All Topics / Help Needed! / cash flow positive real estate

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  • Profile photo of DOUGADCOCKDOUGADCOCK
    Participant
    @dougadcock
    Join Date: 2012
    Post Count: 22

    hi all
    I have a question which i hope you guys can help me with. I currently changed my investment strategy and now I’m focused on cash flow positive real estate. Just like steve did. just wondering if anyone knew a good formula. or where to look for these properties to give me a jump start in this new direction. Thank you all.

    Profile photo of streamlineinvestingstreamlineinvesting
    Participant
    @streamlineinvesting
    Join Date: 2010
    Post Count: 171

    It is getting very difficult to find cash flow positive property in Australia, however note I am saying difficult, not impossible. There is still plenty of oppurtunities out there. The strategies that Steve outlines in his books are probably as good as any when you are hoping for a ‘formula’ for success.

    In my opinion, the better oppurtunities I have seen for cash flow positive property are typically out in the country areas, not completely remote properties, but in small towns of around 10,000 – 30,000 or so, there are good oppurtunities for properties to be cash flow positive, or neutral.

    Always talk to a few real estate agents in the areas, the ones out in the country seem to do the job for pleasure rather than money, so they seem to be typically more honest than city real estate agents. So just ask them the potential a certain property has.

    Just doing a quick look on the internet now, this one the first one I really saw –

    http://www.realestate.com.au/property-house-nsw-taree-110294369

    Nice property in Taree NSW, $125,000. Potentially can be leased for $220 per week. With a 20% deposit, the principal will be $100,000. Interest only repayments at 6% interest gives $6,000 a year in interest. The rent gives $11,400. Taking away fees, maintenance, rates etc, I would say you would be slightly positively geared here, or at the very worst neutrally geared.

    That is my advice when trying to find positive geared property, everyone else I am sure has their own ideas and can probably get a whole lot more creative than me.

    Profile photo of Josh AthertonJosh Atherton
    Member
    @josh-atherton
    Join Date: 2011
    Post Count: 269

    Emerald QLD is providing great cashflow positive opportunities. buy price however is $400,000 – $500,000

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    DOUGADCOCK wrote:
    hi all I have a question which i hope you guys can help me with. I currently changed my investment strategy and now I'm focused on cash flow positive real estate. Just like steve did. just wondering if anyone knew a good formula. or where to look for these properties to give me a jump start in this new direction. Thank you all.

    Hi there

    Welcome aboard.

    For a quick calculation, I jot down and allocate costs to the following expenses:

    Interest repayment on the loan p.a

    Property management fees p.a

    Insurance p.a

    Rates p.a

    Land tax p.a

    Maintenance p.a

    Total costs p.a = xx

    Total rent p.a = yy

    Total rent (yy) minus total costs (xx) = cash flow position of IP

    This doesn't cover absolutely everything (I haven't included depreciation) but it gives you a quick idea of how the numbers will look.

    Here's a blog entry on the basics of negative/positive gearing that you might find useful.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of TaylorChangTaylorChang
    Participant
    @scha9799
    Join Date: 2009
    Post Count: 234

    when you do the calculation just like everyone says, take maintainence fee, rates, insurance, etc, into calculation.

    normally I take 30%of rental income as maintaince and rate expense

    eg,
    $200 pw * 52 w = $10,400 per year rental income.
    $10,400*30% = $3,120 maintaince fee, rates…..

    TaylorChang | Finance Broker
    Email Me | Phone Me

    Home loan | Commercial loan | 0414 691 517

    Profile photo of mattstamattsta
    Participant
    @mattsta
    Join Date: 2011
    Post Count: 604

    i just got steves books a couple of weeks ago. I'd suggest folowoing the strategies in there – it's pretty straight forward. Good luck!

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    Hi Doug

    What is your ultimate objective?  For example, are you trying to assemble a sufficient portfolio to live off in your retirement?  It might help to figure out your goal and work back from there, and only look at properties that will get you to your goal.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

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