- ipropertyco.comMember@ipropertyco.comJoin Date: 2010Post Count: 2marx3bullMember@marx3bullJoin Date: 2009Post Count: 86pierswMember@pierswJoin Date: 2010Post Count: 4
Cash flow positive….? When investing in real estate, does one ask why? are you investing for long term growth? so a buy and hold?
If this is the case, why are you looking for CF+. are you employed? if so, you have your CF there, you have an income. Any decent property these days will not be CF+. Unless you go to a rural centre. Do you live there and know the area? would you be an owner occupier there?
so then how long will it take to sell the prop? if you can sell it. Remember as well, in chasing CF+, you will be probably be forgoing capital growth, which means if that is the case, after holding costs and expenses etc etc will you have made money? afterall that is the idea of an investment, otherwise it is infact a liabilty…….william123Member@william123Join Date: 2010Post Count: 2
saw the page in Steve's book that said effectively the way to CF+ve earnings is to find properties yielding in excess of 10%, I thought, "OHHHHHH OK, that's what I have been missing, the key to wealth generation is spotting non-existent undervalued asset opportunities". I am a believer in efficient markets. Rental yields are at historical lows (hello, anyone hear of the property boom???), because interest rates are low and capital gains are taxed concessionally. Having done a quick scoot around the market even country properties sub $150k are yielding 6% max. So in answer to the question "where do you find such properties
ccnaWyethMember@wyethJoin Date: 2010Post Count: 9
William – I’m new to all this and have been looking at the market myself to try and familiarize myself with what’s available and I’ve come to the same conclusion as you…..well almost.
It appears that you’ve read Steve’s book and have had a quick look on the internet and amazingly didn’t find a property advertised that will actually make you money without having to do anything. If it was as easy as that everyone would be doing it. I think that a lot of work, time and investigation and a bit of luck is required to get a true CF+ property, it’s not something flicking through 2 pages of Domain.com will get you.
The current market with the low interest rate will certainly be making this situation worse, however, it isn’t likely to stay like that forever, so maybe a change in your short term strategy is required
I started looking mid 2003 for CF+ properties, on the net.
Took me about 3 months.
Block of basic units in rural town.
Have been making us $100 pw (after all expenses) since late 2003. Consistently. Since first purchased. Currently over $180pw, as rents have gone up and interest rates are low. Minimum of $26,000 income to date, probably over $30K.
No capital growth? About double the value in 5 yrs, better than elsewhere in the state that I know of.
piersw, do you have a better idea for investing? Why would you want that income? (Use your imagination!!)
In my case, provided income while I looked after a seriously ill relative, and didn't have to work for a few months.
(My partner was working.)
Could you have done better investing somewhere else? And at a fairly cheap buy price ( well under $300K).
The concept is PASSIVE income ie your money works for you, not you for your money.
You need to read Steve's book and open your eyes to a whole new world!
(i'm serious, not being nasty!)
If we advertised the property, it would sell on the net the same day… its a no-brainer. Advertise CF+.
The bank loves us, we've borrowed more.
Questions to ask is, where is there insufficient property to rent ? Check the investment magazines (back page) for vacancy rates, for a start.
Usually backed up by high yields. Steve's 1% rule (to paraphrase)
"If you find you can borrow at eg 6%, add 1% pa for costs and anything over 7% yield will be CF+."
If you believe that interest rates will rise in the coming year (and I do) add 1% for safety net.
To find the yield, multiply weekly rent x 52 (weeks), divide total by asking price.
eg $400 week rent x 52 = $20,800. Divide by Purchase price $300,000. =0.069, ie 6.9%
Borderline, may be worth looking into.
Then find out your exact costs and do your due diligence.
This stuff works!
quickchickKiwi Property GuyMember@kiwi-property-guyJoin Date: 2009Post Count: 82
Great post quickchick!
