… positive cashflow properties will ever be in plentiful supply again? Why/why not?
Cheers
rI do, but not for a while.
At the moment we’ve gone through the boom cycle – where properties are going up, so everybody jumps in to buy a rental.
Just yesterday I was talking to a friend whose husband bought an IP two years ago and in his words ‘It’s tooooooo slow’. Also, this paying money out of your own pocket for little growth in the next couple of years isn’t going to be fun. So for people like him – and I reckon there are 1000’s out there, property will be on the nose, and they’ll sell up. There’ll be fewer buyers, and therefore lower prices. Lower prices automatically means better yields.
Given further time, with wages increasing etc. etc. rents will go up. Soon we will be back to that ‘7% return, that’s easy – let’s go for higher’ period again. Cashflow galore. When the herds realise this (again, a few years later) prices will boom once more.
Can’t say how many years away that is though! Although unemployment on the news tonight was at 5.6%. From my economics studies at Uni – 6% was the ‘equilibrium’ point, so if it drops much more, there will be increasing wage pressure.
Cheers
MelHi Guys,
Honestly, i think they will get limited in numbers, i remember going to an expo were Margaret Lomas spoke out. Some of her words were very true.
If you all remembered back in 2000 the average wage was $36k – $37k, what she said was at the rate of our low inflation, by the year 2014 the average wage will have almost doubled and will be around $70k which is pretty dam on the spot, at the rate of inflation.
Due to this rate, and at the speed of what wages will be like, it was a big wake up call, if you look at the price of housing in the last few years and what wages are now, the prices of houses have just been booming and going up. This means everything is going up.
Remember todays dollars are worth less tomorrow, so the longer you sit around and let these +ve cashflow properties go, the sooner they will be no longer around.
Cheers,
sisWe need to think about wages, and rents, and *benefits*. Let’s face it- a lot of the tenants of these CF+ hpouses are beneficiaries. Unless the govt puts up benefits (which seldom happens- even after the CPI was 6% after the GST came in, the govt only gave pensioners a lousy $4 extra- grrr).. then you can forget putting up rents substantially.
we need to think not only what the *median* wage is- for those on hte median wage probably have their own PPOR- but what the wages of those are who are renting- students and other low income earners. Can we see Austudy rising substantially?
Pozz gearing (in this climate) means buying houses cheaply- probably undervalued, and then charging high rents.
It isn’t a matter of arguing pozz vs neg gearing anymore. It’s becoming more of a practical reality that the only pozz geared places are in broken hill.
There was a discussion before about sydney. I said I didn;t believe there was *any* pozz geared (residential) places in sydney. I maintain that.
When we hear “pozz geared houses are all over hte place blah blah”, I think we should look at our own experiences to wonder whether that is still currently the case. If we have to go “beyond regional” to find some 40K house in a place that has declining population, many of us will wonder if it’s worth it.
Pozz gearing is a nice idea, but given that pretty much everyone in australia is more RE savvy these days, and so many people have IP’s, pozz gearing is something to hope for- but it’s only one strategy.
I’d rather look at location, location location these days.
kay henry
Hi,
i was just wondering about the relationship of the annual rental yeild and the property prices. I have been told that when property prices are low, so too are the rental prices due to ppl wanting to buy at cheap costs; and when property prices are high, the rental will be high too due to lack of ppl wanting to invest in the PPOR.
Can anyone pls shed some light on this subject?thanks
Karan*****
Please reply on the forum or to [email protected]
*****Kay
Without trying to sound too negative – I completely agree with the ‘no +ve geared places left in NSW (or most other states)’. Unless you have the spare 20% cash to inject into it at the start, there is bugger all left. I was definately 2 years too late to get into it and was too busy finding two -ve geared props (Syd & Bris) – good cap. growth though.[^]
Sure I can buy quite a few in mining towns that have very little life left or towns with declining population, but I want to make sure that in 5 or 10 years time I still have a good investment. Most regional centres have agents espousing 6 – 7% as a great return and the fact is that these properties are still getting snapped up within weeks (or days) of listing. There are obviously city people still happy to purchase these even it means -ve gearing them.
As I have mentioned in another forum tonight, I am going to offer on a prop tomorrow that is -ve (about $15 a week). I know that goes against everything that is said on the forums but I am also a realist. I think I can make it positive within 12 months with a little bit of work.
I guess I am coming from it at a slightly different angle too. I have heaps of equity but no spare cash to use as a deposit. Therefore i need 13 – 14% return to get a +ve geared prop off the ground.
I have also offered on a prop elsewhere that is negative (again only $15-$20) but as the house is about to fall down, I am looking at building on it. I can get the land about 20% under market so I hope in 6 – 12 months it works.
s I said at the top, I do not mean to be negative, in fact I am still optimistic when searching, but I am a realist.
I am wondering how many people will say to me ‘you have lost the vision’ and ‘there are plenty of places still out there’.
