No I am based in Sydney

Update: I just visited their site and they offer a great deal of properties with growth opportunities. So it seems they don’t just specialise in positive cash flow.

Let us know how you go with them.

Don’t worry. There are loads of people nervous about posting questions. Forums can be a hazardous place some times. But no question is too stupid. In fact you are only stupid if you don’t ask the questions.

In order for anyone to answer the ‘what should I do?” question, you need to first work out what you want to achieve through your investing. You stated that you want to own your own house in Sydney…and that you want to own properties as investments. How many properties do you want to own? Are you looking for passive income to fund your lifestyle or do you want capital gains?

You guys obviously seem like you are really good savers, which is good. This will help you achieve your goals.

I guess the question is, what is the next step. Are you getting pre approval to buy your house? Or to buy an investment property?

With 90k in savings you might need to borrow some money from your unit to get your LVR on your house at 80% (this will avoid the need to pay lender’s mortgage insurance). But if you move into your house then you can rent out your unit to help pay for the repayments.

If you are buying a unit to renovate then STUDY UP! Renovating and adding value is not as easy as people make it out to be. My wife is an interior designer, and it is amazing how people think what she does is easy and tries to do it themselves…and fail. Some people have the eye for it…I don’t. If it comes natural to you great…if it doesn’t then STUDY! You can’t just spend money on a house and expect to make money…you need to spend it on the right things….so find out what they are.

My wife did up a house recently. Spent $1,000 on it and increased its value by $75,000. I could never do that unless I studied a lot. To her it is her talent.

Anyway, what I am saying is to get smart. Get smart about what you want to achieve (funnily enough most people don’t know what they want to achieve when investing in property…they just want to get rich). Have a figure in mind, be it an income you want to achieve through rental returns or a figure you want to have in the bank (maybe $1,000,000). Then study up and only purchase properties if they will get you closer to your goal.

Working for yourself is definately rewarding. I love working for myself. If you are smart it can also offer you a lot of freedom. I work about 2 days per week most weeks.

One thing to be careful of. I was confused whether your business was in real estate or whether you were starting your own business and then investing in real estate on the side. I have found that banks look more favourably on businesses after they are 2 years old or more. Brand new businesses can make it a little more difficult to get a loan…not impossible….but a bit harder. Just something to be aware of.

A piece of advice. Keep learning about real estate. If you want to make this a full time gig then you need to know as much as you can. Go to seminars, read books, study up. Because the more you learn the more you can earn

The negative side of positive cash flow is that often the capital growth is less. The guys are right. Capital growth allows you to get rich, but cash flow is necessary to get there.
I would prefer to own 10 positive cash flow properties than 1 negatively geared property. Even though the growth may only be 4% instead of 10% I can afford more and therefore get richer quicker.

Hi Brendan,

Firstly well done on buying your first property and building up such a good equity base. Everything Richard said is good (he know’s his stuff).

My suggestion would be to think about what you want to achieve from your investment portfolio. Yes you want to be ‘rich’ but break it down and define it more. For me my goal with property is for it to generate me passive income to fund my lifestyle. So I look for cash flow first and capital gains second.
I just see people stuck in the trap of capital gains and never getting to enjoy their money. For example, someone buys a house that costs them money each money to own, but they scrape by and in a few years sell and make a whopping $200,000!!! They think “this is awesome” and they go and buy a bigger property that costs them more to own. They are getting rich, but in the meantime they are living off baked beans.

I want to enjoy my riches and I grow them. Not everyone wants this.

But with only $75,000k/year eventually you are going to be capped with negatively geared property because you won’t be able to buy any and afford to live. Before you buy your next property and be paying more each month in interest (and rates are still going up). Think about what you want to achieve. If you don’t mind scraping by thats fine, just know exactly what you want and whether the next property will get you there or not.

You don’t want to end up being a poor rich man living off baked beans but owning a few million dollars in property.

Basically what Richard is saying is that subdivision isn’t quick. It can take 6-12 months to subdivide a block. So don’t buy it thinking you are going to subdivide in a couple of weeks. It takes a while, but there is a lot of money to be made if you can do it properly.

The more property you own, the more you can take advantage of growth. Owning one block is good, but land almost ALWAYS goes up in value, so if you can leverage one property to buy another property then it could be a good move (if you can afford it).

I agree with you that it would be hard to find somewhere in Perth that is positive cash flow, but you could always aim to buy something that is only slightly negative.

The main reason I would buy again (if it was me in your shoes) is because rents go up in value over time, which you mean you could move from negative to positive in a couple of years if you buy properly, and land goes up every year. By buying another property that you can rent out now, in the future you will have more income and more equity to do you duplex/town house development.

Just some ideas for you to think about. Might be a good option. Maybe you could even buy a place that is ugly but structurally sound and do it up to increase rents thus making it positive cash flow.

This frustrates me with the banks. I can understand their viewpoint though. If I was a lender I would never take 100% of the rental income into account. As Richard said, rates, water and a whole bunch of other things (vacancies, management fees, maintenance, insurance etc) all have to be paid for out of the rent. For a lender to take 100% would be silly.

It would be nice if they did, but they don’t and I doubt they ever will.