Mikey old boy. You are as naive as the rest of the people in this forum. I ask you this. You say you don’t care if the place falls down – well I would be there goes your investment. I’ll use an analogy for you to understand what you are doing. You are shopping at the $2 shop buying cheap products that seem fantastic for the price. What happens though after a few days when you take it home – it falls apart and you say “gee i would have been better buying one for the full price – better quality etc.” What everyone seems to be missing in tails’ point of view is that he is saying you need to buy quality property and to do that you need to spend large amounts of money. You guys are buying duds, therefore you will be continually forking out money for repairs maintenance, having to kick drop kicks out etc. Think about the type of properties you are buying – shitheaps – who lives in shitheaps – shitheads. All I can see is problems for you people. Times change we are at the peak of the housing boom cycle as tails says cash up and look for other opportunities, don’t restrict yourself to “safe” property as you can still get burnt.
“Be greedy when everyone else is fearful and fearful when everyone else is greedy”
Interesting post ireland. Care to share your investment strategy and portfolio with us since you’ve felt the need to condemn ours?
You both seem to be missing the point that others have tried to point out. The strategies that we are using suit our own individual situations. If you don’t like them, that’s fine, no one’s forcing you to do them but don’t critisize what works for others just because you don’t like it or think it will work for you.
My 2 cents,
Matt.
I guess I will have to ask the post office to send me all those accumulated repair bills that I don’t know about.And I suppose I’m going to re-screen all those tenants I thought were good.They’ve only been there for 2yr ave.I never picked up that they were all shitheads.The things you learn on this forum.If this info level keeps up Steve will start charging us again[
]
I guess I will have to ask the post office to send me all those accumulated repair bills that I don’t know about.And I suppose I’m going to re-screen all those tenants I thought were good.They’ve only been there for 2yr ave.I never picked up that they were all shitheads.The things you learn on this forum.If this info level keeps up Steve will start charging us again[]Mike please do not think I am critisizing you. I am critisizing your investment strategy. I am trying to save you and others from wasting your time in this slow growth problematic industry. What are your goals? Buying these cheap arse properties are not going to make you a millionare. Ask yourself this – does Kerry Packer have investment properties in $50000 units – no – he buys quality places like 16 million dollar mansions that make 10% a year. 10% on 16 million is 1.6 million 2-3% on 50000 is $1500 – why bother??? YOU ARE BUYING LIABILITIES NOT ASSETS.
Yours Faithfully
Your Financial Angel
“Remember be greedy when everyone else is fearful and fearful when everyone else is greedy”
Hi Ireland,
Presumably, if one is interested in getting to the level where one accumulates $1m + properties, one has to start somewhere more…modest?
Are you saying that $30k houses are too modest? If so, where would you recommend one starts?
Kindest Regards
Jason S
++++++++++++++++
Check out my E-Bay Auctions:
http://cgi6.ebay.com/ws/eBayISAPI.dll?ViewSellersOtherItems&userid=jayess70&include=0&since=-1&sort=3&rows=25Well this topic seems to have stirred the pot. I may be one of those naive people you care to talk of Ireland but I am happy. Like Mike I haven’t seen any of those people you are talking about but hey maybe they are all waiting to evolve.
I guess what disturbs me most is that you wish to criticise but in a negative manner. You have your opinion and I have mine. Good. I will not shove it down your throat and vice versa. From what I understand of this site it is about sharing information to try and educate each other. I guess your point is loud and clear and it has given us something to think about. Each of us is responsible for our own paths we tread and must plan for eventualities. You have given us something to think on. [?]
I have a good friend who has been investing in property for 20 years and he started in “cheap” properties and he still has them all. 53 properties later he still loves his cheapies that are worth far more now than ever before.
I guess I will happily follow such a path and see where it takes me. If you choose to follow another path…..great go for it and I hope it does you well. You sound very savvy with the market and I am sure you will do well so best of luck.I may also reach a point where I feel it is no longer worth the effort and sell out but if I do I will do so for myself and allow others to make their own decisions which will be right for them.
And Tails you first said that you have found nothing on this site that makes you want to go out and do deals. Great. That is called an outcome and if it works for you ….excellent.
I hope both of you do well and enjoy what you do. Wishing you abundance. [
]Enjoy
AD [:0)]“A successful person is one who can lay a firm foundation with the bricks that others throw at him.”
-David BrinkP.S. thanks for the bricks. [8D]
Well, I’ve already stated my viewpoint on this discussion, but as nobody else has answered the questions posed by Tails, I’ll give it a go.
