow them. Not everyone wants this.
But with only $75,000k/year eventually you are going to be capped with negatively geared property because you won’t be able to buy any and afford to live. Before you buy your next property and be paying more each month in interest (and rates are still going up). Think about what you want to achieve. If you don’t mind scraping by thats fine, just know exactly what you want and whether the next property will get you there or not.
You don’t want to end up being a poor rich man living off baked beans but owning a few million dollars in property.
Ryan McLean | On Property
http://onproperty.com.au
Email MeJust be extremely careful. If the mines ever close down then your property may end up being worth nothing. You won’t be able to rent it or sell it. I know there are a lot of projects at the moment but definately keep an eye on the major players. The big mining companies. If employment ceases to exist people will move elsewhere.
In saying that, I wish I bought in Port Hedland a few years ago.
Ryan McLean | On Property
http://onproperty.com.au
Email MeBasically what Richard is saying is that subdivision isn’t quick. It can take 6-12 months to subdivide a block. So don’t buy it thinking you are going to subdivide in a couple of weeks. It takes a while, but there is a lot of money to be made if you can do it properly.
Ryan McLean | On Property
http://onproperty.com.au
Email MeI think interest only is good in a few situations
1. When someone else is paying for the interest. Such as a neutral or positive cash flow property. If your rent can cover all your expenses and the interest on your mortgage, then you don’t have to pay for it. This means you can use the money left over (after all expenses and interest is paid) to enjoy your life.
2. When you think you can get a better return on your money. When you pay principle off your loan you are effectively getting a 6-7% return on your money (whatever the interest the loan was costing you is). If you think you can get a better return for you money such as 10-20% by using that money to invest in more property or shares or something then it would be worth spending it on investments instead of paying off debt.
3. When you need the cash flow. When you start investing it might cost you too much each month to do a P&I loan, interest only makes the cash flowing out of your pocket a lot easier. This means you can afford more properties. When rents go up to cover the cost you can then switch to P&I.
Hope that helps. If it was me I would do P&I for cash flow purposes and try to neutral or positively gear the property ASAP!
Ryan McLean | On Property
http://onproperty.com.au
Email MeThe more property you own, the more you can take advantage of growth. Owning one block is good, but land almost ALWAYS goes up in value, so if you can leverage one property to buy another property then it could be a good move (if you can afford it).
I agree with you that it would be hard to find somewhere in Perth that is positive cash flow, but you could always aim to buy something that is only slightly negative.
The main reason I would buy again (if it was me in your shoes) is because rents go up in value over time, which you mean you could move from negative to positive in a couple of years if you buy properly, and land goes up every year. By buying another property that you can rent out now, in the future you will have more income and more equity to do you duplex/town house development.
Just some ideas for you to think about. Might be a good option. Maybe you could even buy a place that is ugly but structurally sound and do it up to increase rents thus making it positive cash flow.
Ryan McLean | On Property
http://onproperty.com.au
Email MeSteer clear unless you know a lot about this investment. Niche markets like resorts are risky.
Often banks won’t lend you more than 60-70% and if the resort goes belly up what will you be left with, a tiny studio room in an empty resort that you can’t rent or sell to anyone.Not saying you shouldn’t do it, just be very careful and well educated.
Ryan McLean | On Property
http://onproperty.com.au
Email MeThis frustrates me with the banks. I can understand their viewpoint though. If I was a lender I would never take 100% of the rental income into account. As Richard said, rates, water and a whole bunch of other things (vacancies, management fees, maintenance, insurance etc) all have to be paid for out of the rent. For a lender to take 100% would be silly.
It would be nice if they did, but they don’t and I doubt they ever will.
Ryan McLean | On Property
http://onproperty.com.au
Email MeYeh Rod,
If you have done the place up I would look at getting it revalued from the banks. I don’t think there would be much point in getting a real estate agent to value it, as the banks have their own valuers they use and they likely won’t even look at anything the real estate agent has done. If your property is worth more then you could look at borrowing your equity to buy another place.
Make sure you don’t over-extend yourself when it comes to cashflow. More properties isn’t always better if it means you can’t afford to eat because you have to pay for your properties. Interest rates are only going to go up, so expenses on properties will only go up, so be careful of your cash flow when looking to invest in another property. If you can afford it, or if you can find something positive then that would be awesome.
But get looking, get investing. The more you own the more money you can make.
Ryan McLean | On Property
http://onproperty.com.au
Email Me
