Forums / Property Investing / Help Needed! / Answers to “Where to Find CF+ Deals”

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  • Profile photo of paulskippaulskip
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    @paulskip
    Join Date: 2004
    Post Count: 1

    Hi everyone

    Question for nordicskier:

    “So what if you successfully got it for say $115K, divide by 2 (58) and multiply by 3 (168) so it will cost $168 per week in mortgage payments and a bit towards rates etc. So you increase the rent to $170 and see what happens or purchase for $100k ( /2 then X 3 = 150) that would be cash flow positive.”

    Could you please explain this working out a bit more? Why do you divide by two and multiply by three? I’m interested to know just what you mean and how this could become positive cash flow.

    Sorry if this seems like a stupid question but I’m a newbie to the world of property investment (or I should say I have been studying as much as I can about it for quite some time but now it’s time to take action so I’m eager for any information I can get hold of.)

    Thanks
    Paul

    Profile photo of makeithappenmakeithappen
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    @makeithappen
    Join Date: 2006
    Post Count: 1

    only 10 miles from you !

    Profile photo of nordicskiernordicskier
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    @nordicskier
    Join Date: 2004
    Post Count: 85

    Question for nordicskier:
    RE: Paulskip
    “So what if you successfully got it for say $115K, divide by 2 (58) and multiply by 3 (168) so it will cost $168 per week in mortgage payments and a bit towards rates etc. So you increase the rent to $170 and see what happens or purchase for $100k ( /2 then X 3 = 150) that would be cash flow positive.”

    Could you please explain this working out a bit more? Why do you divide by two and multiply by three? I’m interested to know just what you mean and how this could become positive cash flow.

    Paulskip, I look at hundred of properties each week and need to do a quick calculation to find the diamonds. The calculation is quick and dirty but good enough.
    So a property for $115,000 will need $174 per week to service the loan (not $168 – I made a mistake)
    Proof: As calculated on smartline.com.au
    Loan Amount: $115,000
    Interest Rate: 7% Loan Term: 30yrs

    Principal & Interest – Weekly $176.45
    Interest Only – Weekly $154.81 So $173 is close enough

    So how to get from amount to week repayment?
    – amount in thousands ie 115
    – multiply by 1.51 I don’t have a calculator with me all the time so I can either divide by 2 (58) then multiply by 3 = $173 – loan repayment per week.
    Or just add a half to 115 (ie 115 + half of 115(58) = 173)

    I figure if you have to look at so many properties, you have to know what you will need to pay the loan from rent, especially during negotiations. I hope this helps. PM me if you want more assistance. :)

    Profile photo of Simon CSimon C
    Participant
    @simon-c
    Join Date: 2004
    Post Count: 52

    They are around if you look. Here is one example I found doing a search. Wish I had some dollars, but in the midst of a subdivsion……one at a time :)

    On a 20% deposit this one is roughly a 20% gross return on your cash dep which is not too shabby. Have not taken into account rates or maintenance.

    http://www.realestate.com.au/cgi-bin/rsearch?a=o&c=94702414&tm=1156760577&id=103317912&f=0&p=10&t=res&ty=&fmt=&header=&s=nt

    Cheers
    SC

    Profile photo of natrogersnatrogers
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    @natrogers
    Join Date: 2005
    Post Count: 2

    Great points.

    Get out there and do your homework. befriend the local realos. They will call you with potentials prior to listing. “Anything with high yeild and “unusual” is something Id like to know about”…plus any other requirements.

    Await rents to rise. Capital is up nationally so its time for rents to push higher. Buget for negitive gearing but leave a slip stream reserve to get you through till rents go up…only if its close. DOnt go crazy.

    Add another room from a dining room increasing rent. Spilt a big lounge. Furnsih. Barter. rent to students by the room.Add perks (pay this rental for three years and you keep furniture) Use your imagination! Dont expect others to do the work for you. Its not an easy job. If you want an easy job go sit on your ass for another ten years till CF++ return in hordes. Thats easy! But if you want the taste of finacial freedom doesnt that take time and work?

    And if this is too much pluck courage and invest offshore. Go somewhere where the cycles producing cashflow. You arnt negitive gearing so why not?

    Mind you patience and persistance pays off. You want to be rich? Youll find a way.

    I just picked up a six unit corner site with four houses (well..house-ish) all tennanted and cash flow positive for $265k. Plus I can strata and sell for $400 odd with little work and in Kalgoorlie where stats say its population is growing 2-3 times that of Perth!

    Work at a job and earn a pittance like most of the flock do or work at finacial freedom. The only person stopping you is you.

    They are out there alright…but do you have the time/motivation to find them? Your call!

    Profile photo of bendavbendav
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    @bendav
    Join Date: 2005
    Post Count: 2

    G’day all,

    There are so many posts in this thread, I haven’t read them all yet. It seems often people guard their secret area in case a flood of investors suddenly turn up…well here’s where I’ve been looking.

