Positive Gearers vs Negative Gearers

I am looking at keeping up the diversification in our portfolio. I have four properties that I am looking at with negotiations going well on one.

two are +ve CF and in regional NSW, one is a block of land next to one of the +ve CF properties (buy and hold with ideas to use both blocks for a development) and the last one is a brand new house which I am looking at both CG and a good yield.

So I guess I am copying SiS’s offest gearing strategies. Seems like a less risk situation for us.

‘Eat rich food, barbeque a yuppie’ [greedy]

Thing is, Master sis, that if our expensive properties had potential for both CG and rental yield that was CF+, well, we’d all be in there doing the CF thing. If only our $300k property got $600 a week rent, well, wouldn’t we love that?

But *someone* has to buy nice houses and apartments. To suggest a beautiful unit with views, or a lovely landscaped house is a bad investment just messes with my psychology, because at the end of the day, being an investor is a psychology, and we do what makes us feel comfortable. Otherwise, we’d just feel off our heads all the time- completely worried about what we were doing. Who wants to have a nervous breakdown about RE? We just do whatever feels right for us- and that’s such an individual thing.

Sis, I will buy properties that suit my headspace. I’d have no probs with buying CF+ properties if I felt they were good buys. But do prefer post-1985 apartments- I am not a renovator, and wanna set and forget.

So I guess I’m something of a neg gearer but i do have a prop that is now 10% yield- lucky me and one day, when the money runs out for me, I’ll be a “wannabe gearer”- hehe. So I’m gonna try and buy up a few more IP’s before I’m 40, so I can continue to play this fun game of monopoly.

Best CF+ is Old Kent Road
Best Neg Geared is Park Lane

kay henry

I aim for my properties are postive cash flow after tax.

However, at the moment, it is difficult to find such properties in the areas I am looking at.

CarLover

Hi Everyone,

What a wordsmith our Kay is!! Your Monopoly analogy said it all about the two sides of this debate.

I find myself in the Yack and Kay camp. More by good luck than good management (as well as the passage of time) I’ve found my 2 IP’s – which were poorly researched and backed up by little logic -have become CF+ve [tongue]. Jan Somers approach makes sense to me too, and after the first plunge into the RE pool you realise her approach is reasonably painless, even if you are putting a few dollars in.

Because I limit my contribution to around $50 a week after tax, I’m not finding many opportunities in the current market. So I plan to look around, but expect to wait a while. The wheel will turn.

Raymondo

fifi- who is henry?? hehe

fifi- I have a little difference of opinion about your idea of CF+ occurring when one has paid off one’s mortgage a bit. Here’s my ideas about it.

CF+ can occur at any time during one’s mortgage (by raising rents)- but the calculation is on the price one paid, not on how much one has left to pay on the mortgage. So, for example, on an IP, I had 20k left to pay on my mortgage before I sold it, but I NEVER considered it to be CF+. In fact, the rental yield was low, even relative to the original price I pad for it, some 9 years ago. So I think that’s a false way to calculate cash flow positivity.

The other way people sometimes call their property CF+, is by saying they paid a higher deposit. Again, I maintain that CF+ is all about rental yield VS original price one paid, and NOT on how much deposit one puts in. I could put $100k of my quity into a 300k property- a 1/3 deposit) but my measurement still has to be on the paid price and the rental yield.

Just a few thoughts ))

kay henry

Kay, what happened to Mayfair?

And in any case, I’ll take Mayfair any day.

* $400 purchase price
* $200 rent with one house depending on vacancy. With 40 squares on the board, assume this will be occupied 2.5% of the time, so the rent is $5 per circuit of the board.
* As one gets paid a fixed amount from the central bank once a circuit, this is clearly a government payment, like Centrelink. As most payments are fortnightly, we’ll assume that the actual rent is $2.50 per week, or roughly $125 per year (allowing for letting time etc).

Therefore, this is a yield of over 30%! PLUS, think of the capital gain of a property just across from Hyde Park and Buckingham Palace!

I’m off to the UK!

So chook, the most expensive one on monopoly is Mayfair? Sorry about that! I forgot the addresses and had to look them up in google this morning. Followed link to link until I came across a book called “From Old Kent Road to Park Lane”, about some guy who travelled all over England and visited all the places on the Monopoly Board :o))

Please forgive my “Latham”. [laughing]

kay henry

That’s yield, Rubba?? No, no, my friend- that would be CG in the last 12 months… here’s why.

As we know, exxy props have more CG and less yield, and cheaper ones have greater yield and less CG. So your figures for yield need to be inverted.

Really, the utilities and railways never should have been privatised. We should have just been taxed every time we landed on them, with the money returning to the box. Like a tax for playing, you know.

kay henry

No – that’s yield!

Using the same logic as in an earlier post that is what the yields work out at!

But, yes, going on the feedback of some UK colleagues I am starting to think that Monopoly prices are not a fair reflection of the UK market…[stun]

Sounds like a good idea. You could have different pieces – instead of a car, ship, cannon etc you could have a Steve McKnight, Jan Somers, Henry Kaye, Neil Jenman pieces.