Hi all,
Lately i have started researching into property investment as i will be finishing uni soon.
I have read Steve’s article about the pro’s and the con’s of negative gearing. It seems obvious that a positive cashflow is the way to go, however i assume its not easy finding an investment property that will provide this.
My question is, is it better to wait out until you find a good investment that provides a + cash flow; or just buy when you see a good opportunity for capital appreciation and save yourself from ‘letting opportunities pass you by’??I wont be buying for about two years, maybe three – so maybe in that time it would be a good opportunity to negative gear because the market might be on its way up again (correct me if i’m wrong, i dont really know what i’m talking about
)Moreover, when i graduate i will be working for BHP on 60k per year. If i bring my income down 10k per year and slip into the lower tax bracket (and not go any lower) will that be a smart way to invest?
And lastly (to save me starting another topic), i’ve read ‘rich dad, poor dad’ already, and just wanted to know what the next book i should read is; i was thinking of something that is more practical and applies to australian law. Dont bother saying steve’s books cos they’re already on the shopping list
.Thanks
Sam
Hi Sam,
Can’t answer your Q about income/lower tax bracket, but I love books. Steves books are great, also Margaret Lomas has several very good ones, and the Reno Kings have a couple of good ones too.
There are two ‘schools of thought’ from what I can gather. The first one is that Positive Cash Flow is the way to go (I agree) and the other is purchasing for capital growth. Peter Spann has a good book about that called ‘How you could build a $10M property portfolio in just 10 yrs’
Other people no doubt have their favourites, but whatever you read, just keep reading and learning and by the time 2 yrs comes around you will be very knowledgable.
Good Luck to you! [biggrin]
Regards, SharonSharon
Thanks sharon, i’m on my way to the library now! [biggrin]
Samual,
OK, a lot of questions so here goes:
1. Earning less income to try and save on your tax bracket is a no brainer. Earn as much as you can, period. The numbers on this one are simple, there is no net benefit from being in the lower bracket as its a sliding scale.
2. There’s a lot of posts on “which book”. I agree with Shaz that Peter Spann’s book is a must read too. Maybe add John Burley’s “Money Secrets of the Rich” to your list and get the Australian version.
3. I don’t necessarily agree that +ve CF is the way to go. You need to look at your net internal rate of return (IRR). Sometimes +ve CF return less than -ve CF due to their underperformance in capital gain. Just buying for cash flow is a mugs game. Cash flow just determines servicability, you need to consider CG if you want to understand the impact an IP will have on your net equity. Your net equity is basically how much you’re worth and is the money you retire early on by buying an annuity or other such.
Do some more reading, and well done on getting into it up front.
Cheers,
Michael.I agree, +CF is not always the way to go. However, as Steve says, ‘You will never go broke making a profit’.
+CF = small profit now
-CF = loss now for hope of big profit later
)
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