All Topics / General Property / CF+ properties and income – how much is enough?

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  • Profile photo of shangrila00shangrila00
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    @shangrila00
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    Just wondering – for all you property investors out there – how much money in your pocket per week is enough for you, in order to make a decision to invest in CF+ properties? $20? $50? $100+? I.e. At what stage do you take the risk?

    Cheers!

    Profile photo of TerrywTerryw
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    There is no point in buying a property just because it puts $100 pw in your pocket. You need to consider whether there is growth potential which is much more important.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Profile photo of shangrila00shangrila00
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    True, and bearing that in mind when purchasing CF+ IPs – say for argument's sake, 20 IPs at $100/wk – that's a pretty good living, even after taking growth potential into consideration.

    It's nice to dream and have a long-term strategy smiley

    Profile photo of TerrywTerryw
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    What happens when rates go up?

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Profile photo of shangrila00shangrila00
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    Then rents go up laugh

    There's a downside to every investment, I guess, and a risk involved at all times. Plenty of people out there have been successful investing in CF+ IPs, quitting their day job in the process.

    Profile photo of Jacqui MiddletonJacqui Middleton
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    And so begins a very excellent and interesting debate.  Hey Terry what's your stance on this one.  As you say if interest rates go up, it eats into your rental yield which of course happens in both positive and negative geared properties.  I suppose the only solution is to have a slush fund of money or pay some debt down to reduce risk exposure.  What's your stance on this issue?  Are you thinking that with a high-growth portfolio there is always the option to sell a property off for a profit to pay down debt in the remainder of the portfolio?

    Jacqui Middleton | Middleton Buyers Advocates
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    Profile photo of TerrywTerryw
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    I am concerned about people just buying inferior properties because they are 'cashflow' positive. Over the years I have seen many people do this. One went bankrupt.

    Cashflow positive is largely irrelevant. What you want is a good property that will make you money long term. What is the point in buing a property than brings in $20 per week if it doesn't go up in value. What happens when the hotwater system breaks, or a vacancy or rates go up.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of Jacqui MiddletonJacqui Middleton
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    Ah ok so you're referring to areas where the value pretty much doesn't go up at all.  Cheers for the clarification Terry.

    Jacqui Middleton | Middleton Buyers Advocates
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    Profile photo of shangrila00shangrila00
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    I guess I had to be more precise with my question. I wasn't simply referring to CF+ IPs for the sake of $20 in your pocket, but properties with growth potential too, in metro areas, or regional centres that have something going for them.

    Expenses and uncertainties are a given, though.

    Profile photo of Jacqui MiddletonJacqui Middleton
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    I invest in suburbs that have proven track records in terms of capital growth, rental yield and also have low vacancy rates.  If you have all three, and you also know you can put the rent up each year, you almost can't go wrong.  Even if you buy them slightly negatively geared or neutrally geared, after a rental increase they'll be in positive cash flow terrain, and become more-so each time you hike the rent.

    Jacqui Middleton | Middleton Buyers Advocates
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    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of CatalystCatalyst
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    shangrila00 wrote:
    I guess I had to be more precise with my question. I wasn't simply referring to CF+ IPs for the sake of $20 in your pocket, but properties with growth potential too, in metro areas, or regional centres that have something going for them.

    Expenses and uncertainties are a given, though.

    What do you mean by –  at what point do you take the risk then?

    If it's positive and has growth potential. What's the risk?

    Profile photo of shangrila00shangrila00
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    When you put it that way, it's seemingly risk-free, but all investments attract risk/hassles/inconveniences/worries, etc.

    But yes, you do make a good point otherwise.

    Profile photo of simplesimple
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    I found that RE return above 9% makes it feasible to purchase and hold. At this level, property just above brake even (mid therm, 12 months to 5 years).

    Once I find one, all other aspects considered, including mid/very long therm.

    As per original question, $20 PW or $100PR is irrelevant. It's depending on size of the investment and the strategy.

    My strategy is manly Cash Flow. Other aspects are secondary and is a bonus.

    Profile photo of ChrisA1ChrisA1
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    Great thread and many thanks for your insights Terry and JacM. When buying that CF+ve house on today's figures, I am sure many investors don't remember that we are at very low interest rates currently and what happens when the interest rates are back up to the high levels they were a few years ago. While it is easy to just 'put up rents' if the area can't support those higher rents then you have a black hole to support, possibly with the prospects of not breaking even on the sale price either (if employment prospects in the area have all but gone). 

    ChrisA1

    Persistence is 'to keep on keeping on, no matter how hard the going may be'

    Profile photo of ChrisA1ChrisA1
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    Hi Simple

    Out of interest, where are you looking at for the 9% returns – regional or metro?? Are you able to find properties meeting this 9% return on purchase??

    ChrisA1

    Persistence is 'to keep on keeping on, no matter how hard the going may be'

    Profile photo of shangrila00shangrila00
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    Higher interest rates = better economy. Things won't be so grim then.

    Profile photo of Tracey BTracey B
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    In addition to the property being CF+ I would include buying undervalue to the equation so that if you need to exit the property for any reason in the future, some capital growth has been locked in at the start.

    Profile photo of simplesimple
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    @simple
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    I buy within 25 min drive from Brisbane city. I do not go to bad suburbs as well.

    Profile photo of simplesimple
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    @simple
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    It's nice when you can do that. Some time you can get a steal. Not many are around.

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