Hi Queenslander,

Goood question! To be honest, if i’d known about positive cash flow properties 12 – 18 months ago, I may have considered it, but probably wouldn’t have. I’ve heard of a few people (two, literally!) who took the plunge before prices inevitably went up, and now have good +ve returns.

Here’s some of the reasons why it would fail my due diligence:

The towns’ population, even when combined with Napranum, is under 5,000, its still a mining town, so there’s issues around there being no local council per se, power is produced by Comalco which may become a problem if the town ‘normalises’, and Comalco itself is very cyclical in nature. 10 years ago the workforce was over 1200, and by 2000 it was down to 450. Now its going back up, but with time, a new cost saving regime will be introduced and the workforce will be pared down to the bone again, there’s even been rumours about changing to fly in-fly out (just a rumour), and there’s no property manager now… It’s a funny old place, Weipa!

I could go on, but this probably gives you the general idea!

Cheers
Crocco

I’ve just come across an article in the latest API, (Brenda & Les Irwin, pp 32-38) where Brenda says:

“In my experience, it takes approximately 2.5% – 3% of your gross yield to pay outgoings. For example, if your interest rate is 7% you’ll need a gross yield of at least 10% (7% + 3%) to guarantee a cashflow neutral return (before tax).

Brenda ‘fully borrows’ to finance their purchases.

For me this statement had the aha! affect – so that’s the relationship between the rental yield and cashflow returns! Yes, I’ve been reading up, following this and other threads about yields, but just couldn’t grasp the connection. [:0)]

Cheers,
Crocco

Hi Guys, and thanks for your replies.

I’m much clearer now about yield – cheers.

I really like the idea of an indicator to unlimited properties! Lucky I have a risk-adverse other half to keep me in check sometimes.[]

Seriously though, we’re struggling with repayments on a property at the moment, which will be positive cash flow, once the drought breaks, and the cattle fatten, and we heal the salt scald, and the birds stop flying backwards, and, and…..

So I’m really sold on +ve cash flow – where it flows from day one!

Crocco

Hi Ron,

I had a great Chrissy, thanks. I’m curious to know if you invested in Cairns while you were there. Apparently the market has taken off in the last few months.

Cheers
Crocco