I should make it clear that I’m answering about properties that I have wrapped, not properties that are purely cashflow positive.Quote:1/How would a 2% increase in interest rates efect a property.wouldn’t have any effect at all. My buyers are all variable rates, my rate goes up, their rate goes up. If they wanted fixed, mine would be fixed, same scenario. If they could no longer afford the payments, either we come to some arrangement to make it easier for them (and make sure their payments are still higher than mine!) or else I get the house back and do it again with someone who can afford it.
2/ A tenent can not be found for a property for say 3 months.
I factor this in as part of my “sleep at night” contingency funds. I’ve had one house that for various reasons has taken nearly 4 months to wrap, and initially I paid the mortgage from contingency funds, now the income from other wraps I’ve done recently covers it. This is different to Steve’s strategy, which is to find the people first, I find the house.
3/ The banks want more security when times get tough (investment doesnt come up to valuation).
Well, it’s pretty rare that a bank does a margin call on you. And right now I have heaps of untouched equity that is just sitting about if I need to prove that I’m still viable. Even better, I have cashflow details that show that more money comes in each week than goes out. Banks love that.
I hope this has answered your questions, at least from the point of view of a wrapper. Perhaps someone with cashflow positive properties can give their perspective?
Keep smiling
Felicity
You are as naive as the rest of the people in this forum.This insult to the forum is not justified and is out of order. [
!]If you do not concur with the posts then you have every right to disagree in a constructive manner. But no name calling or mud slinging is allowed.
I wouldn’t consider a $30,000 property renting at $100 per week a dud. Even if interest rates went up 2% it will be +ve cashflow.
I once went around telling people that you’ll never get capital growth in the country. How wrong was I!
Then I actually started investing (rather than telling people how to invest) and low and behold, my cheap country properties that I bought for $44,000 are now worth $80,000+.
Everyone, including Kerry Packer, needs to start somewhere. Sure, Australia’s richest man can afford to buy mansions, but this would be a terrible place for a beginning investor to begin.
When the market begins to soften, the worst hit will be the higher priced property – both from a tenant and a cap. growth perspective.
It is wise to buy a quality property but price alone make it a dud or a palace.
Finally, those with alternate views… let’s hear them! If there is a better strategy out there then share the word.
It’s easier to rip down than it is to build.
Bye
Steve McKnight
P.S. For what it’s worth, my empire is built on the basis of buying positive cashflow property to the extent of building sufficient passive income to achieve financial freedom. I’ve bought cheap properties, which is all I could afford at the beginning, and I’m yet to ever lose money. I can testify that this is an effective strategy with more experience in the trenches than the vast majority of property investors.
It is OK to be sceptical, but if you close your mind to opportunities then you are the poorer for it.
**********
Remember that success comes from doing things differently.
**********
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Even at 15% Mike Robinson’s $30k property is going to be +ve[
]. The wraps should all remain unaffected[^], and I’m sure the banks won’t be calling in loans from people with lots of properties – that’s their last resort[xx(]. Cashing up now is also good if it suits you, but that is not what this site is mainly about – hence the upset – most people using the strategies on this forum will have enough property to be able to sell down if necessary to ride out the storm. AND I’m sure there will be plenty of support here for any who are having difficulties. The strategies here have also led to many people being able to cash out if they want to. eg for me I bought a home – 3b/r b/v excellent condition for $65k 3 years ago, and have just sold for $105k, to move to something else. My tenants have been excellent too…the point here is that there are very few bad tenants, but you hear about those.
It would be nice if we could afford to start like Packer, but we have to start with the other end of the scale.
Your point about rate rises does need consideration, but it shouldn’t frighten anyone – after all, last year the advice was to lock in rates, and they are still (as recently as last week with some lenders) going down!!
Are you also advocating (shiver) -ve gearing?For all those worried about interest rates and real estate prices.
Please correct me if I’m wrong anyone that knows otherwise…
It is my understanding that Australia is a highly developing country. It is also my understanding that Australia is behind many other countries in development, and ahead of a far greater number still.
If trends are anything to go by you only need to look to the US at their property prices and interest terms. They have been a developed nation far longer than we have, yet their property prices are still climbing. Finance over there has not skyrocketed to 15 or 20% interest. Far from it actually, the current interest rate is as low as 2% variable (or less!) and you can get a 30 year fixed loan for 4% if you’re still not comfortable with the risk!
I’m not suggesting interest rates over here won’t fluctuate, nor property prices. But one suggestion may be ‘if you’re not comfortable investing where you live or in Aust because of the recent boom and low interest rates why don’t you look to a newly developing town or country which may suit your risk profile a little better.’
Unbelievable!! Finally some heated debate. I have read most every forum for the last few weeks or so and I must say that I have been very interested all the investment theories on this site. I am not a wrap advocate. It does not suit me but Tails and others that have spoken up (and been shot down I must say!) do have some VERY valid points.