Just as a side note; I think there will be glut of properties on the market soon if the rates rise. All these properties that have been bought by city investors that are -ve geared. There will be plenty that will not be able to afford them.[^]
So back to the original question Richmond; I think there will be some more around in the next 12 months but certainly not in the same numbers as 2 years ago.
‘Eat rich food, barbeque a yuppie’
Rugby
I don’t think you’ve “lost the vision”. I think you’re “entitled to your perspective”
)As for me, I enjoy the discussions and the perspectives. I don’t want to hear just one perspective that puts you down if you think differently.
When you discuss reality – you are discussing “your” reality, and that’s really important. I would much rather hear about people’s REAL life, than mere dogma.
kay henry
C’mon Kay
Stop picking on Broken Hill.I can make all my I.P.’s pos.Every time I acquire 2 properties in B.H. I then buy 1 in Adelaide.So my excess rents in B.H. on top of the rent in Adelaide pays the loan.No money from my pay towards any of them.Has worked 3 times so far.Imust admit that all the wrappers in the paper are squeezing up my rentroll.Just means I have to do the due diligence thing more often.Hate that,used to be easier before.Happy investing,MikeAwww Mike
I didn’t mean to pick on Broken Hill- many’s the time I have trawled through every house in BH on the net. I think it looks like a great place- a bit hot though [:X] (That smiley is me looking sunburnt).
I used BH as an example- it does seem, as Rugby said- that really the only pozz properties now exist in mining towns. so it’s hardly the panacea for all our desires. All one has to do is look at cessnock (think it was there) where the mine exploded and shut down a few weeks ago- sheesh- what happens if you bought there and were depending on the mine for tenancy?
If it works for you Mike, I’m happy for you
“Affordable” is a much better strategy than buying an exxy OTP, in my mind!kay henry
i can’t see property prices retreating very much if at all in regional areas that have been place where we traditionaly find cash pos. properties. Therefore it would take large hikes in rentals to make properties cash positive or a dramatic drop in interest rates (costs). Rates won’t drop dramatically but i could see rent increasing in the comming 2 years. By the way there are still areas where cash positive properties are still obtainable.
regards westan
I find +ve cashflow deals in New Zealand which I sell to other investors. To be on my database send an e-mail to [email protected]
>>All one has to do is look at Cessnock (think it was there) where the mine exploded and shut down a few weeks ago- sheesh- what happens if you bought there and were depending on the mine for tenancy?<<
I am pretty familiar with Cessnock (having been involved in recycling a couple of ex-hotels into shops as well as building some new shops) and the town has always been different from most other towns.
The people have a mining town mentality.
When I got busy there (1980) every time there was a strike in the mines everyone would stop spending money irrespective of whether or not the husband worked in the mines.
Yet the amazing thing was that even then the town was no longer dependant on the mines to the same extend as one would think.
All these people who may have lost their job, they have been brought up in that town or in the district, all their family is there, most of them will never leave it.
Everyone has to live somewhere so what is the worry about the renters.
Having said all that, I am out of touch there now so I have no idea what the vacancy factor is there at the moment.
BTW, in summer it gets bl…. hot there.
Has anyone who has been there lately noticed the metal half dome houses (I think ex-army barracks) (which I have no doubt are still there) ?
Pisces133
I agree with Kays sentiments. I dont want to own property in the towns that are offering positive cashflow residential at the moment.
I think the experienced investor now needs to focus on having a cashflow positive portfolio rather than putting the focus on the next asset.
You could,
1.Sell a property and pay down some debt.
2.Buy a commercial
3.Do a renovation etc…I think my next asset aquisition will be capital growth focused, ut who knows that could change.
MJK[8D]
I think the days of positive cashflow properties are pretty much gone for a few years at least, and possibly forever…
Those who bought anymore than 2 to 3 years ago are sitting pretty, but some people who have bought recently will struggle when interest rates rise, especially if values fall 10 or 20% as predicted. Plenty of inexperienced “investors” will bail out at the first sign of trouble, and when they see there investment dropping the “sell sell sell” mentality may well kick in…
I was too young and stupid to get involved in investing earlier, and rue many missed opportunities that i simply didn’t care about because i had plenty of time… Now i have set a goal i look at things differently. Problem is times have changed and we need to change with it. For that reason i’ve just made an offer on two properties in a very large coastal city.
With over 2100sq.m of land for $250k i can see in a few years a nice block of 8 to 10 townhouses where i can sell half and keep the rest…Time to think outside the square people. Steve’s method worked great at the time, and now he has the resources to work with. The majority of us don’t. Do what works for you, the positive cashflow boat might not be back in port for quite a while… [
]Cheers,
Paul…“I want to be rich, and stupidly happy – so far i’ve only managed to achieve the stupid part…”
Yes, coz all of us dead and the knowledge of +ve cashflow never pass on to the next generation
No, we all keep passing on the +ve cashflow ideas to the next generation
Warm Regards
ChanDollars
[Keep going, you’re nearly reach the end of financial freedom]
]
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