I just want to say that this is the best thread on this Board.
I like seeing the opposing views. [
]TAILS due to being technicly challenged this is my first post so i will try to be specific. i have just built 2 houses in Karatha for 270000 ea they are both rented to the Govt employees housing ass for 550 pw with long leases with annual revues ,i can lock into fixed int at any time and still be c/f+tve. One is occupied by the top police person so i dont think he will be kiking my door down ,but if hedoes the GEHA will fix it and being new i shouldnt have any R&M troubles for a while.I used the equity from my PPOR so ididnt have to part with any money .Upon completion they werw valued at 342000 and now have there own equity of 20% thus freeing up the equity on my PPOR to use on my next venture.Is this the type of example u were after, if not perhaps u could tell me where i went wrong. Andy I will always finish what i sta Bart Simpson
Hi,
I believe a lot of people attacking positive cash flow are only thinking along the lines of ‘buy and hold’.
This is definitely NOT the only strategy out there and it is possible to find a lot more positive cash flow properties when you look through the ‘lease-option’ and ‘wraps’ looking glass e.g:
It may be possible to take a 12 month settlement from a vendor (under the agreement you will pay him/her market rent for the period and take over all house costs). You could then lease-option a property to a potential tenant over the ensuing 12 months. They pay a small deposit of $2500 (same as your deposit to the vendor) + $25 more rent per week then you are paying the vendor with $10p/w coming off the final purchase price. They also agree to take on all costs and you market the property to them at $10,000 more than what you paid. This in effect helps the tenant save the necessary 10% deposit (they can apply for the $7000 first homeowners at the end of the 12 months also), the vendor is happy because he/she is still getting market rent and no tenant headaches, and you receive 10,000 in profit + $15/wk cash flow (Win/Win/Win situation). Do only 1 of these a month (which is easily achievable) and you are well on your way to a nice little income with relatively low risk. This is called the ‘Sandwich’ strategy!
“Most people operate under a false ceiling which is 3 feet high” Stuart G Goldsmith
G,day Tails277,now l must admit,when l first saw your post my imediate reaction was not particuly complemetry but as my computor was playing up l was unable to respond.I can now say upon reflection that YOU INSPIRE ME! The way in which you put down any form of property investment as foolishness(my interpretation of your attitude via your posts)is brilliant.It has made me sit down and take a good hard look at my investments and my ten year plan to take me to fifty years young.Tails,for me, my plan is going 8.5/10 and will allow me to do things other than work at fifty.So WHAT IF interest rates go up?so will my payments but over the last ten years my rents have gone up and ive reduced my debt .Debt reduction is part of my plan. WHAT IF l cant find tennants for three months? l buy late model brick etc and l maintain them well,not a lot positive cash flow but fantastic capital growth and lve not had a problem big enough to remember,sorry ive forgotten your last WHAT IF.My biggest WHAT IF is not hearing someone say “look out for that bus”.Maybe ive just been lucky but ive always thought you make your own luck and l fear regret more than falure.So get out there and have a go,if property isnt your thing,thats OK its works for me[
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i have just built 2 houses in Karatha for 270000 ea they are both rented to the Govt employees housing ass for 550 pw with long leases with annual revuesHi Mr Hedge,
How did you come across the GEHA and is there a division in NSW that I can approach to do the same as yourself?
Cheers,
Matt [
]Mitch you said this in your last post.
The way in which you put down any form of property investment as foolishness(my interpretation of your attitude via your posts)is brilliant.It has made me sit down and take a good hard look.Mate at no stage did i say that any form of property investment was foolish (where did you get that from). What i said was the property market is overheated at the moment and it was time to transfer to a safe area (fixed interest) and i have sold all of my properties.
Out of all the posts i have read i agree with your investment tatics the most, buy quality, look for capital growth and debt reduction, but the difference between you and me is you buy and hold while i turn my paper capital gain in to cash to take advantage in other areas. Take for instance the stock market now, its at about 2750 points a year and half ago it was at 3500 points, which means with my capital growth that i have made in the housing sector (no longer paper profit) i am able to put in fix interest at call and wait for any down turn ( the war to start) and buy quality stocks at a reduced rate. My tactic is to keep my money working at all times it might be shares, property, or fixed interest.