I hold positive cash flow properties in Perth (close to city and beach) probably because I bought at the right time and in the right area/s. These properties have also enjoyed substantial capital gain. The best of both worlds. I only did this after making a few mistakes. I think some of the potential Wrappers in this forum are getting romanced by the +ive gearing aspect. Never forget that yes you can buy in a Country area but they do have the tendancy to be hit in the hard times. Always keep population growth, private and government investment and proximity to lifestyle choices in mind when buying. I lost over 33% on a +ive cashflow country property in a couple of years due to a downturn that is only now starting to turn around. Paper loss yes, but if I was not in a position to keep it and not panic I would have been in trouble.
While we are on this note there is I have noticed a few posters that get in here and fire off “I have done this +ive cashflow deal in an area I want to keep a secret so there!! ” attitude and this I think has frustrated posters such as Tails. I think sharing the knowledge of potential boom areas would be a great deal more constructive than some of the secretive bull that has been going on. It just causes frustration.
I just want everyone that does drop into realise that there are different ways of getting there. Steve has NEVER advocated that I have seen that wrapping is the only way. Thanks. [
]Hi all
This has been the most entertaining discussion so far.
Tails227. I too would love to hear a little more about your uncle & father.
1/How would a 2% increase in interest rates efect a property.
A property may not sell for as much as when the rates are higher. Or if it is a desirable property it may have no affect.
2% increase means that for every $100k you borrow you will need to find another %2000 p/a in interest if your loans are variable. If they are fixed there will be no change.
2/ A tenent can not be found for a property for say 3 months.
Make sure you have a contingency fund.
Don’t design a way in without also designing a way out.Very important!!
3/ The banks want more security when times get tough (investment doesnt come up to valuation)Regardless of what a property is valued at or worth shouldn’t matter to a lender as long as the repayments are kept up.However should you wish to borrow more with the same security and it has not been revalued higher , then the lenders are really doing you a favour.
Cheers NAIVE Rob
“A bank is a place where where they lend you an umbrella in fair weather and ask for it back when it begins to rain
Steve the other day you said this.
P.S. For what it’s worth, my empire is built on the basis of buying positive cashflow property to the extent of building sufficient passive income to achieve financial freedom. I’ve bought cheap properties, which is all I could afford at the beginning, and I’m yet to ever lose money. I can testify that this is an effective strategy with more experience in the trenches than the vast majority of property investors.
You also said that you started investing in property in 1999.
Your decision to invest in property in 1999 was a great decision, with housing prices increasing in value two fold. Now if i remeber rightly 1999 was the year mum and dad investors swamped the stockmarket (attracted to huge growth thru technology stocks). Now as we all know stock prices were out of control, some even doubling over night. Now why did the share market rise so quickley? Because normal everyday people were scared of missing out. You have all heard the term of what goes up must come down (economic cycle). And as you know it came down with a thud, stocks that were worth $10 were now worth no more than 35c, now i here you say what has this got to do with the housing market! The reason why the tech stocks crash was because people were paying $10 for a stock when it was worth no more than 25c (Demand v’s supply), the same as the housing market people want to get into and not miss out. I liken the tech boom to what has happened to the housing market of the last two years. Another eg is What ever happened to the show Money hosted by paul some one? Well it went of air because people lost faith in the share market which the show was based on, no all you see is Location location, hot property, and auction squad, what does this tell you? the majority are investing their money in to property. Now i am not saying i am in favour of shares over property im saying you need to read the market and be able to transfer between property ,fix interest, and shares. I have made great money in the tech boom in which i transfered in to the property market and have also made great money but now i am investing in fixed interest (due to unsertainy) with and idea to go back into the share market. Now i play things safe, when i see things are getting over heated i am happy to get out. As steve said “remeber success comes from doing things differently. Now as for what steve said aboveQuote “I’m yet to ever lose money”. I can testify that this is an effective strategy with more experience in the trenches than the vast majority of property investors. Steve you said that you started buying houses in 1999! I put it to you that you have only seen Positive times and this formula will slowly die in bad times, and as for your claim that you had vast exsperience, well i would hardly say buying your first property 4 years ago as vast.
Remember when everyone is running away you run forword.
As steve says do things differently.tails277
Hi All,
What an intersection of differing opinions.
My property investment goal is to look at a property and to have the ability to maximise my profit out of it by looking at the viables around it (the property, the area, interest rates, occupier etc) and selecting the strategy (instalment contracts, renovations, lease option, license to occupy, second mortgage or buy and hold etc) that is the most viable option at that point in time.
I currently specialise in second mortgages and instalment contract and are up to my 20th property. I might joint venture with others to do renovations etc if I do not have the expertise at the time.
My Thoughts ….
