Hi,
Just wanting to know what the Gross Positive Cashflow consists of. I am guessing that it includes all cash made in the MAP deals (including bird-dogging fees). Does it take into account costs, particularly interest?
If I missed an explanation in the book, I would be grateful for a reference.
Many thanks,
Frog2Hi Frog2, please see below what Steve had to say:
SteveMcKnight
Administrator [1254 posts]
Posted 10/10/2004, 17:27:17Hi,
Thanks for your feedback and I’m delighted you enjoyed the book.
A couple of points:
1. The cashflow figures are ‘gross’, meaning before expenses such as those you listed.
2. The cashflow is only from property remaining at the end of the MAP. Cashflow (i.e. non-cap gains) from deals bought and sold in the 12 months were excluded.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Cheers
C@34
OK, maybe I’ve misunderstood here, but I’m not sure why the “gross” annual positive cashflow is the figure Steve has chosen to give in the book. It seems that this figure is, well, useless – if you are trying to get an idea of how well one of the Mappers did in terms of positive cashflow.
Have I understood correctly that this figure is the cashflow before expenses like loan repayments, rates, insurance etc. are taken out?
Looking at Will and Del’s figures from page 250 (chosen purely because that’s roughly where I’m up to in the book right now): if we assume that they bought all the property at an LVR of approximately 80% then they have debt somewhere in the area of 1.3 million dollars. I have no idea what interest rate they are paying, but guesstimation says they _may_ have an annual interest bill as high as 80 or 90 thousand. That’s well over half of the “gross” annual positive cashflow specified, before we take into account the principal repayment (unless they’re all IO loans), rates, insurance etc.
The “real” positive cashflow that Will and Del have from their MAP purchases (i.e. cashflow after all expenses but before tax) may be very small.
Of course, since we don’t know their actual LVR, whether they have IO or P&I loans, their interest rate, etc. etc. it may be that I’m wrong and they actually do have a lot of “real” positive cashflow… but this is entirely my point: *we have no idea*… so what use is this “gross” annual positive cashflow figure? Why not give their cashflow after expenses but before tax?
We know that Steve managed to “get out of the rat race” (i.e. achieved an annual positive cashflow *after expenses* in excess of his annual living expenses) in under a year (in 11 months, if I recall correctly.) In the same amount of time, and with the benefit of having attended one of Steve’s seminars, plus a whole year of mentoring from Steve, did *any* of the Mappers manage to get out of the rat race? Did any of them come close?
Yeah, I was wondering the same thing. If this is the way it is then the increased valuations and sales seem to account for the lions share of the “profit”.
As the cashflow is a gross amount the net amount would probably be somewhat reduced after removing what may be considerable expenses?
Hi,
You are correct that the gross would be higher than the net.
Nevertheless, gross was chosen as a more accurate basis for comparison given that using net would have meant employing more budgets for forward estimates.
As mentioned at the book launch, my estimation of net cashflow would be somewhere b/w $450k and $550k per annum. Such a figure was never measured though.
Regards,
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
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