Hi all,
I just wanted to get some feedback on what people’s strategy was when looking for positive geared property (ie. buy hold).
From what I’ve seen, positive geared property is possible, but the capital gain is low (probably none) for these properties in these locations. The rent might just only cover the loan payments, and nothing significantly more.
You might say that after 10 or so years, the property will eventually be paid off, and the rental income becomes yours to keep. That doesn’t sound too exciting, it’s almost like borrowing money to purchase some bonds, and letting the yield of the bonds to pay for itself, and when it’s paid off you get to keep the yield.
What I want to know is what is the strategy here? Is it to find these positively geared properties with low capital growth, push up the yield higher via wraps, and use the cashflow to fund negatively geared properties with high potential of capital growth.
Also, when people talk about property millionaires, what do they really mean? Owning a couple of $500k properties financed 90% by the bank isn’t really a millionaire. What I define it as is (Asset – Liabilities).
What are your thoughts?
Hi,
Everyone is different, but I try to make at least $50 per week nett passive income per property I own.
Finding buy and hold deals that generate this sort of return is getting a bit more difficult than it once was, so you’re right that sometimes creative alternatives are needed.
Again, you’re right about the millionaire status. Personally, I measure +ve cashflow and let my nett worth look after itself.
We don’t live on paper… we live in reality where cash is paid for the groceries [
]Bye,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Once, I would have agreed that the cap gain is low – but having lived thru this latest boom, no longer believe that. Now I believe that cap gains come a bit less often, but they still come.
eg we bought a property under market value at mortgagee sale in 98 for $65k, just sold for $105k- I think you would agree that’s not bad, and it was +ve cash flow from day 1. I am about to move on to a property with ocean views for $130k returning $230pw – and am quite sure there will be brilliant cap gain from that.
You just have to look for what you want – not what you hear other people say you might find.
[^][]Hi Steve,
Do you mean you try to get $50/wk passive income for properties you invest in anticipating for cap growth, or are you not too worried about the cap growth and investing for the tenant to build your equity for the property?
Hi Hilary,
Your property of $130k returning $230/wk sounds great. I would imagine you have done your other due diligence. How did it measure up?
Hi jg1234,My reasoning behind my pos. geared properties is 1)cashflow and 2)I then marry that to a city property and the excess rent from the 1st one allows them both to be positive.While my main concern has always been cashflow,I believe that even my country properties have all gained in value.Hope the thoughts of a smallfry can help,Mick
Hi Mike,
So your purpose for the positive cashflow properties in rural areas is mainly for income generation, not really for capital growth.
This was my thought as well, but how much income from a single positive cashflow property is required to make the investment worthwhile. It would be different if your making $50pw for a $100k property versus making $50pw for a $200k property. Of course you can up the income if you wrap it.
What would be best, principal+interest or interest only loans? For maxing income, I would imagine interest only would be best, but you would only be able to do this for 5years unless you refinance (which will cost money).
In terms of your strategy, how many positive cashflow properties can finance the negative cashflow property? I know that it would depend quite abit on the property, rent, and personal income. It would be great if a postive cashflow property can finance a couple of properties, but chances are it might be the otherway around where you have a couple (or more) is paying for one negative cashflow property.
Hi jg1234,
I am looking to postive gearing an $80k property for $30 extra p/w. hopefully purchase @ 75K.
In ur opinion what do u think is the better option, interest only or principal and interest loan?
I am also hoping the area and hence the property will appreciate say 15-20% in the next 18-24 months.
Thanx!
Julian[]
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