I am starting to have considerable doubts about this method in today’s market. Have spent many hours and spoken to many re agents who say that pgeared properties a thing of the past. I know it is possible to find some however the time it takes to find them needs to be taken into consideration when calculating how long it will take to have enough to live on this elusive passive income. The areas where they can be found also have very little cap growth. I purchased a neg geared property in Sydney two years ago and in the first 12 months made $100,000 profit. How long would it take for me to earn that with these pgeared properties?? Numbers don’t add up to me. I know Steve insists it can be done and that he is doing it. I accept what he says but how many of us are doing what he is doing. There also seems to be a lot of selling tapes, books, etc $20 tape or book times 20,000 members is $400,000. That’s also not a bad income.
Hi Judith
Reality is that this method of property investing was a lot easier a few years back before the boom hit.
Reality also is that it can still be done, but you’re right, it’s a lot more hard work.
Perhaps until prices settle down and rents rise a little, you need to look at other options, such as wrapping.
In the end it all comes back to what are your goals? If you want a regular cashflow income coming in every month, then positively geared property or wraps are your best option.
If however you just want equity, well, maybe then capital gain is what you’re after. The only problem is there are years when property values stagnate or go backwards…
I think Steve has always made the point very clearly that positive income can be relied upon, capital growth can’t, because it doesn’t always happen.
Yes, maybe historically if you hang on long enough, periods of stagnation are followed by periods of growth. But nobody has a crystal ball to tell you when those periods of growth will happen, and if you’re relying on it to happen so that you can draw down that equity to live on, and no growth happens, you’re in trouble.
I always figure that the starting point in any investing strategy is to work out what you’re trying to achieve, then find a strategy that achieves it.
I think I’m waffling now!!! Hope this all makes sense. [
]Keep smiling
FelicityHi Judith
Have you heard of Oakey? Its a small town of 4000 only 25 kms west of Toowoomba. The Defence force (we have a large helicopter base) placed 138 houses on the market about 6 years ago. Prior to seling every house was fully fenced(wooden pickets) re-painted and re-carpeted. The majority were hardiplank or camphorboard homes. The senior officers lived in brick homes.
The result was it collapsed the housing market in Oakey. The houses were withdrawn and then re-released in batches of about 8. The result was the same. They sold slowly and all the non-brick houses at about the same price ie. $68,500. All are 3 bedroom with blocks between 700-850 sq. metres.
Despite rapid price rises in toowoomba, Oakey was ignored. I found them in November 2002.I immediately bought 2 and then another 2. Word got around and the market started to pick up. the last 16 were released in february and i was lucky to get 1 more.
The best part is they are all positively geared despite only a 10% deposit. Repayments are about $100 per week (20 year morgage)and rent is $140/week. Rates average about $27 perweek.
Even better is the severe shortage of rental prperties. i checked yesterday and between the 2 real estae agents there were 3 houses for rent in Oakey.
Other good news is that we also have 2 large abbotoirs nearby which employ huge numbers of people. Recently the Oakey abbatoir announced palns to increase facilities and employ an additional 700 full time workers!!
Expansion has yet to begin but a new IGA supermarket is about to be built.
I which i had found these bargains earlier and bought 20. The bank manager was shocked that the amount i could borrow would hardly decrease which each new house as they were positively geared.
Anyway you can still consider oakey. current prices are now about $78,000 but at $145 per week are still positively geared with 25 year mortgage at 6.3%
Stamp duty is low in Qld at these prices..about $1800 per house. the soldiers were very lazy and rang the housing authority for even the slightest mishap. hence houses are in very good nick.
hope this helps
MikeMHey Daydreamer
I was interested to read your post. I was out at Oakey just three days ago, hoping to find positive cash flow properties (pcp).Spoke with the two agents. One guy had a totally awful attitude (not sure if he just reserves that for women) and the other guy had nothing near a pcp and was much help at all.
Seems to me you must have some inside contacts.
Betty
Hi Betty
Sorry to hear about your experience with unhelpful agent. I had no inside info. I found the properties listed in the Toowoomba Realtor magazine.
Surprised you were told no cheap houses available. Last months realtor had 2 pages on Oakey and this weeks local newspaper ‘The Champion’ has a large front page advert from local agent boasting about the large number of properties sold this past month all of which he has listed in the advert..total of 2.7 million $.
Did you try the other agent? Remember rentals are VERY tight and look like remaining that way.
cheershi there, what does very tight mean? In short supply?
cheers-
MiniJudith,
You only “Make Money” on a Capital Growth Property when you sell it, you can’t use the money until that happens. Also you have to consider the large Capital Gains tax grab and other fees when you try to sell it. You also have to pick your time to buy and sell.
I was wholly “SOLD” on -ve gearing a month ago, but I realise now that there are other options.
I think that the best solution is a combination of both. It really depends on how much disposable income I have to pay a loan (+ tax relief) in the hope that my profit will come by way of a capital gain.
Each to there own, and as long as people keep posting their own experiences I will continue to learn….
“Gee I wish I had’ve bought that property in Essendon 15 years ago”……..
Regards,
Milkman.
Judith
Daydreamer is right. Oakey is just one of many towns in Qld where bargains are available. The object of the exercise is to clear define in your own mind your investment goals. Whether it be to buy and retain or buy and wrap and after that what your fall back position is. Deals may appear in short supply but I guess like any business it is all about the contacts that you have. Keep searching your first property is only around the corner.
Cheers Richard
[email protected]There is no such thing as a problem.
Just a solution waiting to be foundRichard Taylor | Australia's leading private lender
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