How can +CF work ??
If I were a tenant paying “Dead Money” in rent in a property, which I could be buying for less than I was paying in rent, what would I do?
Let me think!
Oh yes, borrow some money from a bank together with the FHOG (if applicable) and buy a similar property to that which I was renting. And with the extra money I have left over probably buy another property to rent out (+CF of course [wink])!
Are any of you +CF investors concerned about this?
Do you have a high turnover of tenants? (My –CF properties {2} have had long-term tenants)
If my tenants want to purchase a similar property to that which they are renting they would need to have access to capital of about Double what I did {Capital Growth} and it will cost them more than double to service their debt {presuming that they borrow} than they are paying in rent now). I borrowed $260K to purchase 2 houses on a dual occupancy block ($242500). The rent is $200 and $185 PW. ($385.oo)
You guys would say I need about $485.oo pw to be +CF but after I do my tax return I am ahead. Last year I put in $175.oo per fortnight into my investment ($175 x 26 = $4550.oo). My total tax return was over $5000.oo
Over $450.oo ahead maybe a meager amount but NOT negative.
Age
Buy new!
Never Sell!There are a great deal of people out there who never entertain the thought of owning their own property.So when you say that a person could quite easily buy a property cheaper than the property they are in because it is +CF is true but not so.They are quite happy to rent.Maybe they only want to stay for 12 months and then move on.Maybe they dont want the hassle of rates,insurance,repairs etc.
There are a number of reasons people rent.
Remember that not everyone thinks the way you think so there will always be opportunities in every sector.
You can keep feeding your negative property every day.And keep working everyday so you can afford to.
There are other ways to do things and differing lifestyles my friend.
Where do you live,how hard do you have to work,how much travel do you do each day,how much time do you get to spend with your family.
All of these things are important when it comes to deciding on how to invest.
Myself,I dont work.I live in a crime free area.I can walk to the beach in 15 mins.The air is clear and free from pollutants.And because of this i,ll probably live a lot longer and will enjoy my passive income from my +cf properties.[king]Thanks Russ
I was hoping you would reply! In my short time here in thid forum I can see you konw what you are talking about
Buy new!
Never Sell!Dear Age,
How far would you be ahead(or behind) if you owned 10 or 20 properties? Negative gearing with a positive cashflow will only work for a few properties. Then you start to go backwards.
Regards
Tracey[biggrin]Hi there,
While there has been a steady approx 70% of the population owning or paying off property….Of this percentage of home owners only around 6.5% are investors:
1-prop =5%
2-props = 1.5%
3 or more props = 0.5%
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There has been a steady decline in population paying off a property since 1974 and as far as I know there is now only 26% of the population paying off homes … compared to 38% back in 1974.
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In my opinion this means that in the forseable future that there will not be a miraculous influx of buyers (5.7Million renters) to take up the slack and buy….as properties continue increasing in value and people just perferring to just rent as they cannot sustain the sacrifices these days needed to persist with the common drudgery of home ownership.- Thisis good as there will be a sustainable renting population to market to.
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The property cycle has now turned (To a bear Market) according to a presentation of statistical information supplied by the CEO of residex Mr John Edwards at the 2004 property investors conference held in Sydney in March.
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As for the +CF property scenario…. it all depends on what you really truly want… income and use of those funds today? or capital gains…. if it is capital gains … then positive cashflow and rat race freedom …will be more challenging to achieve (especially as a short term goal) as you are trying to have your pie and eat it to… not that this is not possible…. merely very challenging and very few do it successfully in a short term.
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I personally use non standard cashflowing strategies to achieve my goals with income at the forefront of my sights… so as I can use the income to my best advantage (reinvest) to then get a percentage of positive, Neutral and negative CF props to build my long term goals of capital gain and permanent financial independance…(my own personal insurance policy).Food for thought and my opinions only.
Cheers,
Kiwi[biggrin]
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