Herald sun sat 9th Aug p.9 real estate section.
Just read Monique’s article and she doesn’t have much positive things to say about positive cash flow, simply because often you have to buy run down houses or regional houses that don’t have much going for them.
How true is this?
Being a journo myself, I would respond by saying don’t believe everything you read, especially opinion pieces… that’s all they are, opinions…
If you want to find out for yourself, find out an area where there are positive cashflow houses for sale, go and have a look… even if that means flying somewhere interstate for a few days or a week… that’s what I did, and it was the best move I have made in this whole PI thing. Sure, there are some dumps, but there are some good tidy homes as well… you have to put in the work (lots of it, no-one said this is easy) and make up your own mind…
cheers
rAgree 100% Rich re country areas and cf+ homes in country areas which meet all of Wakelin’s criteria EXCEPT they are in country towns.
I enjoyed reading Wakelin’s ‘Streets Ahead’ and found it gave me lot of useful info, but she is one-eyed towards buying properties only for their growth.
She does not seem to realise that people have different objectives, incomes and wealth levels, and that a growth only approach is not suitable or realistic for everyone.
Before I decided on my strategy, I compared growth/cf – properties versus high yield/cf + properties. I assumed 20% deposits, P&I loans and paying properties off on retirement. It was true that one high growth property made me wealthier than one cf+ property. But I found I could afford to buy two or three cf+ properties for the same outlay as one -ve property. So the wealth outcome was EXACTLY THE SAME!
Later on I read Jan Somers ‘More Wealth’ book. She arrives at the same conclusion as I did.
I found that going for capital growth may make sense if you:
1. Already own PPOR or have substantial equity
2. Are in highest income tax bracket
3. Have a fair amount of start-up capital
4. Willing to have only one or two properties for years before being able to afford No 3.
5. Being willing to dig into your pocket to pay the interest.
6. Am able to expose yourself to the risk increased interest payments.
7. An abilty to get large amounts of finance
8. Have 20-30 years to retirementI found that going for cf+ was better if:
1. You don’t own a PPOR
2. Wish to retire early
3. Don’t have much start-up capital
4. Have a conservative attitude to debt
5. Agree with diversification and spreading risks across several properties early on
6. Are a low or middle income earner (or even a retiree/superannuant)
7. Don’t want to divert money from other investments (which could even be growth-oriented shares) to fund the property
8. Are concerned about interest rate rises and your ability to meet them
9. Am eager to make an early start in PI but can’t afford anything decent in the city
10. Don’t want to take a too big a risk for your first IPThe types of properties that the Wakelins push are not necessarily cheap, especially in Sydney or Melb. However for the price of a substandard poorly-located property in a big city you could buy one or even two attractive properties in a large country town. They might only be 5-10 min walk from all facilities. So they meet all of Wakelin’s criteria except for being outside Syd/Melb. They they should be easily lettable if there is pop growth in the town. And they could well be cf positive as well.
Peter
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