- bunjieParticipant@bunjieJoin Date: 2013Post Count: 2
G'day all, i am very new to this all and was wondering what people opinions were on positive cash flow rentals. Do they even exsist??? or are most people in investing in captial growth properties??? any help/opinions woould be great cheers bunjieJamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069
Yes – they exist. Especially with the historically low rates that we're experiencing in Australia at the moment.
If you do a search on the forum for "positively geared" "cash flow positive" "CF+" etc – you'll find heaps of posts.
JamieJacqui MiddletonParticipant@jacmJoin Date: 2009Post Count: 2,539Tony FlemingParticipant@the-dark-knightJoin Date: 2008Post Count: 396bunjieParticipant@bunjieJoin Date: 2013Post Count: 2
gday everyone thanks for the replies, will be doing some more research on thanks for all your help. happy to find a ggreat forum like this cheersJoel.MacdonaldMember@joel.macdonaldJoin Date: 2012Post Count: 52
Better cashflow opportunity in America in my opinion.
Gross Yields of 20%
Interest Rates at historical lows
Prices are at 1979 levels inflation adjusted
US market is already showing strong signs of recovery. The bottom was February 2012 and on its way back upJothamMember@jothamJoin Date: 2012Post Count: 47
But Joel, how do we know you aren't ripping us off? How can you back your statement up with warm advice and insights, rather than state a fact, that is like talking to the air
Kind regardsCorey BattParticipant@cjaysaJoin Date: 2012Post Count: 1,010
Cash flow positive (CF+) properties exist for sure, I invest in them.
Consider however that your yield need to be substantial enough to cover interest, rates, insurance and maintenance among other things, you'll be wanting a yield of 8%+ on purchase price.
Thankfully deals like three year fixed rates under 5% are making it a lot easier to buy neutral/positive properties and let rental growth take you from there.CatalystParticipant@catalystJoin Date: 2008Post Count: 1,404
Bunjie "G'day all, i am very new to this all and was wondering what people opinions were on positive cash flow rentals."
Depends what type of cash flow rentals you mean.
Do you mean in mining towns?
All very different.Joel.MacdonaldMember@joel.macdonaldJoin Date: 2012Post Count: 52
Fair point you make. How rude of me not to introduce myself and the reasoning behind my hot air statement.
I own properties in both the US and Australia. My US portfolio is doing way better than my Australian one.
I am speaking from a bit of US property experience as I manage my portfolio from Melbourne and also manage a large wholesale US property company.
I was in a similar position 5 years ago, looking for cash flow rentals in Australia, but wasn't willing to invest in a mining town. Soe times you can't force something that is not there and need to sit patiently until the right opportunity presents itself. I am not saying there isn't CF+ property in Australia, just a little harder to find and get the hands dirty.
Fortunately, the GFC presented an amazing opportunity to invest in the US. Back then you could name your price for a lot of homes going into foreclosure and rent them out and collect 30% gross yields. So I decided to align myself with an American company who specialised in foreclosures and turnkey properties.
Gross yields in the US a few years on can still be achieved around the 20% but I am noticing bigger players now entering the market which is a good sign. The market is still the lowest it has been in 30 years inflation adjusted (source:bloomberg)
Case-Shiller index has just reported a 10.9% increase over the past year in US home prices (source:Case-Shiller)
Mortgage rates are at historical lows (source: Citibank), large Hedge Funds raising 2 Billion to purchase single family homes in Californai, Georgia, Texas (Source: Wall St Journal)
Only have to google "Blackstone group raises $2billion". ( Google search: Colony, Silver Bay, Blackrock, Roc-Bridge for more private equity firms now in this space)
Question I want to raise is: How many private equity firms are raising money to that scope to purchase Australian cash flow property?
Warren Buffett is stepping up his holdings in the real estate space. Berkshire Hathaway now own 14% of Wells Fargo Bank. Buffett has been quoted many a times on TV about if he found a way to manage single family homes at the volume he would buy them in, he would do it.