Now in two years when the property market is still in a stagnant mood i will return to the property industry (with capital from the share market). I liken it to when you go down to the beach. A wave is building out the back, its nice and solid, one person gets on it followed by more and more, now people near the waters edge can see that their are many people on this wave so the also deside to catch the wave, at this point the person who first caught the wave pulls outs because he has a good ride and wants to catch another wave out the back, he also knows that the closer he goes to the sand the more likly he is to being dumped. I am the one who swims out the back and has a good ride but always pulls out before i get dumped, because i know that their is always going to be another wave out the back that is bigger and better. DONT BE THE PERSON PLAYING AT THE END OF THE WAVE WHO GETS DUMPED.PS you dont have to love me just listen to me.
I’m new to this forum and have found this discussion really interesting so thought I would post my thoughts.
In the last few years we have bought 7 properties, the worst is a 5% return. Since that mistake (for us because we did not do enough research) we have purchased 6 cash flow positive, in price from $55,000 to $130,000. eg. one at %80,000/$170pw, $55,000/$120pw so our strategy is going well for us and there is more money coming in than going out.
That is working for us and if interest rates go up we are still ok. If we lose one tenant, ok. We researched areas where there is work, people want to rent and checked out vacancy rates with the agents. This strategy is working for us and
having received Steve’s tape/CDs etc, I believe we are on the right track (again for our particular plan.) The positive thought is that as properties usually double in 7-10 years and rents increase of course, the mortgage payments won’t be a problem. We start off I/O and fix for 5 years.Thanks to the forum for all the thoughts and ideas.
Hi Matt i first came accross GEHA in beautiful Broome where i now live,as they look after police/teachers ect i presume they are state govt but i am sure all states would have similar.There job is to get there people in to areas where they wouldnt normally go,in Broomes case plenty of people want to come here but with such high rents[350-400 p/w for 4/2] GEHA have to suppy houses to get people interested.Karratha is differant with the same outcome,The gas to China deal is only one of about five projects to start in the near future and hence plenty of people will be there for a lot of years but not many want to buy the family home there so exellent opertunitys for investors,i am sure the same things exist thruout Aust.Look in your phone book or govt web site, i am sure with perseverance you will find it.Or in TAILS777case -worried what effect the war will have you could try Defence Housing Aust[invest.dha .gov.au] they do long leases similar to GEHA and will even repaint &recarpet.Remember to find out what the majority are doeing then do the opposite Regards Andy I will always finish what i sta Bart Simpson
Hi Andy,
Thanks for the info, I will do some research and look into it.
Cheers,
Matt. [
]Dear Tails,
You said earlier:
PS you dont have to love me just listen to meAfter all your ranting and raving this is the most profound statement I have heard you make. It is quite clear you are set in your ways and do not wish to listen to anyone but yourself.You are very right in being able to ride to the wave of the economic cycle and I whole heartedly agree, however, it seems that you have not fully understood where Steve McKnight is coming from with his ideas in regard to IP.
Being a pesimist will only bring your soul harm.
Try smiling and think positive thoughts.and
If God wanted us speak more than listen, he would have given us two mouths rather than two earsThere are those that LET it happen, and there are those that MAKE it happen!!
1/How would a 2% increase in interest rates efect a property.
If you have your tennants rate tied to yours, then they are covering it, having gone into the deal full well understanding that this is how it works.
2/ A tenent can not be found for a property for say 3 months.
This is why you advertise for tennants *before* buying the property and build up a database, firstly so you know you have a tennant lined up and secondly so you know the demand is there if that tennant defaults later.You can even get an agreement on sale contract signed before purchase to guarantee tennancy. Its all about negotiation. [
]3/ The banks want more security when times get tough (investment doesnt come up to valuation).
This is why you always keep a percentage of any profits made aside in your “security bucket” to cover you in tougher times (as with *any* investment). You can use this to provide colatterol in a number of different forms “when times get tough”, especially when you consider that these “tough times” are often the *best* times to be taking advantage of new opportunities while investors who haven’t covered themselves are panicking at offloading assets at firesale prices.
What is the point of cash positive properties? are they used for extra weekly income or will they be used to retire, if it is the latter how is this possible!
If you retire with a massive paper portfolio do you care exactly which shares/mutualfunds/bonds etc you have – or do you care about the stability and income you get from them?
Your houses, selected well, provide enough income to create a self perpetuating business entity that continues to purchase more income producing property without you. The fact that the exact properties your business owns may change from decade to decade is irrelevant compared to the income it creates and the stability of the asset base. Steves shown that the income works, and if you want more stable than the most average residential property then the world of investing may not be for you.Please fellow postees give me answers, you havent as yet
Hope this helps! [
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