Forums / Treasure Chest (Past Forums) / The Treasure Chest / Where are +ve cashflow properties?

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  • Profile photo of KeeshaKeesha
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    @keesha
    Join Date: 2003
    Post Count: 6

    Many people on this forum say that they buy positive cashflow properties. May be because I live in Sydney, I never saw one. I only saw negatively geared properties.

    So I suppose, either the +ve cashflow properties do not exist at all, or they are so far away…

    How far shall I go to at least have a look at one?

    Profile photo of Stuart WemyssStuart Wemyss
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    @stuart-wemyss
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    Post Count: 598

    Hi Keesha

    Welcome to the forum.

    Purchase a copy of Australian Property Investor (“API”) magazine. In the back is a State based post code list. It lists the average rental yield for each post code. That might be a good start.

    Cheers

    Stu

    Property & Finance News
    at http://www.prosolution.com.au

    Profile photo of scottscott
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    @scott
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    Hi Keesha,
    Positive cashflow properties are found in major regional centres around the country, you used to be able to find them on the outskirts of Sydney, but I’m afraid that’s not the case any more.
    Usually these properties are at the lower end of the market, and often aren’t the ones advertised in the window of the agent. Granted they are becomming harder to find, but they are out there, it’s just a matter of looking hard enough!

    Cheers
    Scott S

    “Aim for the stars and you’ll shoot the top of the telegraph pole. Aim for the top of the telegraph pole and you’ll shoot yourself in the foot!”
    -anon

    Profile photo of johndjohnd
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    @johnd
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    Hi Keesha,
    I like you are interested in acquiring +ve cashflow properties, however its not always as simple as that. Nowa days you need to be astute and think outside the square to achieve this result if like me you dont particularily want to be purchasing out in the sticks, not that it’s bad. Some of the tactics and startergies I have used to achieve positive cashflow is by
    1. Purchasing wholesale (Below retail for what ever reason, hard to do in todays market)
    2. Adding value ie Purchase $200K rent $250pw spend $40K new value $300K rent based on new value eg $350pw
    3. Include extra benefits ie Electrical pack consisting of TV, Microwave, Fridge, DVD surround system, Washing Machine, Dryer total value $5K approx but negotiate $50pw extra in rent and the renter after 2 years gets to keep the goods.
    4. Share the equity growth with the renter, ie cash back at the end of a pre dettermined rental period like 5 years in return for a higher rent.
    5. Wrap the property information on this site inrelation to wraps
    6. Option Contract to sell to renter
    Use a combination of any or all of these stratergies to achieve +ve cash flow. Its hard to find properties that are positive cashflow but you can turn a -ve geared property into +ve gearded just think outside the square.
    I hope this helps.
    regards
    JohnD

    Profile photo of hwd007hwd007
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    @hwd007
    Join Date: 2002
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    JohnD interesting ideas.

    Do you deal with tenants directly ? or through a real estate agent ? I was just wondering if through agent, how would they react to some of your strategies, such as the TV, stereo, dryer, dishwasher type deal with higher rent agreement and ownership after two years etc..

    Sounds like an interesting strategy
    spend $1500 on TV dryer and washer etc.. then charge $20 per week extra. thus you gain $1040 per year extra in rent by half way into year 2 they have paid themselves off. so you get another 6 months extra rent increase of $20 , plus are they tax deductible or depreciable ? so you may save a bit there also.

    I definately like this strategy. in 2 years time CG has kicked in creating upward rental prices so when you renegotiate the rent, you are in a stronger position. You have also secured a 2 year lease which gives you more stability in your investment.

    Profile photo of willrogerswillrogers
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    Keesha Im only new in here but I think positive cash flow properties are investment properties that return more a week in rent than you have to pay for them. If Im on the right track then I suggest look outside of Sydney. In Alice Springs it is an easy process with high rental prices and reasonable purchase prices for buying homes its almost a guarantee. (If Im not on the right track please tell me) Thanks Will

    Profile photo of hwd007hwd007
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    @hwd007
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    Just be careful with hidden repair expenses with old positive cashflow IPs. You do the numbers and it looks positive then after you buy, you find out you have to pay for various repairs possibly into the thousands of dollars. This can make such property cash flow negative at times. Conversely, a brand new IP may start out negative, but can sometimes turn positive after a few years of good CG and rental increases, combined with lower maintenance overheads.

    Something to think about.

    Profile photo of KeeshaKeesha
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    @keesha
    Join Date: 2003
    Post Count: 6

    Thanks for everyone who responded!

    This is what I learned:

    In terms of geographical location,
    the +ve cashflow properties could be found in regional centers or far away locations like Alice Springs. Definitely not in Sydney.

    Alternatively, one can apply strategies such as the Options Contracts, Wraps or share the equity growth with the tenant to keep the cashflow positive.