Robert K. is my main mentor and like his board game “Cashflow 101”, you start and cut your teeth on the small deals (learning experiences – mistakes are only small financial loses and do not wipe you out of the game while you are learning) so that you know what to do when the big deals come along.
I believe that you should not start investing by placing all your money on just one bet/investment. If I could purchase $240K worth of property, I personally would rather by four $60K properties as a learning experience than buy one $240K property.
I am trying to model myself of an individual who operates in the lower end of the market $60K – $80K properties and has acquired over 500 positively gear properties …. He has results and his technique is simple …. why reinvent the wheel.
By being in the real estate game and starting off doing the small deals you gain confidence, you gain tremedious knowledge and get to meet very interesting successful property investors.
And one very important thing you get offerred the deal of a lifetime ….. to joint venture in a deal to bulk purchase 75 properties for $50K each … most of them will be second mortgaged, some will be instalment contracted and others will be buy and holds. By starting off with the small deal, when the big deal comes it is just a magification of the small deal …. Better yet … [1] The properties will be given to me … [2] I do not have to sell them [3] I do not have to property manage them [4] I do not have to personally financially fund them ….. All I have to contribute is my technical knowhow and the systems that I have.
This has all come about by understanding what the guy with 600 properties has done and simple copying it … he has results, he operates in the lower end of the property market, hes wealth and it works.
One must adapt to the environment in which it exist in or you will become extinct.
Some of you are saying ….
1. What happens if interests rates go up?
2. You need tenants to make it work?
3. What happens when the market crashes?You need to know your game plan when things go wrong and manage them effectively …. by being a PROBLEM SOLVER … you can make money whre other would lose money.
Well … well … well, that my ten cents worth ….
Regards,
Jason Moore
[email protected]Property Trader | Boston West Pty Ltd
http://bostonwest.com.au
Email Me | Phone MePrivate money lending opportunities available paying upto 12%, secured by bricks and mortar!
Property Trader
Can you tell me wher i can fined out more about second mortgages and instalment contracts sounds
intresting…
thanks davlyn..All can see the tactics by which I concur,none can see the strategies out of which victory has evolved…
Hi Ireland
Just a thought
Buying these cheap arse properties are not going to make you a millionare.I presume you are obviously a millionaire to be able to know what won’t work. That being the case it would be great to hear of how you have been able to get where you are
Looking forward to reading your post
Cheers Rob
“A bank is a place where where they lend you an umbrella in fair weather and ask for it back when it begins to rain
Quote from DeanJP:
While we are on this note there is I have noticed a few posters that get in here and fire off “I have done this +ive cashflow deal in an area I want to keep a secret so there!! ” attitude and this I think has frustrated posters such as Tails. I think sharing the knowledge of potential boom areas would be a great deal more constructive than some of the secretive bull that has been going on. It just causes frustration.I like your suggestion, If anyone willing to share their experience, please be specific. We are (new people) not lazy, we just can’t see & understand yet. Especially in Sydney, I can’t see where we can’t find a +ve cashflow property (I have tried 3hr drive from Sydney).
Being a Sydneysider and looking for +ve cashflow is difficult, I feel. I have found one property in Cairns that passes the 11 second test, but it is not exactly a matter of jumping in the car … I have found other +ve cashflow ie: Brisbane, but that depends on depreciation to make it +ve. On this site I have seen little mention of the depreciation factor. Does Steve advocate only +ve cashflow before depreciation is taken into account? Having said that it seems alot of the properties he may have acquired are older, hence little depreciation. I was using the Margaret Lomas strategy and her software to test +ve cashflow. I must admit I was estimating depreciation when I found some +ve properties. Anyone else have any comments on the effects of claiming depreciation? Any other Sydneysiders feeling the frustration?
Ally
Firstly as a newcommer to this site, I have been helped and inspiered by everyone’s comments and adivce, so thank you all!
Secondly as a ****head living in a low end ****heap, I am offended by IRELANDS comments.
I own my own home, that I have substansial equity in, which I am looking to use to start creating my wealth. I have my reasons for being a tenant at present and treat the house with respect. I do minor repairs, garden and generally keep it in a condition where I can call it HOME. I would like to think any self respecting human being would do the same!I would also hope that I as a landlord have the ability to find such people to tenant my propertys.
Regarding matduqua’s post ,I know that +ve cash flow propertys are about.I know a numbers of people with one, but advice on where to look would be great,as they are saying that they cannot find them any more. Hints on where to research facts about an area that I feel is about to grow would be greaty appreciated, as I’m not very web friendly, and have trouble finding my way around.
thanks again everyone, especially Steve. Finding this site has been a godsend.Warmest regards,
Scott
]
]
!]
) -ve gearing?
]
The topic ‘Why Positive Rental Cash Flow Doesnt work’ is closed to new replies.