It sure does work To find positive cash flow deals you first have to be open to it, and believe that they are out there. I have seen it many times before – If you dont think it is possible, then you wont find them, or be able to create them.Sean ListerMember@sean-listerJoin Date: 2010Post Count: 18
Need some advice.
Ive found two studio apartments on one title for $225,000, each apartment should rent for $230/week, to me this sounds like a great deal, and at these figures will bring a 10-11% yeild? Does any one no anything about buying apartments? would you go for it??
Sounds good from the surface.
What expenses? strata (if not, building insurance)? council rates? water?
Are any rented, what is the ACTUAL rent?
What is the area vacancy rates, especially for studio's ie limited appeal, got to be singles who can't afford bigger.
What interest rates can you borrow at?
Presuming you need to borrow.
Which brings up a major issue…
Will your bank lend for studios?
If area less than 50-60m squared, per apartment, you may find bank will not fund you. They don't like studios (too small).
Unless you put up maybe 30-50% equity (if you can afford to).
Ask your banker/ broker.
Put any offer in "subject to finance approval" as a safety clause.
quickchicksteve-investMember@steve-investJoin Date: 2010Post Count: 30[email protected]Participant@cjmcdarby-hotmail.comJoin Date: 2005Post Count: 1financial_freedomMember@financial_freedomJoin Date: 2009Post Count: 18
Just a note that unit prices in the liverpool area of western sydney for a 2bedroom unit are around $220000 mark start price. Rents start at about $260 if you r lucky. Alot of my family and friends have had trouble with rents keep going up in the area. With the hospitals redevelopment i think it can be a good area to invest in.
I think theres still cf+ properties out there, u just need to look carefully and hard enough for them.
Hi Financial freedom,
Just done some numbers on the Liverpool flats as quoted above (and I know the area, rents maybe likely to go up I imagine?)
52 weeks x $260pw = $13,520 rent income pa.
(Deduct for strata fees, water, council, and maybe 7% ie $946.40 pa, for management)
$13520 pa rent divided by $220,000 purchase price gives 6.1% return less expenses.
If you can borrow at 6.5%, you have already made a loss before paying your expenses.
So at these numbers, it will still be negatively geared. Unless you put a 20% deposit down.
So $220,000 – $44000 deposit = loan $176,000.
At 6.5% interest repayments on $176,000pa total $10560.
$13520 – $10560 = $2960 "CF+"pa.
Dont forget to deduct expenses starting $946 pa management.
ie If you have $44,000 deposit this unit will be approximately neutrally geared if you can borrow at 6.5%
If interest rates go up, it will become slightly negatively geared unless rent increases match rates.
quickchickSean ListerMember@sean-listerJoin Date: 2010Post Count: 18
Can i get some advice please?
how bout a 1 bed studio, $79000 with a guaranteed return of $10294pa, apart from Body corp fees, what else do you recommend i check out??
– other costs, ie managing real estate agent, council rates, water rates.
Get your solicitor/conveyancer to enquire about how much the Body Corp has in its account, what expenses it has paid in last 2 years.
– "one bed studio" bit confusing… a studio usually means bed is in the only living room.
either way, under 50 m area, you may well have trouble getting a loan. Check with a broker!
(Easier to get loan for 2 or more bed unit or house.)
Do your research.. is $10294 ie $198pw the going rent for that building, that area?
Likewise, is $79,000 about the right cost to purchase a similar one bed unit there?
If either figure is too much, an artificially high rent will leave you with an under-performing property when "guarantee" runs out. But if that is the going rate for both, fair enough. (If you think that the area will continue to be sought after by tenants and investors in next few years.