    Property can start negative and turn positive after years of capital growth, good rents and paying off your mortgage [:(]

    From my personal experience, adding value by ways of buying electrical pack may appeal to some tenants and turn off others. Plus, you have to get the idea into the brain of your real estate agent since (s)he is the one to negotiate with your tenants.

    Thanks again for your ideas!

    Profile photo of johndjohnd
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    @johnd
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    Quote:
    JohnD interesting ideas.

    Do you deal with tenants directly ? or through a real estate agent ? I was just wondering if through agent, how would they react to some of your strategies, such as the TV, stereo, dryer, dishwasher type deal with higher rent agreement and ownership after two years etc..

    Sounds like an interesting strategy
    spend $1500 on TV dryer and washer etc.. then charge $20 per week extra. thus you gain $1040 per year extra in rent by half way into year 2 they have paid themselves off. so you get another 6 months extra rent increase of $20 , plus are they tax deductible or depreciable ? so you may save a bit there also.

    I definately like this strategy. in 2 years time CG has kicked in creating upward rental prices so when you renegotiate the rent, you are in a stronger position. You have also secured a 2 year lease which gives you more stability in your investment.

    Hi hwd007,

    Yes in most cases I deal with tenants directly, I look for a need and negotiate win win, I include foxtel in some deals etc to get my rent return up. In relation to agents I’m not particularily fond of them, what I’ve found is that they need incentives to concentrate on renting my properties. Generally when I do use an agent I simply ask them to refer the potential renter to me and I handle it from there. If the renter that is finally sellected is refered by the agent I pay them their asking letting fee for the referral. No one knows my properties better than I do and most agents cant think outside the square. I am nearly always able to arrange above market rentals by value adding in some way. I even in some properties give my renters a holiday every year to the value of 4 weeks rent for resigning for a nother 12 months. You need to do extraordinary things if you want to achieve extraordinary results.
    regards
    JohnD

    Profile photo of KeeshaKeesha
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    @keesha
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    Hi John,

    I think this is an extraordinary incentive to give your tenants a holiday from rent! Well done!

    Keesha

    Profile photo of RSTARRRSTARR
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    @rstarr
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    Hi hwd007,

    Yes in most cases I deal with tenants directly, I look for a need and negotiate win win, I include foxtel in some deals etc to get my rent return up. In relation to agents I’m not particularily fond of them, what I’ve found is that they need incentives to concentrate on renting my properties. Generally when I do use an agent I simply ask them to refer the potential renter to me and I handle it from there. If the renter that is finally sellected is refered by the agent I pay them their asking letting fee for the referral. No one knows my properties better than I do and most agents cant think outside the square. I am nearly always able to arrange above market rentals by value adding in some way. I even in some properties give my renters a holiday every year to the value of 4 weeks rent for resigning for a nother 12 months. You need to do extraordinary things if you want to achieve extraordinary results.
    regards
    JohnD
    [/quote]

    Hi JohnD
    Do you live in the same area as your investment Properties? Or do you handle it over the phone etc?
    Thanks!

    Profile photo of johndjohnd
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    @johnd
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    Hi RSTARR,

    Yes I live in city where my investments are and this is because I am able to achieve +ve cashflow from my properties one way or another. Initaily I handle it over the phone but then always finalised face to face.

    One of my life lessons learnt is
    When it comes to business, money and your spouse you shouldn’t trust anyone.

    So I’m not at the stage where I trust people to work with my investments, not saying that this is bad it just not for me yet because I cant afford for anyone to stuff it up.
    regards
    JohnD

    Profile photo of hwd007hwd007
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    @hwd007
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    Dont trust your spouse ?

    Hmmm ….. that’s a worry.

    Anyway, I guess as they say if you want something done the way you want, then do it yourself.

    On another note, my property is interstate, so I am leaving it all to my agent. I may run the idea over him with my next property which settles in a few weeks.

    cheers.

    Profile photo of hwd007hwd007
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    @hwd007
    Join Date: 2002
    Post Count: 247

    Dont trust your spouse ?

    Hmmm ….. that’s a worry.

    Anyway, I guess as they say if you want something done the way you want, then do it yourself.

    On another note, my property is interstate, so I am leaving it all to my agent. I may run the electrical package idea over him with my next property which settles in a few weeks. he may be able to use it as a negotiating tool to get better rent.

    cheers.

    Profile photo of johndjohnd
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    @johnd
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    Post Count: 25

    hwd007,
    You miss understood I do trust my spouse, she does the right thing always (well nearly always)its other people you cant trust (sometimes you have no other option), they dont do the right thing. Dont get me wrong not all people but it only takes one or two bad experiences to feel this way.
    regards
    JohnD

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