*More and more Americans credit ratings are starting to re-set since the 2009 crash
*Mortgage rates are still the lowest they have been in history (3.8% fixed for 30 years)
*Foreclosure inventory has dropped from 1.5 Million to 1 million in the last 12 months
*Supply is drying up and private equity are buying everything they can get their hands on
*Homes are selling for 50% below their replacement cost
*I expect to see more families enter the market and confidence rises
*Home Depot (America's version of Bunning's Warehouse) is hitting all time highs on the NYSE and revenue is still growing. If the largest homeware retailer in the country is hitting record revenue growth…a couple of American's must be buying or renovating or doing something to their house to add valueBoughtWithEquityParticipant@boughtwithequityJoin Date: 2013Post Count: 68
Joel – nice reply, you obviously know your stuff. I've spent several decades investing in the US and live here….if you have a good team, boots on the ground, you can still do very well here with 7% to 20% annual returns depending on who you are alligning with and what you are buying. Avoid groups who are spread amongst too many cities…no one can be an expert on many markets as it requires localized knowledge. Average prices have bumped up 16% this year in Atlanta but, similar to Phoenix and others, you have to look hard at the numbers to see why. Most of the increase is due to the bidding wars between the hedge funds who are buying up major investment cities. My guess is that when the dusts settles, most of these funds will go bust as the single family rental business has always been a Mom & Pop type business and can't be cookie cuttered like a McDonalds. Some of the hedge funds are already beginning to realize that their model doesn't work and are running into the same problems: evictions, vacancies and repairs!
There's never been a better time to buy in the states than the last couple of years. Just find a group and a model that makes sense to work with! Happy to network. AndyjayhinrichsParticipant@jayhinrichsJoin Date: 2011Post Count: 1,177
Since Overseas deals threads have died maybe we can get something going here… couple points…Interest rates really don't affect Foriegn buyers because most cannot get a loan from a US institution for IP period. One can hope and try but far and few between nation wide… At least in the types of properties we are talking about 50 to 100k SFR rental houses. US citizens have a hard time still… There are vendor financing programs that some of the bigger turn key guys provide…. However one thing that we need to point out is that most of the Cash flow investing has been East of the Mississippi river.. with AZ and NV being the exceptions.. And maybe a little CA. The East of the MS river offers the higher returns, however has the higher risk with sociodemographics that can delude investors.. Just think Detroit….. Then you can come to a market like were I live Portland Oregon.. We have NO Au investors at least I have never heard of one. But we do have lots of Chinese and Indian engineers that work for Intel or Nike. And our rental market here is a 5 to 7% positive geared market all day long.. but never higher.. And other than San Jose CA. read Silicon Valley the strongest rental market in the entire US… less than 1% vacancies and the rent gets paid with no major drama… And our market has gone up in the last year like the rest of the US by 10% or so… I am not advocating Portland Or. but I wanted to point out that virtually every market in the US is positive geared.. Save SF pennisula NEW York and many areas of LA.. the rest of the country will give you positive cash flow. The it comes down to how easy is the property to keep rented and quality of tenants long term… this is were the west coast out shines the east coast and mid west all day long… But again who could argue with buying a home in Atlanta for 60k that rents for 800. a month… The Portland Market is Oh 125k for the cheapest homes that rent for maybe 900. to 1000.. then the average rental will be 175 to 275k and will rent 1200 to 1500.. The difference is your running cost will be minimal as the tenant base here is as noted above one the best in the entire US, one just needs to check out the demographic mix to understand this. And with employers like Intel, Fujitsu, Nike, Techtronix, Addidas, Boeing, Genetech, Facebook, and all the lumber companies you have a pretty solid upper middle class base of employment as opossed to a more transient blue color work force. The above are just general statements for one to consider… On another note I was reading about some huge OIL find in AU that is suppose to be bigger than all of Saudi Arabian oil reserves is this true or just internet hyperbole?