Ok here we go.
I posted a couple of months back about me looking for a coastal property in WA as my second IP.
I am now only weeks away from making the finance application which is very stong this time.
I am now in a position, where I had my heart and mind set on purchasing a -ve geared IP which was to be purchased for up to around 275k. The rent expected would be around $190 – $200 pw. This would mean I would have two -ve geared IP’s.
After doing a fair amount of research (which is by no means complete yet) I have found (as examples) THREE properties that I could purchase for the same amount (275k) with a positive cashflow. My 1st IP is also -ve geared so this will help to balance the properties out.
The thing that confuses me is, how can I be sure that these properties will continue to bring in the rental income they do now? They are in large regional centres in WA (2 of them) and the third is in Perth. As the capital growth may be minimal in these areas would it be worth setting up the loans as P&I to get more equity in them? As they are cashflow positive anyway this may be a good idea?
My main concern with doing this is that if I was to purchase 3 x cheaper properties having four in total, HOW and WHEN can I apply for more finance? If equity is needed to borrow for more finance, and 3 of the 4 properties will have little growth, is the only way to do it to save up enough for a deposit again? This may take a while thats all.
I could go on with more questions but I might throw them in once I have a few answers to these.
By the way, I know my accountant is the best man to speak to about how to set this up, and I will be speaking to him in depth about this, but I would like your opinions.
Thanks
Luke
[upsidedown]In a thread called Collinsville Rugbyfan did a good breakdown of the kind of things to do due diligence on in a mining town. I’m sure you could adapt this and use the information as a basis for determining whether rents will continue at current levels
Luke, you’ve done well.
If you have the positives cancelling out the negative, that means any extra you were funding yourself you could put towards the next property.
If there is no growth in the positives, you will be relying on savings, and the growth of the negative to provide the equity for the next purchase, but it depends if there is any growth in any of the properties I guess.
As to the rental research, talk to the real estate agents in the town, and check out the population trends etc. this should give you a good idea of what will happen either way.
Cheers
MelPersonally I would go the cheaper property and regional W.A is a good area. I Wouldnt even consider PerthDont know where people get there info regarding no growth in regional W.A.Thats where I live and there is heaps of capital gain here.Think about all the people going bust in the city from over extending.Where they going to buy in the future.Out here so prices will rise in country as people move out of horrible city.Its already happening where I live.Pop. 3000 and growing daily.
So many +CF properties in Western Australia.Let me help you. And we can achieve a win win situation.Russ.
DV8 [blink]
Remember, you may not be experiencing Huge capital growth, but, what with your country IP’s being + geared you should be repaying your loan quicker , plus your contributions etc..
Thereby achieving Eqyuity m8, this..will help you in achieving a strong base for further acquisitions, with a mixture of – and + geared IP’s you should achieve a strong balance, granted you’ll hit a time when you may have to slow down and re-avalueate, look at Brenda Irwins story, she took stock of portfolio and sold of the poorer performing assets and continued on..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
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