Hi all,
I have done a fair bit of research now into the whole cash flow positive way of investing and I think that it makes complete sense, however, there are a few things that I have found. These are,These points are with reference to residential not commercial
– While Cash flow positive properties do exist in Australia it would seem a little pointless investing in these properties for anything less than say 10-15% cash on cash return, unless offcourse your also getting very good capital gain as well. (I think that Steve expected a minimum of 15% return and accounted for zero cap gain.)
– It would seem based on my research that getting this sort on return on residential investment properties in areas with solid economics i.e. population, growth etc, is now very difficult primarily to the influx of investors searching for these sorts of properties.
– Many people, it seems, whom are getting these returns are taking some pretty big risks in relation to where they are buying (i.e. tiny little rural towns minimal due diligence performed). (I have heard of some investors taking these big risks for small returns as well. If we took the idea that the higher the risk the higher the return, then you would expect 20% plus cash on cash return for these sorts of areas. Would you not?
I’m not trying to rain on the parade and I don’t think that I am being negative. I am trying to identify the reality of the situation, as it exists today. This is based on my interpretation of the facts that I have gathered, and I could be and there is a good chance that I am wrong. So I am putting it out there.
Am I wrong?
Better to try to understand what is really happening and adjust the strategy accordingly.
Cheers
I totally agree with you. We are at the stage of the property cycle where the returns are not worth the effort. Again thats MY interpretation.
MarkyMark said:
“I’m not trying to rain on the parade and I don’t think that I am being negative.”
Your perspectives are welcome here, MM- don’t apologise for them- I personally don’t think you’re being negative :o) Others might, but really you’re entitled to your (well thought out, in this case) ideas. I also doubt if many people on here would disagree with your analysis.
Yes, there has been CG in pretty much every area of australia, so whilst the rural properties are now *comparitively* cheap, compared with, for example, wages, they are not something you’d just throw your money into without thinking.
Rural is one thing, regional is another. But if you can have a long-term tenant and there is a rental market in the rural town, then why not?
Choices are becoming less and less in Australia of buying cheaper properties.
Good luck in getting those 15-20% returns! What’s that again? 100k property rented out for $400?? Um, I don’t think so :o)
kay henry
Hi guys,
i agree, theres hardly anymore cheapies left in OZ, if you all remember back 6 – 12 months ago and more, there were so many properties at $50k and less, but hey, we all should have known, that one day, this flourish of Cheap Properties with High Yielding Returns, would disappear.
Though i will admit one thing, if the banks, or governments push the issue and many of the bigger banks, are happy to start lending out loans over 40 year periods, there should be a new flourish of +ve cash flow properties again….
Though in time, IMHO, i really do believe at the way the cost of property housing in Sydney and in Melbourne, we might get lucky and see 40 year loans slowly come about…
Though the question is…. will the banks consider or think of 40 year loans ????
Cheers,
sisI think 40 year Bank loans are inevitable. I often hear people say that houses can not get any more expensive in the capital cities. All the banks have to do is lengthen the period of the loan. 100 year mortgages like in Japan???? hand the mortgage over to the kids………
Spider
pay now play later
Hi Spider,
Are you serious about 100 year mortgages in Japan? and handing them, to their kids?
Cheers,
sisI read about them about 10 years ago. A family purchases a rabbit box in Tokyo for $2m (Aus dollars then) and gives a commitment that their children will inherit the rabbit box and take over the mortgage. I don’t know if I will see that in my life time BUT 40 year mortgages….as you are aware they have 30 year fixed mortages in the USA. 40 year mortgages is only a matter of time. Medical knowledge doubling every 3.7 years, people living longer. I am in my 50’s and still run marathons. When i was a kid the only running people did was to the pub. Better eating habits, more exercise. They only have to resolve 2 issues (heart, cancer) and people will be living into their 100’s. With heart they can resolve that with exercise and proper eating habits. Cancer can be resolved with early detection. Keep buying property
Spider
Pay now play later (and play big)
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