Hi Financial freedom,

Just done some numbers on the Liverpool flats as quoted above (and I know the area, rents maybe likely to go up I imagine?)

52 weeks x $260pw = $13,520 rent income pa.
(Deduct for strata fees, water, council, and maybe 7%  ie $946.40 pa, for management)

$13520 pa rent divided by $220,000 purchase price gives 6.1% return less expenses.
If you can borrow at 6.5%, you have already made a loss before paying your expenses.

So at these numbers, it will still be negatively geared. Unless you put a 20% deposit down.
So $220,000 – $44000 deposit = loan $176,000.
At 6.5% interest repayments on $176,000pa  total $10560.

$13520 – $10560 = $2960 "CF+"pa.
Dont forget to deduct expenses starting $946 pa management.
ie If you have $44,000 deposit this unit will be approximately neutrally geared if you can borrow at 6.5%

If interest rates go up, it will become slightly negatively geared unless rent increases match rates. 

quickchick 

Hi Pasha.

My understanding of China is that they are trying to slow their growth artificially. If they reduce their growth from 11%pa to 8%pa., they're still going to need 8% MORE of our product than last year.
My mining sources suggest from Feb things should be picking up as companies increase hiring. (In the area I have property.)

I do not have a crystal ball, and form my opinion  from what I read. You are quite right to have your own views, and base your opinion on that. You may be right. Or not. But you have to know your own risk profile, and invest where the risk fits your views.

I agree with some of your points, ie cost of petrol and living to increase. To me, though, these are reasons to be optimistic in investing. They may deter people from buying, so more renters to rent our IP's! Which over time will increase rents, and if they keeps up with interest rates, I'm happy. 

I don't agree prices are over-inflated. Last year "they: said prices may drop 5-10% and they almost all went up that much in Sydney, Melb, Darwin, …. I believe we have avoided the bust they had in USA and UK.
The catch is, conditions will never be perfect for property investing. And if you never invest, you'll never make money in property. (Or make a loss, I agree.)

quickchick

Hi again Pasha.

My perception re China is, they have been artificially trying to slow their economy down so it doesn't keep expanding so quickly.
They have such a massive population, and a hugely expanding middle class who are getting used to Western comforts, so demand is high. If their growth slows from11%pa to 8%pa, that's a lot of Aussie mining supplies! And we're still talking about them needing 8% more product than last year.

My mining sources suggest that things will be picking up very soon in areas I am investing.

No, I don't have a crystal ball and can  only go on my various reading and personal contacts.

Your points, except for prices being inflated, I agree with. ie petrol prices, cost of living,…. many carry high levels of debt.
Which all suggest to go for property investing to me. Maybe gradually, less people will be able to buy their own place. So more likely, they'll rent my IP! Rentals scarcer means rents go up. If they only keep up with inflation, I'm going well!

I don't ever suggest you should "hope" prices should rise, and base your investing on that. And you should not invest based on my opinion, neither should Nigel. Because I will not be paying the mortgage on your property. 
But if you wait for perfect conditions, they'll never be there. And if you don't invest, you'll  never make $$ from property.

You have to know your own risk profile, what you're comfortable with, and invest at that level.

quickchick  

Hi Nigel

My opinion with your deal is, if there's space in the deal for all you costs and and extra 10% that may arise (unexpected costs) and still profit, it should be worthwhile.
I think Perth has had its correction. (Not that I'm very knowledgable about Perth real estate.
Feel bullish about the mining and resources industries.

And you're not just looking to buy/hold long term, but value add.

So my gut says, go for it!
May end up better than you anticipate!

quickchick 

What you have not thought of, is what will properties like yours be worth in 29 years? Maybe somewherebetween double and triple your purchase price??? We don't have a crystal ball!

The question is, if you can sell and pay your loan out, can you find a better investment (or maybe buy a home for yourself if you haven't done so) instead of hanging on?

As an investor, I think you could! And I wouldn't want an investment property to force me to move outback (unless you'd like to try it).  It would be nice for your future properties to be a bonus, not a financial drag.

