Just a quick question on what sort of return you other cash flow + investors seek, to make a property worth while. Now I know this will vary based on area, rates, etc, BUT as a guideline.
As an emample, in the past I required 9.5-10%+ on a house in non-metro areas.
On new homes (new house and land) I have required 7.0%+ (with deprec. this is cash flow positive for me). I would also do these closer to the metro areas (20-60k from CBD), and expect greater capitol gains.
What are your bench mark %’s?
Also do most of you consider a property cash flow positive if it requires the depricaition benifits to make it positive? or do you only consider it positive if it has cash flow without tax breaks?
Thanks
Slum Lord
Should have been more specific, I mean in regards to basic rental returns.
Thanks
Slum Lord
From an investment point of view, rents haven’t kept up with the recent boom in house prices. This means yields are much lower, particularly around cities on the east coast. Some rural areas are still showing yields of more than 10% if you look around.
The last place i bought has a gross yield of 5.5% which ain’t that great, especially since i borrowed $940k and have repayments of $4,750pcm. It’s a block of units and i intend to increase the yield by improving the property and increasing rents in the next 6 months. However the cap gains will be spectacular so that’s my trade off.
I think you’re asking the difference between cashflow +ive and positive gearing.
Negative gearing – expenses exceed income.
Positive gearing – income exceeds expenses.Positive cashflow is the After Tax result of EITHER a -ve or +ve geared investment. Of course a +ve geared investment will ALWAYS have +ve cashflow, but a -ve geared investment may (or may not) have a positive cashflow depending on depreciation.
If anyone can elaborate on this, please do so.
Q
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