    South East Queensland has been growing strongly for years. I recently looked nearer the border, and found a good looking deal in Warwick. As part of DD, I realised that a 200 (approx) development was nearing completion, so I didn’t want to try and compete. But a lot of small towns 1-2 hours from brisbane look good.

    Further north, a lot of fuss has been made about the mining towns. I actually grew up in Moranbah and Dysart. But for small, new investors (like me), we’ve probably missed the boat.

    More recently I’ve looked in Bundaberg, where I’ve been living. Overpriced. I’m shifting focus to between Bundy and Gympie. This is smaller, mostly citrus and cane area. Places like Mundubbera and Gayndah.

    So there are some actual place names. Like others have said, there are great deals (whether they are actual CF+ or potential CF+) everywhere, if you look hard enough and get creative.

    Happy hunting. It is worth it.

    Ben.

    ps. Just buying (with friends) 6 flats in central brisbane for 1mil. I’ll be paying the same rent I would have to anyway, but to my mortgage, and I’ll end up owning 1/3 of 6 flats on a big block. There are deals everywhere.

    Profile photo of celesteceleste
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    @celeste
    Join Date: 2005
    Post Count: 169

    Hi all

    Oh dear, you mean I can’t sit in my office surf the net, play spider, have a coffee / choky bikky whilst watch the midday movie to make good deals?

    I have to go out into the big bad world???

    Who exactly should I talk to and how do you find properties that are not listed???????????[blush2]

    Celeste

    Profile photo of fivetalentsfivetalents
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    @fivetalents
    Join Date: 2006
    Post Count: 11

    Can I just say that yes it is possible to find properties that you can turn into cahflow positive, but in today’s market it is hard work and if you are not prepared to put in time and effort you may not reap the rewards. Investing in real estate is not a way to get rich quick unless you put in some serious effort early on.
    Our PPOR has turned into a CF+ after moving interstate (it is our first one) but has become that way after much blood sweat and tears. We bought it at a mortgagee auction , it had a half finished renovation at the front(brick work no roof) and we proceede over 12 months to renovate the place and turn a 3bedroom to a five bedroom house whilst my husband was working and I had three children under five at home, the youngest was 3 months when we started. We did alot of it ourselves and employed family members as well, consequently we spent only 25K to finish it. I’m not saying it was easy- it was probably the busiest year of my life [ohno2]and now we are reaping the benefits being able to rent it out and looking at buying again using the equity we now have.
    So be prepared to put in the hard yards and you will reap the benfits later on!![biggrin]

    Therese

    Profile photo of ogilvyogilvy
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    @ogilvy
    Join Date: 2006
    Post Count: 32

    In terms of CF+ is there a minimum sized town one would search in.
    For example is it silly to buy an IP in a town of under 3000 people? How about if this town was slowly growing.

    How about a town of 5000 but slowly declining?

    Any ideas ?

    Profile photo of rmeadleyrmeadley
    Member
    @rmeadley
    Join Date: 2005
    Post Count: 1

    Hi all

    I have been looking at property investment for some years now and still have not made that first step. I read one of Steve’s books about one year ago and thought, wow, this sounds great, just what I have been looking for. I have not been able to find that positively geared property(although I have to admit I have not been fully focused on it). Thanks for the tips and pointers. I will make a more concerted effort and see if I can stitch up my first deal!! Great idea having this type of topic Adam. Just what I needed to get a variety of ideas.

    Rusty

    Profile photo of wiseinvestwiseinvest
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    @wiseinvest
    Join Date: 2005
    Post Count: 6

    try a search on google or msn or wherever and ask for cash flow positive. That how I found some interesting information. I find real estate.com very useful as I can then compare. However as steve suggests there may not be the daggy places in the glossy mags. However I have seen a few on the internet.

    linda I am back in nursing full time and I want to pick up again as we had a set back last year. I am puzzling of how to with the way in which to do the company trust Can somebody tell me exactly how it is done ie do I have to wait two years to have two (years) tax returns for the Trust(s) to provide to the lender when I wish to purchase further properties under the system on the Master Class

    Profile photo of dutchiedutchie
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    @dutchie
    Join Date: 2003
    Post Count: 13
    Originally posted by andrew west:

    Lee

    Im on the bottom rung of the ladder too with one IP under my belt but think that you have missed the point. There is no golden goose that you walk up too with a bucket and then walk away with a 10% yield. If you think that you can buy CF+ off the shelf you need too look somewhere else. But if you do this you will do what have done for a year or so and thats go around in circles. From what I can work out CF + deals are made not found. But more importantly you need to get your structure right to start with.

    Andrew

    I think there is a huge misunderstanding about what CF+ really are. I’m currently reading Margaret Lomas book about Positive Geared Props and a lot of it makes heaps sense. I suggest this as a great start. The good thing is that the book is only 6 months old as well…..

    Good luck

    Profile photo of Jessica3Jessica3
    Member
    @jessica3
    Join Date: 2006
    Post Count: 26
    Originally posted by Mortgage Hunter:

    For me personally, I have accepted that no one is going to hand me a cash +ve deal on a plate, especially in my choosen areas, and have accepted that in my current situation I don’t have a lot of time to go hunting, so have diverted my available time and energy into other investment options.

    regards,

    Paul

    yes they will. Buyers Agents will hand you a deal for a fee. Just like most investments!

