Forums / Property Investing / Help Needed! / Can new homes or units be CF neutral/positive?

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  • Profile photo of OwlOwl
    Member
    @owl
    Join Date: 2012
    Post Count: 2

    I am currently on a 457 visa.  This limits the investment properties I can purchase to new buildings and any purchase is subject FIRB approval.  While I intend becoming an Australian citizen, I would like to start my portfolio now. I am looking to purchase only CF neutral or CF positive investments with 80% LVR. 

    I have looked into both DHA and NRAS which may be viewed as easy ways around the 457 restrictions, but I am so far not excited by the net returns. 

    I would welcome readers' thoughts.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,010

    Hi Owl
    Welcome to the forum and I hope you enjoy your time with us.
    Yes I don’t see an issue at all in starting your portfolio with a new home
    ( I built my first investment property when I arrived in Australia in 1993 and still own it today)
    as it will certainly provide with plenty I’d Tax credits in regards to Depreciation and Capital Allowance claims.

    Course never purchase a property purely for the Tax incentives but at an 80% loan to value the will certainly put the property in good cash flow positive territory.

    Just make sure your mortgage broker provides you with a copy of the valuation so you can double check the true value if the property as there are some scary over pricings around in the new home market and if sold by marketing or property organizations you may find that the value is less than the true purchase price.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of WomeninPropMelbWomeninPropMelb
    Member
    @womeninpropmelb
    Join Date: 2008
    Post Count: 234

    Get your own valuation or quantity survey done on the property- that will help.
    Try the mining towns – not my favourite investment choice but you might find some FIFO opportunities there which might be new and CF+
    And talk to a good broker- your situation is not so straight forward I would guess with a 457 visa. Is your sponsor or workplace able to offer some advice and support?

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

    personally, i haven't found new homes or units that are positively cash flow… i tend to find CF+ for existing homes and units

    Profile photo of Ephraem1Ephraem1
    Member
    @ephraem1
    Join Date: 2012
    Post Count: 17

    Hi Owl,
    there is a way to turn a new home into big positive cashflow using a strategy called "owner finance". Which state are you based?

    Profile photo of OwlOwl
    Member
    @owl
    Join Date: 2012
    Post Count: 2

    Thank you folks for the feedback above. I could not agree more that good advice is key and I am having several meetings over the next few weeks with Accontants, FA's and property advisors.  Still daunting as it is pretty tricky to figure out who is really good and has your interests at heart!   Ephraem, I am based in Sydney, NSW.

    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    Owl wrote:
    Thank you folks for the feedback above. I could not agree more that good advice is key and I am having several meetings over the next few weeks with Accontants, FA's and property advisors.  Still daunting as it is pretty tricky to figure out who is really good and has your interests at heart!   Ephraem, I am based in Sydney, NSW.

    Hi there

    It's an exciting time and you'll no doubt be trying to absorb as much info as possible.

    My only comment is that a financial advisor/planner is probably going to be of little assistance unless they're licenced to give credit advice (or are a rep of a licence holder). It can also be difficult trying to locate a planner who is property focused.

    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 Daneo79Daneo79
    Participant
    @daneo79
    Join Date: 2012
    Post Count: 32

    I have not found any CF+ houses in new estates around city CBDs or surrounding suburbs.
    Mining towns can offer good yields on a new property but the entry price is high.

    Does your visa allow entering into a joint venture with a small developer and build new units on a rezoned site?
    Joint ventures can be a good option to overcome difficult situations.

    The best way to find someone to team up with is be around like minded people in forums like this. :)

    Profile photo of WomeninPropMelbWomeninPropMelb
    Member
    @womeninpropmelb
    Join Date: 2008
    Post Count: 234

    Daneo79 has good advice. Even Steve McKnight sent out an email a couple of months ago on this topic of finding JV partners and that was to hang around with like minded people. This forum is a start.
    There IS so much to take in.
    I LOVE RPData and all it can offer. It is a view of prices around you.
    There are many strategies out there. But you learn so much getting started that you dont learn from doing nothing.
    I have probably said before – you need a planner, accountant, broker who KNOWS about property. Most dont have any idea and will recommend against it.
    Get along to our next meeting- if you are in Melbourne- its going to be a ripper!

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

    New homes and units can be cash flow positive within many mining regions and larger towns. Our past year has seen every new home we sold instantly become CF+ for our clients by $100 – $150 per week at least.

    You have to buy right, not based on the yields, make sure the property you look for represents market value and that any rental appraisals are independent and at market value also, not guaranteed yields from developers which sometimes are inflated.

    I have seen some guaranteed rents in Gladstone at present for $1000 per week, local agents are appraising comparable properties at $700 approximately.

    Profile photo of WomeninPropMelbWomeninPropMelb
    Member
    @womeninpropmelb
    Join Date: 2008
    Post Count: 234

    I was wondering about mining towns and FIFO.. they seem to be giving great returns.
    Josh offers sound advice.
    Also it is ALWAYS a good idea to actually GO there. You just cannot put a value on seeing the location. Yes, it can be done from afar.. but nothing like going there.. speaking from personal experience….

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

    Another point which I would like to add is high cash flow areas can, from experience, fluctuate with rental prices seasonally throughout the year. Many smart vendors will somehow value add for the short term and take advantage of seasonal fluctuations and get an amazing yield for their property. I quite often see that this yield has been, in some part, just good luck and actually doesn’t represent market value. It is so important to not JUST buy on yield as vendors to this to get a better price for their property.

    Profile photo of NooobNooob
    Member
    @nooob
    Join Date: 2012
    Post Count: 34

    I've heard this one about 2 weeks ago and I'm not sure if it is true or not;

    An investor told me that he purchased a unit near Perth (within the 10k diameter), "off the plan" and after 6 months when it was ready, it was CF+ by $100/week.
    I know that developers have to pre sale a percentage of their units to be able to secure their finance of 70%, otherwise they can not get more that 40/60.
    I will dig in more for my self but if it is true, this is something that can get me excited.

    Risk is higher than buying a ready house and renovating but the reward is escalating too

    Profile photo of John MaxwellJohn Maxwell
    Participant
    @john-maxwell
    Join Date: 2010
    Post Count: 30

    Hi Owl,

    Welcome to the group! I agree with Josh, there are a lot of good properties out there in the mining regions that are CF neutral … we have also done many that are CF positive. If you know how to negotiate well and structure the deal correctly you can even set these deals up with a buffer in your loan to cover and costs, upkeep or shortfall for a few years.

    Make sure you are thorough in your research and have excellent professionals in your team!

    Profile photo of WomeninPropMelbWomeninPropMelb
    Member
    @womeninpropmelb
    Join Date: 2008
    Post Count: 234

    There are many different property strategies that can provide yields of differing orders. I was just thinking of some beach side areas in Victoria where I suspect they could be cash flow positive running rough numbers- now that you write about it Josh. House purchase for sub $300k- rented to my friends for $1500 for a weekend… food for thought..

    You also have to consider just what “is” cash flow positive. If you have a big chunk of deposit – you can make anything CF+.

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