Hi everyone
This is my first time on the forum and I’m a bit nervous about how silly I could make myself look!!
Is the whole thing about positive cashflow as simple as: If you purchase a house or unit for say $100 000 you need double the first 3 digits (that is $200 per week) in rent to make it a positive cash flowing property?
Thanks for reading this, any feedback would be appreciated.
[biggrin]Hi abhjf642
Welcome to the forum.
Basically it is the 11 sec rule.
Take the Rent, divide by 2 and multiply by 1000 gives you the price to pay for a 10.4% return. This should just about make the property cashflow positive.
$180/week rent will make for a property worth $90000.
You could also do a search for postings on the 11 sec rule.Regards
Hello
This is my first time too. I am half way through reading the book – sounds good but is there an argument against it? I believed in negative gearing until the book got me questioning it and now I’m not sure what to believe.
If you follow Steve’s philosophy, is there any benefit it studying property management or other real estate courses?[confused2]
Hi Snooze
I’ve read the book and will be starting it yet again very shortly. I agree that it does make you question everything you ever thought about investing in propety.
From my searches on the internet I’m finding it extremely difficult to find positive cashflow properties but I guess it means keep looking for now.Hi ab (mind if I call you ab?)
Yes that is the 11 second rule but (there is always a but [evo]) there are as many equally other important issues that need due consideration too.
Finding a property meeting the 11 second rule is important if you are cashflow focussed but then there is also rental demand, short, medium and long term prospects for the locality, infrastructure considerations and so on.
By the way – welcome and ask all the questions you want – the only silly question is the one not asked.
Derek
[email protected]Read my comments? Think I can help you? PM or email me.
Hi Ab
thanks for your reply. I too have been surfing the net all day and the only thing approaching a positive cashflow property (using the 11 sec rule) was a commercial one, and now I need to go back to the book and look up what it said about commercial property.
I can see that this is going to be a long project however I’m willing to give it a go. I do enjoy a challenge! and it would be cool to be working for yourself.Snooze – found out that you can’t live on negative gearing?? Well unfortunately it’s true. As it has been said – How many negative geared IP can U afford?? 1, 2 or 3, Max?? How many positive geared properties can U afford?? As many as you can get!
Steve’s techniques are quite universal, and many other people teach similar concepts, some in more depth (as Steve’s book was more an overview – but still an excellent one. Education is one of the mosyt important things when it comes to investing, so read as much as you can.
Rgds.
Lucifer_auHi Again Snooze
I’m with you I’d love to have the money to walk away from my job. At the moment I’m dependent on my fortnightly wage and at this stage will be for some time but who knows where we could be in 10 years time from now.
Good luck with your reading and searching.
abYou need to look at what your objectives are. -ve gearing can have its place for someone on maximum income tax rate, where the property value is expected to grow fast enough to recover your tax losses.
Steve’s +ve cashflow does have the advantage that the sustainability of the investment does not depend on you keeping your job or keeping the tax deductions.
Remember too people like Margaret Lomas consider positive cashflow where the income from the properties plus the tax refund exceeds the cash out.
It’s horses for courses. You need to look at what your objectives are, what the risks of the different approaches are for you, how you can manage the risk.crj
Hi, Cash-flow positive simply means that all the incomings from an investment (rent, dividends etc.) are greater than all the outgoings (interest, rates, maintenance etc.).
I suggest strongly that you read “0 to 130 Properties in 3.5 years” asap!
Cheers
Paul Hodson BEc GradDipDipAppFin AFPA
As myself and others have stated here before..’don’t’ buy simply because a IP is + geared, there are many out there in Regional areas ‘cheap as chip’s’, however.. would you want them ?
Look at the Population trends and Economic trends of an area you feel meets your criteria ( in saying that, the first thing is to have a Strategy ), most + Geared IPs are older properties, some in dire need of repairs, others are well kept and a bonus, someone on this site described a lot of them as Sh*^#boxes, why buy in a one horse town – if the horse then ups and leaves, so make sure you have a reasonable tenant base..
If your going to invest $1000’s make sure you invest well, otherwise you have an expensive holiday home !
If you don’t have the time or the inclination to conduct your research, utilise the services of Westan, Bear 1964, MiniMogul or RussH, who offer spotters services..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Hi Ab,
also welcome to the forum.
Yes that’s the 11 second rule and you’ve pointed out a quicker method of calculating it.
Of course this should NOT be your only factor in deciding on a property. Steve makes a point of this in the book. It is just a very first step to sort the possibly good from the bad. Once you’ve narrowed down your choices that’s when the due diligence process (the real fun
) begins.Originally posted by abhjf11642:
This is my first time on the forum and I’m a bit nervous about how silly I could make myself look!!That would be hard considering you didn’t start off like:
“HI I AM NEW HERE AND I WOULD LIKE SUM ADVISE”
The rest of your post sounds fairly close to the 11 second rule as discussed. Still do your research though.
Originally posted by Lucifer_au:Snooze – found out that you can’t live on negative gearing?? Well unfortunately it’s true. As it has been said – How many negative geared IP can U afford?? 1, 2 or 3, Max?? How many positive geared properties can U afford?? As many as you can get!
Hi Lucifer_au,
i would have to disagree with your comment about “found out that you can’t live on negative gearing?? Well unfortunately it’s true.”
i would have to disagree, my mentors and the person i deal with, has about 30 – 40 negative geared properties, for myself also i carry a load of about 7 negative geared properties and 4 of them are heavily negative geared. though i do use offsetting principles (some can also be classed neutral gearing), but it is possible to have many -negative geared property and still have them running at a postive gearing ratio…
Cheers,
sisOriginally posted by Still in School:
it is possible to have many -negative geared property and still have them running at a postive gearing ratio…What do you meant mate? you gave me a headache. Please explain?
if it is -vely geared, then it got to be -vely geared, right? don’t tell me you’re going to add dep sch into this.
Kind regards
Chan Dollars
[Retire Young, Retire Rich] [strum]huh, sis i don’t get it
how do you plan to retire so early with all these props so negatively geared
live on fresh air?
are these props already being paid off to a point of positve gearing
what about all that maintanence of props $^!#
i find these can really take a lot out eg insurances, PM fees, repairs, land tax etc
i have 4 props +ve about 10k/yr but after costs its less than half of that with 500 K mortgage
so if i live on fresh air alone, great i can retire now and spend 5K on entertainment every year for the next 35 years NB im 30
PLS EXPLAIN (in Pauline Hanson’s tone – i’m sure u love her Chan$ – lol)CHAN$
Still in School has thrown me there also, just when i thought i was getting a grasp of his ‘Offset principles’..[confused2] Doh..!
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Hi there, just a guess, but perhaps SIS is talking about having a few pos geared properties supporting each negative one, say four positve ones paying for the one negative one, ration 1:4?
Hi All
Possibly what is refered to is redrawing the increasing equity to finance the -ve holding cost and also provide defered tax income based on spending the drawdown rather than having a taxable income.
A more detailed explanation can be obtained via Steve Navra. A link that explains some of this is here http://www.somersoft.com/forums/showthread.php?t=14957
Personally I see this strategy as a high risk strategy as in a flat market and increasing interest rates you can actually go backwards.
Cheers
) begins.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
