Hello I live in the Coffs Harbour area NSW.
My question is are Steves strategies based solely on the premise of using other peoples money???
My situation is that I am unemployed currently(this could change soon) so will find it difficult to get funds. I have 200,000 in offset against my mortgage of 90,000 if I use the 200,ooo for IP then my mortgage is 290,000.
I am struggling with the cash on cash return concept.HELLP[confused2][biggrin]Any suggestions???Hi jazpo
Getting funds will not be a problem if you have the right deal. A lender will see the positive cash flow and gladly give you the funds. But I dare say that the lender will not be the every day run of the mill bank/credit union etc. You may have to go to a Mortgage Agency or Broker to source these funds. A quick search on this site and through google etc will more than likely give you some good results.
It is important when presenting your investment property deal to the lender that he can see that you have crunched the numbers and allowed for all contingencies. This will prove that you have financial nouse and are well aware of the costs in purchasing and maintaining your investment property.
When you crunch these numbers include a current financial postion, ie $90K mortgage, payments and income, and then $290K (?) mortgage payments, income and investment property income. When seen side by side your balance sheet with the investment property should be more cash flow positive.
It is also wise to include notes such as opening a new account specifically for IP income etc, this way the lender sees that you are not comingliging (putting private and business) funds together. Open a separate account for each IP so that separate IP funds are not comingled. There are many reasons why you should do this and it is best to speak to your accountant and legal advisors for a better rundown on this very important information.
As far as cash on cash return, or COC as you may see it sometimes, it is all about the velocity of your money.
Say you buy a house for $150K. You put a $10K deposit on it and pay $5K in legal and closing costs. Your total input into that IP is $15K. If you recoop all that $15K in the first 12 months your COC is 100%. If it takes 24 months then your COC is 5%. Conversely if it only takes 6 months to get your $15K back then your COC is 200%.
I have created spreadsheets to work out all of this and now I only put the basic numbers in and the computer works out my COC. This way I can keep a record of that particular property’s fundamentals.
Anyway I hope this helps. Remember to think outside the box. Buy the newspaper on the real estate day, this is usually Saturday, and most of the brokers advertise there. Start a scrapbook to put all this information in. Don’t try and hope you will remember all this. As your progress as an investor there are more important things you have to remember.
Cheers
[gorgeous]PS I hope this posting works – its my first
Hey jazpo
Just a beginner myself, but I had a thought. Couldn’t you look for a cheaper area to buy, somewhere a bit regional maybe, but which shows a reasonable growth, and only draw $100,000 from your offset account? That way, you’re allowing a margin for things to go wrong until you can get work again. Just a thought.
The options with investing seem to almost endless, and my head is spinning with a lot of it, but it’s very exciting all the same. Good luck with it.
Kez
Kez
Or jump right in and buy 40 $50K properties.
40 Properties with an average +CF of only $20 is $800 per week.
And I can tell you, I have no properties returning that little.
There are +CF deals everywhere, and many that have good CG poptential too.Check out http://www.jaffasoft.com for a good calculator which works out wether a deal is positive cashflow or not!
Rgds.
Lucifer_au
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