Having read the book and been excited, I am still confused on where the money is coming from for deposits.
In a negative gearing/capital gain case, I understand the theory. I have $10,000 and use it to buy a $100,000 property at 90% LVR. The property grows in value 10%, and I use that equity to buy my next property. On average growth, this will take two years max.
As I read the book (0 to 130), it claims that positive cash flow is the important factor, not capital gain. So I have a $50 cash flow per week on a property, but it will take me 200 weeks (4 years) to accrue the $10,000 for deposit for my second property.
Am I missing something? How are people paying the deposits when buying tens or hundreds of properties in a few years?
Danny [confused2]
You still need to have some decent capital growth or be able to fund new deposits from your salary or elsewhere. (my 4 rental properties were positively geared from day 1 and have all had excellent capital growth). I had enough equity to borrow 100% on new ones, but I have had to beg, borrow and …… whatever I could to scrape up deposits at times when lenders would only lend 70 – 80% on regional/deemed commercial investments (residential flats). In the long run (which has only been 5 years) they have all experienced fantastic capital growth, but I still find myself having to manipulate the system all the time to get finance…..
Steve’s book talks about cashflow, but he also got some pretty quick capital gains too. I would not buy any property without CG potential – there’d be no point.
So you have to rely on capital gains, plus savings for deposits.
Terryw
Discover Home Loans
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