Forums / Property Investing / Help Needed! / can someone explain this????

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  • Profile photo of tamtamtamtam
    Member
    @tamtam
    Join Date: 2004
    Post Count: 27

    hello all
    if i was like steve and owned 130 ip that were positive cash flow of just say $20 each per week. Then lets say interest rates went up dramatically that would incur negative cash flow (short fall of $10 or $20) per week. thats $1300 a week short fall, and with no job and just relying on passive income, how do you pay $1300 a week??????????? just confused by all this!!!!!

    ta

    Profile photo of aliandmikealiandmike
    Participant
    @aliandmike
    Join Date: 2006
    Post Count: 34

    Hi tamtam,

    only owning one ip myself (so far) I’m not sure if I’m qualified to answer this but I would suggest that when you come to own 130 ip’s it is not only passive income you are receiving. In one of Steve’s theories/diagrams he discusses using profit to purchase other income producing assets (be that shares, property or other). Steve also says that although he started out aquiring property for +CF he has made much more on capital gains. This being the case, if interest rates went up then selling a few properties becomes an option, or servicing the loans from income derived from seminars, etc comes into play.

    The scenario you depict is certainly possible but not overnight and I don’t believe Steve (or anyone with 100+ ip’s) would let his properties get to the stage where they were CF- as a result of interest rate rises.

    I guess I’m trying to say there should always be a plan B and you should always be aware of what your protfolio and the market are doing. When we both own a hundred properties we’ll be able to answer this question more easily.[biggrin]

    Cheers
    Mike

    Profile photo of ADAD
    Participant
    @ad
    Join Date: 2002
    Post Count: 636

    Hey Tamtam good question.

    I guess my answer is a question back to you …what do you want to achieve and what sort of property or investments do you need to make to achieve them. If your concern is cashflow then you need to be very focussed on achieving a comfortable interest rate buffer when you crunch your numbers. If you are struggling to buy due to cashflow maybe you need to look at ways to get some cash out of the deal by cleaning up a few properties and flicking them. There are many ways to skin a cat and you gotta be comfortable with your method. I do it a little different to Steve but I am still successful. You gotta find th Tamtam way as it is the bes for you.

    Sorry got a little carried away as I haven’t been n the forum for a few years. (For those of you who still remember me).

    If interest rates do go up that is a very real fear. as I said you should include such numbers in your calcs. For example I always borowed the deal on th basis that rates were 1.5% more than when I did the deal. Allowed me to see if it would still work. Make sure you do nto cut delas to fine as things can change….

    Hope this helps and makes sense.

    Enjoy
    AD [:o)]
    (Andrew)

    “Work joyfully and peacefully, knowing that right thoughts and right efforts inevitably bring about right results.”

    Profile photo of BattleshipsBattleships
    Participant
    @battleships
    Join Date: 2003
    Post Count: 63

    Hi Tamtam

    If your $20 per week is a margin above the variable interest rates as it is with wraps- your $20 is not affected except that your client will have more to pay so you will be more susceptible to walkouts.
    To do these takes a bit more than just casual observing and it also needs the right market conditions- but as Steve has proven it can be quite profitable.

    Hope this helps
    Cheers
    [exhappy]

    Profile photo of crushercrusher
    Participant
    @crusher
    Join Date: 2002
    Post Count: 186

    Hi Tamtam

    I have given myself a safety buffer by locking some of my properties into 5 yr fixed interest rates. If you have a couple of good capital growth properties then you should build up some good equity in 5 yrs. There are ways of drawing on that equity later to make sure you have some funds to access for emergencies.

    Todd Burns
    http://www.freepropertyhelp.com.au

    Profile photo of JarrahJarrah
    Member
    @jarrah
    Join Date: 2005
    Post Count: 99

    Hey Guys, I would just like to add a little note.

    I attended the Brisbane Master Class on the 26th where Steve felt lead during a sit down question time with Dave and his accountant at the end to reveal that he donates all monies from seminars and books and other “products” to a charitable organisation and ONLY makes money from property…

    “ask and you shall recieve”

    Sincerely, Jarrah

    ++CASH FLOW PROPERTY HUNTER
    (your not hunting if your not hungry)

    [email protected]
    Climbing & Consulting
    Arboricultural Services
    0431433288

    “be ye angels?”,
    “nay we are but MEN!”

    Profile photo of Don NicolussiDon Nicolussi
    Participant
    @don
    Join Date: 2005
    Post Count: 1,086

    battleships v jarrah

    will they battle is out to see who keeps the green yoda head.

    Hi tamtam,

    along the way you will diversify and also make capital gains that will insulate you from higher rates. You will be able to find investments yielding much higher net rates than property. The beauty of property is the unbeatable gearing that it offers.

    I remember when I had a job banks were lending me 95% on property as standard on stand alone loans. I can’t see that happening in the share market.


    Positive Cashflow NZ Property Deals.Email to receive current deals & Free New Zealand Information Sheet [email protected]

    Don Nicolussi | Mortgage Broker - Home Loan Warehouse
    http://homeloanwarehouse.com.au
    Email Me | Phone Me

    "I think of finance as a technology, a way of getting things done." Robert Shiller

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