I have read Steve’s book and many of the forum posts. Like others I am having trouble sourcing positive cash flow properties… Is the positive cash flow calculated on the amount borrowed after the deposit? i.e. if a property is worth $100,000 and a deposit of $20000 is paid are the calculations based on the $80,000 or the $100,000??
Probably really clear but I am a touch confused!
A positive cash flow is based on what it costs you each year (interest, rates, maintenance, etc) compared to what it makes you each year (rent). Therefore if you have a deposit, it is not included in the figures according to Steve’s book. His CoCR formula can be applied to see if the deposit you put on the property is working for you though.
I hope that helps.
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Bundy made me do it…..
Hi Dingles
I just have to jump in here too. This is one of my points of view in a debate under another thread! See https://www.propertyinvesting.com/forum/topic/10276.html
In the forum +veCF is loosely used and is a relative term where the deposit can range from 0 to 100% to achieve +veCF. However, this compares apples with lemons for analysis and folks seem to ignore the fact that the deposit is actually part of your cash flow.
Glenn
I personally would include the cost of the deposit. You could have a deposit ranging up to 99% of the property value and in this case anything becomes +ve.
If you have a PPOR loan then I would counsel against using anything less than a 105% loan for any IP.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thanks Glenn,
We clearly think alike!
DiOriginally posted by glenetti:Hi Dingles
I just have to jump in here too. This is one of my points of view in a debate under another thread! See https://www.propertyinvesting.com/forum/topic/10276.html
In the forum +veCF is loosely used and is a relative term where the deposit can range from 0 to 100% to achieve +veCF. However, this compares apples with lemons for analysis and folks seem to ignore the fact that the deposit is actually part of your cash flow.
Glenn
Hi Dingles,
It’s my belief that the deposit should be included as part of the cashflow to get a true accounting of ALL your actual costs. Any cash going into or coming out of your pocket during any part of the transaction is cashflow.
The P&I or IO payments for the balance of the purchase price are classed as cashflow, the deposit is part of the purchase price so therefore should also be classed as cashflow.
Despite what others will say, you can’t pay a 10% or 20% deosit for something, then just forget about it for the sole purpose of saying that the property is +CF.
Just my opinion for what it’s worth.
regards
Ron
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