Before I frame my question I would like to state that while I posses 2 cashflow + properties and 2 neg. All properties were purchased (inner city and coastal Perth) with the goal of capital growth, slowly and conservatively over an 8 year period. The properties I have now that are positive cash flow are so for the 1st because of time in the market and the other due to a v low purchase price and some renovations. The other 2 are development sites which I plan to build on in the future.
My question to those of you who purchase properties for + cashflow which appear now to be only available in rural Aust (with some rare exceptions), is should we be comming to the end of the cycle are you still prepared to purchase properties giving you small amounts of + cashflow without any or minimal capital growth over the comming years.
When people talk of their success in + cashflow investing it is mostly the capital gains we have all experienced over the last 5 years or so that have driven this success, it seems to me that should this trend abate and we return to a period where only properties that have significant demand continue to grow (albeit at a greatly reduced growth rate) are you still convinced this is the best way to go ?
I guess my question in a nutshell – is investing in rural Aust with limited future potential (in many but obviously not all cases) for growth still an effective strategy in todays market unless the amount of cashflow the property provides is greatly in excess of all costs ?
If so how much would you need to be in the + to make this worthwhile, considering the risk you are undertaking ?
$50 per week
$100 per week
or more ?Please do not interpret this Q as a having a go at people who invest for cashflow it is without doubt a legitimate investing tactic, that is not in question, I am more trying to find out what peoples expectations are in the current climate.
Look forward to your thoughts,
Ben.
Without going into the capital gain / positive cash flow combination, I think you’ll find it is not so much the risk investors take, but what results will take you to your goals.
If $50pw average is what you need, so be it.
If you need 30 of these, that’s fine.
If you want to do this is four years and then retire, go for it.For some, it is less about risk and more about:
a) how many IPs at $xx per week will I need to stop working, or
b) I have certain goals and require a level of wealth to achieve them, so this means xx IPs at $xx per week.Others will have different goals and certainly different motivations driving these goals.
I find it a good exercise, sometimes it’s a little amusing, to ask people (investors) when they will STOP investing. That is, when will you reach a point in life where you do not need to invest any further? You can get a very blank look from them at this point.
As far as rural properties go, I have read and heard from several commentators, including those that have seen more than one property boom, that when the investors “go bush” it is an indication that the end is nigh. In property, this could mean only a slowing down over 1-3 years, or sideways market.
People need to realise that their property deals should be good for them over the long term(that it, take them to their goals).
One persons strategy to meet the financial committments of their goals may be 100% cash flow based. Another’s will be pure capital gain. Most will be a combination of both.
Michael
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