(This may not be an exhaustive list, just what comes to mind right now.)
quickchickeuro73Member@euro73Join Date: 2009Post Count: 60
The closest you will get to achieving this is to invest in NRAS approved properties. Because of the federal and state tax concessions attached to the NRAS programme, they offer BOTH neg gearing and Cash Flow positive benefits in most cases ( I know that sounds too good to be true, but Google NRAS and do some reading) There are lots of sites that explain how it works. I think NRAS stock will be the only way to achieve what you want. 50,000 of these properties are going to be built in the next two years, by established/reputable building companies in a wide variety of locations. They are exclusively targeted at investors. There have been some negative comments made about NRAS as well as some very positive ones- take some time and read through some of these sites and decide for yourself;
http://www.qahc.asn.au/modules/tinyd0/index.php?id=34SashMember@sashJoin Date: 2010Post Count: 91
Hi Everyone, this is my first post. I have spent the last 2 days reading the whole thread. I plan on moving to regional areas after my first project listed below. Please take the time to have a read
Im 21 and have been learning/researching/networking property as a whole for the last 6 months now. I have just finished Steve's book '0-130'. I think the concept of cf+ property investing is the way to go for sure! I absolutely love property and I believe strongly I have found the area I want to put my time towards.
In September 09 I purchased my first piece of property in New Norfolk Tasmania, overlooks the Derwent River, mountain and snow views (winter), about 25-30 mins from Hobart. It's a large block on a bit of a slope that can def be subdiveded as others on the street have done so. $45000. I was going to try and build but talked myself out of it as I was even more of a noob then. Currently holding a bit under $250 p/m interest only repayments.
As i was so excited over my first property investment i naturally wanted to do more. I bought a 3 bedroom, 1 bathroom in Central Frankston, down the road along the beach from Melbourne $310k. It too had a large block which I have commenced the process of subdivision, plans and permits are being worked on currently. Unfortunately the previous landlord hadnt pushed for a rental increase for sometime so it was a little under market value. Current tenants have been asked to leave by 1st of May where I will do a 2 week clean up, paint the inside and get fresh tenants in and the prop will be back at market value for approx $300 p/w. (thats the plan anyway).
Now obviously I have 2 negatively geared properties. After the increased rent out by over $400 p/m. The company that is doing the s/d guarantees council approval otherwise money back. So.. With the gained equity of the backyard as a seperate piece of land- proposed value anywhere between $120k-$150k plus a portion of my salary. I intend to construct a 3 bedroom unit or townhouse. Finance obviously like always will be the major issue. Speaking to my broker and the s/d company i should be right.
Proposed rent will be $315-$325 + $300 for existing dwelling. Conservatively $600 p/w.
Construction $200k??? – equity gained over 100k. funds needed $100k loan
Final result = 2x dwellings $2500 p/m rent. Interest repayments for 2 dwellings + tassie block $2100 around.
Equity gained approx $200k.
Can anybody please give thoughts, crticism, anything!!! On this idea.
P.S Frankston is an area that is set to boom. $500million marina being built (Melbournes new port), Freeway extension (18 minutes closer to city), new state of the art huge golf course, the list goes on.
Sounds great, Sasha!
Sound like you are also investing the time to make sure things go ahead as planned. I'm realising more and more, the money is in the management. eg the time wasted if you're no actively moving it along adds to the cost of holding while it is negatively geared.
Are you doing the same for The Tas prop subdivision?
You can always cost the difference in building, or just subdividing and selling. If the profit is not much different, go the easy way and you'll do a lot less work for your money.
Contrary to the suggestion of the last 2 posts, most of the time cashflow property is made, not bought as a package.
Just make sure you have all the costings (ask your subdivision company; includes water, power and gas supply costs to new block: don't forget to add the cost of negative gearing during the project. Council costs, land tax if applicable, rates etc.)
quickchickSashMember@sashJoin Date: 2010Post Count: 91
There are so may little things involved and extra’s that pop up. Especially when your a total freshman.
The land in Tassie I am waiting for a while as the subdivision has to be timed. Waiting for access from the top of the block aswell as the bottom.
You made a good point, I will email the s/d company and ask them about gas, water etc.
I appreciate your response.