Hi Everyone,
Just wondering if anyone could give me a bit of advise. I’ve recently bought a +CF property in a mining town in Western Australia, and have realised there are alot on offer in this town. Tenants are also not hard to come by in this area.
How many positive cashflow properties would you all recommend to purchase in one area? Is it ok to have as many as possible or is it better to spread the properties out over a variety of areas?
Also, in any given investment portfolios, is it ok to have many +CF IP’s or is it better to have more negative ones? I realise all about tax benefits etc….on -CF properties, and the lack of capital growth on +CF properties, but what I’m getting at is – Is it dangerous to have too many +CF IP’s?
I hope I’ve made sense of this all, and that someone can give me some insight.
Thanks in advance,
BonnieHello Bonnie,
Congratutions are in order on two counts here:
1. For the purchase of your first IP (woo hoo!!!)
2. For asking, albeit a basic, but very worthwhile question, especially for any newbies out there!!!Well done!!![thumbsupanim]
IMO smart property investing should incorporate a mixture of both +CF and -CF (neg geared) properties, thereby having the best of both worlds!!! Many will refer this type of strategy as offsetting, but call it what you will, an even balance is always highly recommended to maximise your income and tax advantages.
In reply to your diversity question, yes this is also an important factor, especially to start off with, and as you progress through your investment journey you can re-evaluate, and bring things closer together (this is what I have done); that is, I used to have interstate properties, but then preferred to have them all in my own backyard (state) so-to-speak. Please note, this was MY personal preference and there is absolutely no reason why one cannot have IPs all over the country, and indeed overseas (ie. NZ)for that matter; it really is just a question of personal choice!!!
For the sake of those screaming “shares, shares” as I type this, let me add, that diversification is not only about geographical investment placement strategies (hey, I like that, does such a term exist??? If not can I lay claims to it??? [biggrin]) it is also about employing more than one investment vehicle. That is, combining property, shares and cash. This is mainly because (although there are many who prefer one vehicle over another), it is common knowledge that when one market is down, the other will be up, and so (again for the purpose of balance) it is not a bad idea to have you hand in more than one pie!!!
As for “how many IPs???”[blink]……Well, as with any investment (regardless of type or volume) as long as you can maintain your SANF (sleep at night factor); then IMO the sky’s the limit!!!
Cheers,
Jo
I believe you can have as many cashflow one’s as your equity will allow. Trouble is, if you borrow right up till you have no more equity, how are you going to get any capital growth? You will then have to sit and wait patiently till the market in the mining town rises and you have more equity.
You also need to assess risk. Vacancies equal no rent. That’s gonna wreck your cashflow. Make sure there is enough demand for extra rentals in the area and the mine is not going to fold and kill off the economics of the town.
We are just mostly coming off a capital growth bonanza and may not see it in any spectacular strength for a few years now. Do you really want to buy a negatively geared ip, now, and wait for the value to rise?
A couple more positive ones in a substantial town shouldn’t hurt. Then look else where for a bit to see what else is available. Be mindful of maintenance costs, and rising interest rates as well.
If you want to get out of a hole, first stop digging.
Just keep ticking away. Positive deals are getting harder to find.
Hi Bonnie,
just for personal interest, what Town did you buy in? I live in Hedland WA, so have an interest where you bought.
If you’d rather keep it low-key then PM me, I’m very curious!!!Cheers
C@34
Hi Bonnie,
In reality the number of properties is going to be determined by a range of factors including, primarily your capacity to borrow funds and ultimately by your ‘income needs’.
If, for example, you want an annual (pre-tax) income of $100K then you will need sufficient property to generate that level of income after making some allowance for differences between P & I or I/O loan repayments when calculating your profit.
As for issues surrounding ‘having too many properties in one location’ – that will be determined by the size of the community you invest in. For example I wouldn’t have one property in a one horse town – but then I am very happy to have multiple properties in metropolitan areas. In some respects it also comes down to a ‘saturation issue’ – if vacancy rates are rising too fast then I suggest it is time to look elsewhere.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Bonnie,
I agree with both Brenda and Monopoly.Positive cash flow properties are becoming increasingly hard to find. Well done on finding one. On a personal level I wouldnt over expose myself in a mining town due to the risks associated in investing in a mining town. A mix of positive geared property and property which you believe will give you capital growth in the future will hopefully provide you with equity to continue investing. Anyway I think you know the importance of gaining capital growth and positive cash flow. Its just the balance of these and the uncertainity of what the future holds that creates the risk.[biggrin][biggrin]Good luckMartin
Thank you all so very much for your input.
The people on this forum are so very helpful and I really appreciate every bit of information you all share with me.
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