Hi everyone.
Just out of interest. We are always hearing of people with either CF-ve or +ve. YOu could for example have a property that with 20% deposit would be positive but with 5% deposit would be negative… So I find it hard to know when people say positive of negative….I personally only plan for have 10% deposit as a buffer. That may mean that my properties may not neccessarily fall int o postive cash flow unless I had 20% deposit….What do most people work on? [inlove]
Snowflake
Hi as41,
A large deposit is an easy way to ensure positive cashflow, but it’s not the best way. Some people will tell you that it defeats the purpose of finding a good deal. Try looking for properties that will be positive on only 10% deposit, this may not be easy but keep looking. I wouldn’t tie up 20% in one property unless I absolutely had to.
Lena
Hi Guys
i usually do the figures on 20% deposit. Lena i hate paying LMI so i usually put up the 20%. Sure if you can do 10% you end up with more properties but for most people that probalby means more negative geared properties.
regards westan
A large deposit defeats the purpose of the investment as you are trying to get as much back from what you invest.
The real deals are ones which you use low deposit(5-10%) and get +ve. If you have to put in 20% to get positive then you will tie all of your capital up for one positive.
Hi DraconisV
in theory you are correct but where can you buy properties with cashflow with only 5% down ?
I’ve bought a lot of properties over the years showing 20% gross returns etc. (None like that in Aust since 2003),.
regards westan
Hi Snowflake.
I Agree with alotti 100% in what she says.
The CF +ve aspect should be worked on based on a 10% and if it looks good try to reduce the cash down to only 5% coz you have a good deal. Never any less – even if you borrow 100%, make sure you have the 5% cash equivilant in reserve to allow for any downturns.
Gerry G.
Gerry G
Hey guys ,
I take CF+ to mean: A property that returns more cash than what it costs each month.This including the deposit interest at market rate,(even if you own the deposit outright and didnt borrow it.,as you would be getting a return on it if it was sitting in the bank),no matter how big a deposit you put
down.:also including all expenses,rates,repairs etc.
Very hard to find these type deals today? Yes, but not impossible.
Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
With a 5% deposit. I have read Steve’s book and have become very attached to wraps and lease-options, but wraps in particular.
If you wrap a property and you get a deposit from your tenant then that can help your deposit, and they pay more interest than you pay as you cahrge a premium. So why can’t it be CF+?
Or is everyon talking about buy-hold, where you own 5% and charge normal rent?I don’t know about wrap deals…. Yes, you are making money each month. But at the end of the day, you are making the property available to buy by the tenant. Doesn’t this kind of defeat the purpose of being CF+ if you have to sell the property in 3yrs time anyway if the tenant wants???? What makes a WRAP deal so good????
Cheers
Paul[suave2]
No, the tenant can’t buy the property in 3 years time. That would come under the lease-option thing, where they have an option. And by the way you would increase the price so that if they did buy you out(somehow?) then you would stand to make a profit and still be CF+.
Having a property that is not CF+ defeats the purpose for investing. I don’t know exactly but im guessing that you want to invest so you dont have to work aqnd can be financially independent. Well Its CF+. For 3 years, still its CF+ for those 3 years better than 10 or so years of CF-(even though you would get more capital appreciation, you would not have acheived the objective).
CF- defeats the purpose of investing(if thats financial independence).
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