Hi all
I read all the messages with great interest and much confusion at times but I really enjoy the site> thanks Steve!and participants.I am running figures through a program I wrote but the facts are not adding up. The figures seem to meet all the requirements that everyone is discussing but after all the charges, rental management fees, R&M , insurance interest etc etc. On a $101,000.00 purchase with a rent of $210 p/w leaves a net weekly cash flow of $12.76 ( after all costs & based on 7% int only account). This meets the 11sec rule and it is a 10.4% return on the total Purchase cost.
Depreciation not accounted for nor opportunity cost. Yes it is positive cash flow but I would like to make more then $12.76 a week for all the effort >
Where am I going wrong????Thanks in advance for any help on the above matter.
Cheers Isagold.Hi Isagold
What you have is time on your side. Yep its positive and your going to make $663 pa this is $633 more than you had.
Whilst you have loans on property the return is generally small, as per your example, in relation to the total amount in gross rent. But in 8-10 years you will see a doubling of the value and on the way see a slight to generous increase in the rent obtained. So you win 2 ways.
Always remember that buy and holds is a slow but very profitable game. You will not achieve millionaire status overnight but will achieve it in the end, particularly if you build that property portfolio over the time between now and the next boom.
Remeber you can buy way more properties (deposit available) if each property is not costing you any further money(+ve) then if they are (-ve).
Personally speaking it is worth while, I have been investing since 1985 buying a property every 2-3 years. I still only make a small amount on each property and the effort does at times seem overwhelming but the capital base I now have is enormous. Similarly all those small amounts added together would allow me to retire immediately if not 5 years ago.
So in conclusion remember the ultimate aim and don’t deviate from the path as in the end it will all have been worthwhile.
hth
Cheers
Hi Ziz, I really dont know where to start? I have looked at a lot of postings on this site and nothing has made me want to go out and get involved in a cash positive property. This 11 second rule seems to be a hot topic! lets do the sums on say a 250k unit 20 minutes from a capital city. $500/2*1000= 250,000. So to purchase a $250000 Perth outer suburb unit you would need to be getting $500 per week rental income (26k p/a). Now i dont believe their is to many people out their who would be prepaired to spend 26k p/a for a unit 10 minutes from the perth CBD. So lets go further out, 15km you could pick up a 2 bedroom unit for $130k, lets do the sums. 260/2*1000=130k. So you need to get $260pw to be cash positive with this one. So it looks like a capital city is out of the question! Ok so we need to find a property that is going to be cash positive and also be afordable for tennants. Lets get in the car and go for a drive and find a country town to invest in. Find a unit worth $75k, lets use the 11 sec rule again 150/2*1000=$150, Ok we have finally found a unit that a tenant can afford, but the only problem is that you now live 250km away from you investment, it is old and in need of constant repair, the capital growth in the small hamlet is bearly keeping up with CPI. So to be cash positive you need to be returning over 10% p/a, good luck. My second point Ziz is this. You have been investing since 1985 which means that you should have 7 or 8 properties ( buying 1 every 2 to 3 years). Now when i retire the last thing i want to be doing is having to repaint,repair,worry about the idiot who hasnt paid rent for two months and could be causing thousands of dollars damage because its not his property and if you havent had any trouble yet like this, you are very lucky. I would like to here from people who have cash positve investments to put their case forward on how we can rent a 250k,130k and a 75 property using the 11 sec rule
Tails277…
I’d really like to know what your wealth creation plan is.
If you feel comfortable, post it here and I’ll provide some feedback.
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Tails277,
everyting in life has a risk – even walking across the road to get to my bustop to go to work in the morning has risk. So to talk about not wanting to invest because you have to put in some effort, in my opinion is more risky than the risk itself.
I live in Perth like you and have bought in Bassendean (11km from city). It is cashflow positive 3×1 and i bought it for $88k.
Yes the property market is overheating and its harder, but focus on getting the purchase price down rather than getting higher rents.
Its good to be sceptical but not negative. Sceptical is better than blindly following.
I am 25 and i am more scared of retiring without enough money to survive on rather than worrying about the hassle of having to arrange to get someone to fix my tennants broken door or do some repainting.
I hope that you have an alternative plan to provide money in retirement because the government isnt going to support you.
(no disrespect intended.)
DanHi all,
As my previous post, similar to what Isagold did, I build a model that would give me ROI projection of any property no matter it is +ve or -ve. My model takes care of depreciation, CPI, selling and purchasing cost too. In one scenario, I have a 100K property rented at 150/wk, which is about a -$100/m(netted dep and tax), assuming a 5% CG annually, I should see a +ve ROI by year 4 and about 200% ROI by year 9.
However, the ROI is still no comparsion, should I use up my credit to buy a great big house & land and live in it and keep rollover and sell the really big house when I retire. It is mainly because of the CG tax!
I am in doubt.
Hiu
Hi Tails
You seem somewhat frustrated by the current market and the difficulty of achieving +ve cash flow.
I think you need to reread your uncles story and draw some inspiration from it. Your uncles way is just one of many different approaches all of which will work because the person that has set his aims will make his approach work.
The +ve cahs flow is just another way that works using leverage to accelerate the accumulation process (at a snails pace).
Similarly -ve cash flow will work if you find a sleeper area that is undervalued, buy up and wait. ( you need to be very knowledgeable about the area).
Personally I am going into wraps as I see that wraps is my ideal vehicle for the next 5 years.
As per your uncles story the accumulation process does accelerate. In the last 5 years I have actually bought multiple properties in the same year, some of which have been -ve as I could afford to finance them with the income from other +ve properties.
In relation to maintenance and tenant problems these are simply issues that are part of doing business. If at the end you didn’t want to deal with these issues then simply sell up and camp on a beach somewhere. (at least you would have that as an option)
Cheers
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