Forum Replies Created
The story on page 32. I know what you are questioning, she says she is a “stay at home” mom, not a single mom though. Looks to me like she fails to mention her husband/partner at all in the story, and it would be his income that is being used to service the loans.
I have been told if you are married that the house wife can show the husbands income on her loan app and get the loan in her own name only, because they are married his income is her income. This may also depend on the policy of the bank.
Slum Lord
Assuming your rental grows by 3% per annum and assuming expenses at 8.5% total per annum.
You get the following over 10 years
10% growth 5% yield
Cash flow: – $55,361
Capital Growth: $318,748
Net Gain: $263,3875% growth 10% yield
Negative cash flow: $59,277
Capital Growth: $125,778
Net Gain: $185,056Note if you are in the top tax bracket the -$55,361 in the 10% growth model could be cut in half, and if you get deprecation it could be wiped out all together. If you actually “knew†you would get one or the other the 10% growth model is far superior.
The other thing to keep in mind though is with the 10% cash flow and 5% growth you could actual own an unlimited number of properties, with no serviceability issues, this could far outweigh the growth model if you take advantage and own a much larger number of properties.
Slum Lord
Yah I put it in an offset account.
The refinance money spent on loan payments is still deductible. The purpose of the money is not to pay off debt, as its all interest only for me. It’s simply a cost of supporting the rental property.
Slumlord
alwayscurious,
I couldn’t possibly service all my loans without refinance. I do have a number of cash + properties, nearly all of which I have now made cash – by refinancing. But I just keep going and going. I have such a huge equity buffer now it doesn’t much matter, at any time I can sell a handful or properties and turn the cash flow around.
Just something to think about (fictitious numbers):
$50,000 of negative cash flow (sounds big)
On a portfolio of $5,000,000 in property
You only need 1% growth per year to refinance and be break even!
If you get 5% growth you have $250,000 in growth – $50,000 (negative cash flow) = $200,000 up.
Of course the banks don’t like this concept so you need to be somewhat creative in your loan applications.
Slumlord
Waynel2,
There is lots of money building new houses in new estates, 12 months ago in WA you could have bought just about any block and just picked out a cheapish builder and made 30-50k easy. Land Prices have moved since then and house prices have not moved as much, so the land and construction costs have sorta caught up with the established house market.
If you want more info private message me and I can give you some contacts, I have builders, agents, estates, all lined up. I do lots of this stuff in WA.
Slumlord
Refinance and use the money to pay the negative cash flow.
Example:
Negative: $500 per month x 12 months = $6000
Refinance: $250,000 (paid) – $350,000 (current value) = $100,000
$100,000 x 80% (loan) = $80,000Now this will make the property more negative, but you can use an interest offset loan to only draw down as you need. So you should be able to float the negative cash flow for the next 10 years or so.
And if the property doubles in value in 10 years time you are up $350,000.
Also keeping in mind rent should increase so the negative cash flow will reduce over time.
I refinance to float the negative cash flow all the time.
In this example if the property is losing $6000 per year and is worth $350,000 at the moment, it only needs to increase in value by 1.7% per year to be break even. $350,000 x 1.7% = $5950.
If the property value increases by a very mild 4% per year your property value will be going up $14,000 per year compared to your $6,000 in negative cash flow.
Although some people freak out at the idea of refinancing to pay negative cash flow, I find when you really do the numbers it often works out well.
I’m a strong believer in never sell, although I do sell on occasion.
Slum Lord
I own one in Pakenham. If you are looking for cash flow Pakenham is not the place. You would be looking at about 4-5% returns at the moment. It does have huge population growth, but a fair bit of land left too.
If you are going to buy something with only 5% return then I would look for something beachside in WA.
SlumLord
Niki
If you email me the location, price you paid, how many bed bath (ie 3×1 house, 2×1 unit) for your properties I may be able to buy them all off you, fully covering your original costs inc stamp duty, legal fees etc.
email me: [email protected]
Thanks
SlumLord
Prices I quoted I have gotten in VIC and WA, not just one builder, shop around and its not too hard to find them.. Dunno about NSW, never nuilt there.
Slum Lord
If you think the rent is right, switch agents. do it sooner that later. I can’t tell you the number of times I have held on and then finaly swap agents as a last resort and get it rented next day.
Slum Lord
FW,
How many people normaly attend these meetings?
Thanks
Slum Lord
Tycoon,
1. Keep your job, you will need it to get loans.
2. Do a duplex first. You can get normal residential finance, 3 unit site you will need commercial leanding.
3. Just do it. The experience will be worth more than the profit.Slum Lord
90-120k complete for 15-19 Square townhouse.. There’s a range for you..
Westen,
Just a note on your comment, your Morwell property had not gone up any more. Dunno if its just that property or not, but I have a house in Morwell and had thought the same, but when it was revalued this month (by the same valuer that valued it 6 months ago) it was up from 120k in January 2004 to 134k in June 2004.
Maybe they had just been conservative on the first valution, not sure. Also the stats in REI Mag show the area up about 19% over the past 12 months, from memory.
Slumlord
Can’t find anything about in on their web site? where is this information?
Thanks
Slum Lord
Lets stop talking cashflow and start talking rental return. Rent devided by Price of the property. I know there is more to cashflow than that, ie rates, vacany, interest rate on loan, but this at least gives a more subjective starting point.
I have bought houses in VIC in large regional centres with 8% rental return (bought in the last few weeks). Have a mate that has found 10% in small regional vic towns. Stuff still out there. easier to buy now than 3-4 months ago.
Slum Lord
I looked into buying in Iraq a few months back, seemed a logical investment to me… Unfortunately my research told me that non-Iraq’s could not own property. If anyone else finds out otherwise it would be great to know.
You should keep in mind before the major runin with the US and the embargo, Iraq was a rich and thriving country and Baghdad offered a real lifestyle scene for the residents.
Have a look at Lebanon now? The Café-bar lifestyle scene is huge there now, but I bet most westerners still think of it as a place where people get shot in the streets with Machine guns.
If I could, I would buy in Iraq.
Slum Lord
The sad fact is, it is better to switch agents than to expect that complaining to your current agent will generate better results. With the “S” agent I had a house that was vacant for a while and the agent said they had someone looking at my house and another house they have, but they were pushing them towards my house because they didn’t like the other land lord. I would suggest this means if you complain they wont like you and your service will get worse. I will probably move my rentals in the near future.
Slum Lord
fullout,
I have been told by and agent, that has worked in that area for 25 years, that there are no QS out there. You need to get one from Melbourne.
Slum Lord
fullout,
This company that is letting you down. The agency doesn’t happen to start with an “S” does it?
I have had problems with the “S” franchise in the area.
Slum Lord