All the best.

quickchick 

I started looking mid 2003 for CF+ properties, on the net.
Took me about 3 months.

Block of basic units in rural town.
Have been making us $100 pw (after all expenses) since late 2003. Consistently. Since first purchased. Currently over $180pw, as rents have gone up and interest rates are low. Minimum of  $26,000 income to date, probably over $30K.
No capital growth? About double the value in 5 yrs, better than elsewhere in the state that I know of.  

piersw, do you have a better idea for investing? Why would you want that income? (Use your imagination!!)
In my case, provided income while I looked after a seriously ill relative, and didn't have to work for a few months.
(My partner was working.)

Could you have done better investing somewhere else? And at a fairly cheap buy price ( well under $300K).
The concept is PASSIVE income  ie your  money works for you, not you for your money.
You need to read Steve's book and open your eyes to a whole new world!
(i'm serious, not being nasty!)

If we advertised the property, it would sell on the net the same day… its a no-brainer. Advertise CF+.
The bank loves us, we've borrowed more.

Questions to ask is, where is there insufficient property to rent ? Check the investment magazines (back page) for vacancy rates, for a start.
Usually backed up by high yields. Steve's 1% rule  (to paraphrase)
"If you find you can borrow at eg 6%, add 1% pa for costs and anything over 7% yield will be CF+."
If you believe that interest rates will rise in the coming year (and I do) add 1% for safety net.

To find the yield, multiply weekly rent x 52 (weeks), divide total by asking price.
  eg $400 week rent x 52 = $20,800. Divide by  Purchase price $300,000. =0.069, ie 6.9%
Borderline, may be worth looking into.
Then find out your exact costs and do your due diligence.

This stuff works!

quickchick

A few tips I've learnt…

Near (walking distance, not backing onto the tracks!) railway stations is a good spot.
Covenants in NSW often expire after 10yrs, not sure about Vic. Ask council.

quickchick

Hi John,

Good on you for starting young, so many wish they had, but got distracted by life along the way.

If you view property investing as a subject to study, you'll realise that there are many different ways to make money in property. Then figure out what you want, and when you want to achieve it by. Then figure out the most effective way to get there.
It's a progressive thing.
Bought our first investing property at a seminar selling a developer's product. Learnt enough through that, not to do it again! And especially, not to have same agent (who wasn't very local,) to manage it. But no regrets as we learnt a lot from it, and did it progressively smarter as time went on.  You'll learn along the way, how to do it more effectively. 

Wish you every success (but it won't be luck, skill plays much higher dividends!).

quickchick

Hi Wealth for life,

I agree with you to a point. It is very worthwhile to get together with like minded friends and discuss property on a regular basis, and benefit from others learning, and experiences. And talk about which books etc you have found useful.

To a point. If there is a Uni tutorial of eager students, they may well all increase each other's learning curve. But with no outside input except for their own experiences, (ie no texts, lectures, other research or studies or data etc) they will not make such rapid progress. It could become, "the blind leading the blind".

I prefer to augment my experience with that of others. eg how will setting up a family trust benefit my situation?
Then I can decide if that will work for my plans.

Certainly I can agree with Badger that some seminars are just a developer's marketing ploy.
The way to choose what will benefit the individual, I believe, is to read a book that inspires you and seems down to earth, Aussie based, and applicable. Then go to the seminar that the author is running to learn more.

And Badger, fair point about my saying the seminars etc are tax-deductable. Not my aim at all to increase tax deductablilty.
But a very good use of any earned money, if it improves my returns dramatically, ie by many times more than I have paid for the seminar. (And it does, in my application of  my chosen education source.)

Having recently tried a financial adviser, I believe the mentoring programme I'm part of is far better value for money as it applies to my strategy and my goals better, not to what they usually advise. Not that the adviser was all bad, and I'm not saying we shouldn't seek this sort of advice.

quickchick

Yes, you're right  Dan re taking a loan against PPOR for IP.

Didn't think of that at the time.