Where o where?

Hi Brown,

If I recall in Steves second book, the 11 second solution doesn’t really cut it anymore and is just a guide. It is more how you invest not where – problem + solution = profit.

Good Luck,

Ian

Geo – And why would you want to do that?

Geo,

I think Yack’s question was broader than just where to look. I think he was questioning the wisdom of looking further afield to chase positive cash flow. He’s questioning the methodology, not its execution.

I too would not be looking further afield at the moment. I think the ripple effect that rural housing has experienced has passed. Spann describes it like dropping a pebble in a pond. City prices go up so people look further afield to get the yield they want. Of course, the equity growth follows this as people chase these types of house. But once the ripple has passed its time to look back to the centre for the next pebble.

I’d be sticking close to big city centres and waiting for yields to increase and then buy on the lead indicator of the pending market growth. Then let the CG return the big bucks and let the rents catch up once the market softens again.

But hey, its horses for courses, and if you want to make 30 bucks on a $20K investment, don’t let me talk you outta it.

Cheers,
Michael.

I’ve seen a number of properties recently where the returns are cf+. The issue is whether the towns they are in are good risks, prices in many of the smaller towns have dropped, some of the smaller towns based on agricultural industries in NSW particularly in the north west where irrigation farming has been a driver of employment are going to have to adjust to restricted water availability, in many small towns managing agents don’t exist.
Look for things like demand from gov’t dep’ts for longterm leases eg police force etc which might minimise vacancy risk/tenant selection risk

inez,

Unfortunately, I am breaking the golden rule of posting and that is, quoting another post I read on this forum (and not actually referencing as I don’t know where I read it [biggrin]). I read on the forum somewhere that Steve’s second book was written to allow for the fact that the market economics today have changed since he wrote his first book. A lot of Steve’s gains in “from 0 to 100” were maid from capital gain, even though he was buying for +ve CF. The warning is that you can not necessarily aim to replicate Steve’s achievements in today’s market. If you buy for +ve CF, then that may be all you get and potentially run the risk of -ve CG more than offsetting the cash flow. ie. you go backwards. In today’s market you need to consider the potential for -ve CG in any purchase decision whether you’re buying for cash flow or not. eg. Why would you invest $10K to make $10 a week on a property losing $10K pa in value? Sure you’re CF +ve, but in a years time you’re net worth has gone down by $9.5K. This is a really simple example with no real detail applied, just to illustrate the risk in today’s market.

IMHO, you always have to factor CG in to your purchase decisions. I think CF is all about servicibility, and you make your money on CG. You won’t get rich on 10 bucks a week on your $10K.

Cheers,
Michael.