    Cheers,

    Simon Macks
    Residential and Commercial Finance Broker
    ***NODOC @ 7.15% to 70% LVR***
    [email protected]
    0425 228 985

    Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

    If I was a Real Estate Agent, I’d be greedy and buy all those CF+ for myself. [satan][upsidedown]

    ***Evily Laughs***[laughing][satan]

    Profile photo of vyaw2003vyaw2003
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    @vyaw2003
    Join Date: 2006
    Post Count: 185

    i too have lost the point, “+CFI are not found they are made”??
    can i have an example?? Do I buy a crap place paint it and mow the lawn and rent it out for way more than what is was previous rented for… Is that what you mean?
    Sorry i am a bit confused>>> how do i make them?

    Profile photo of ctaingctaing
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    @ctaing
    Join Date: 2006
    Post Count: 111

    Hi vyaw2003, I think it can be made by ensuring that one is prepared to do the due diligence on the following (not in any particular order):

    * Structure the business setup of property purchase to maximise wealth
    * Buy under market value (getting the market comparables on recent sales prices in a particular area)
    * Add value sticking with strict budget to meet market demand
    * Have a point of difference to set your property apart from the rest
    * Use tax advantages to reduce costs – via timely rebates from negative gearing and depreciation.

    Then you have to maintain great ‘customer service’ focus to keep the tenant that bring in your cashflow.

    I know easy said then done[guilty].

    Cheers
    CT

    Profile photo of vyaw2003vyaw2003
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    @vyaw2003
    Join Date: 2006
    Post Count: 185

    if a property returns 6% before costs, after maintnece, commision, insurnace, BC, rates and water, it returns 4.5%

    What is the return 4.5% or 6%?

    Profile photo of v8ghiav8ghia
    Member
    @v8ghia
    Join Date: 2005
    Post Count: 871

    It would be a 6% return……gross. Which is the figure you see when real estate agents quote a place as having X% return. The 4.5% is your net return. So, what we need is a property with a 10% net return…..[laughing]Yeah right! All the best.

    Profile photo of vyaw2003vyaw2003
    Participant
    @vyaw2003
    Join Date: 2006
    Post Count: 185

    so if my property only returns 4.5%, and it wont grow in value much more, i would be better to sell. And try the same thing again with another.

    Profile photo of kjs_2kjs_2
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    @kjs_2
    Join Date: 2004
    Post Count: 42

    If your property is returning 4.5%, how does that compare to your current costs? If it already has had capital growth then your actual current costs may be less (any depreciation? which can help actual cash flow but is not a physical cost), and you may be positive cash flow even though the return doesn’t make the magical 10% we all dream of.

    The costs of buying and selling need to be taken into account, and also why do you think it will not grow? There is a lot of media doom and gloom, but I still hear of properties growing in price in many areas. Sure there are some sad drops on originally overpriced stock, but unlike shares, properties may go stagnant, but on the large percentage they keep going up steadily, as long as you don’t have a desperation sale.

    Also, is the property managed by an agent, and have they reviewed rental? Media reports say rents are going up, so your return may be on the up next time the lease is due for renewal. You may need to look at value adding to the property to get better rent if it becomes vacant?

    Don’t think sell too quickly.

    kjs

    Profile photo of Millionaire in trainingMillionaire in training
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    @millionaire-in-training
    Join Date: 2004
    Post Count: 154

    Hi All
    Seems to me from the few posts I read that people are confused about +ve cashflow properties, where to find them etc and what is considered a good return on them.
    My take on this aftrer spending 12 months on Steve’s Premium RESULTS program is this.
    Anything less than 10.4% on a buy and hold is not postive cashflow or so close to the bone why would one bother.
    Steve is advocating an approach these days that takes into consideration market changes.
    ie Renos, buy a crap house, add paint, clear garden etc “within say budget of 10% of purchase price and look to sell for a profit, taking into consideration, selling costs etc.
    So one needs to be REALLY CLEAR of the likely selling price and work backwards to the potential purchase price, taking into consideration all the costs involved.
    Positive cash flow properties, bought of the shelf are hard to come by, but not impossible.
    Steve is also advocating “Problem+solution=Profit”
    But make sure you are REALLY clear on the numbers, buy cost, hold cost, reno cost, sell cost etc and everything should work out as long as you are on time and within budget and have calculated your correct sale price.
    Have a look at his latest book “0-260+ Properties in 7 Years” it is a great read if you are still confused as he provides loads of ways of analysing these things.
    Also there are 4 parts to Property investing, Analysis, Buying, Managing and Selling. It is how you perform in each of theses steps that determines if you make a profti. in other words you need to nail all these parts of the process to make a profit.
    Also get REALLY CLEAR on what you are trying to achieve and you will eventually get there.

    Warm Regards
    Sue

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