Have read Steve’s $1M property in 1 year, and I am still not quite convinced this is the way for me.
There are a lot of experienced and smart people on this disc board. I have a bit of property dev experience but do not consider myself to be an expert.
My question is:Why should I go for CF+ properties if they can only be found in remote or rural areas where capital gains are doubtful. Please don’t reply and tell me I can have both capital gains as well as CF+.I will not believe you. I understand that CF+ deals are not just lying around everywhere and have to be created not found.
Surely I can do better looking for cap gain, by adding a a bit of creative reno or development?
Cheers
GIDDO[cigar]Mmmmm, to CF+ or not to CF+, that is the question.[blush2]
At this particular time in the RE cycle it does seem that you are putting a good argument forward in favour of CG.
I believe IMHO both are possible, but would lean towards purchasing properties for CG in the next 2-3 yrs, then get set for the next round of CF+ properties before the next boom. At that stage rents will have increased, and prices remained flat (in some areas). Hey presto CF+ readily available again. [
]
Nothing like a balanced portfolio[biggrin]
Have you read Peter Spanns book -$10mil property portfolio in 10 yrs? All about CG.
Regards,Sharon
Isn’t it about working out a strategy that suits you (interests, skills, risk management) rather than one that everyone else is doing.
I agree with you that CG is often questionable in many country towns. In the last three- four years there have been a number of factors contributing to CG in country towns:
a. availability of information through the internet;
b. other finance sources because of the growth of mortgage brokers, and other productsAssuming a number of people invested because it was the ‘in’ thing to do, this money could leave the property sector and possibly has as opportunities are seen in other property markets, or other investments.
So possibly what has occurred in many country towns is akin to an arbitrage where people have spotted a mispricing which has been reduced or eliminated as more people participate.
Assuming better opportunities will occur in cities, coastal, larger regional cities, even if prices in small towns increase the increase will be lower relative to other markets.
I’m comfortable investing in some small towns where I have a good local knowledge and am confident I can handle the risks. But as I have said before i can identify properties that are now listed at 15% or more less than they were 12 months ago.
Thank you Shaztaz and no I have not read Spanns book about CG. I may get it and learn a bit more about CG.I reckon you are right about the bargains coming up in a year or 2. I am right now consolidating and getting ready for the next round of good buys. I know a lot of people in this forum seem to be buying right now, but I just can’t bring myself to buy right now, as I reckon I will do better in a year or 2. [blink]I have limited funds (unfortunately) afterall.
I do not want to buy and find the price dropping further.
Some would say I should wade in and buy anyway, if the figures add up. I cannot see the figures adding up unless I go bush. I am shy about doing this – would prefer a regional centre.
In the meantime, I am researching suburbs, and learning about financing.
Cheers
GIDDO[cigar]Hi Shaztaz and CRJ,
What would be better – 130 properties in the bush CG neutral – or 20 or so in a small city with CG potential?
I guess it all depends on the investor’s own circumstances and whether they need the income straight away; or can wait for CG…[comp]I would feel v uncomfortable owning a whole heap of non CG potential properties. I reckon I will make it up as I go along – to suit my own preferences. To each his own….
CheersHi Giddo,
I don’t think that you have read the book too well, because some of the Mappers were buying property in cities, doing reno’s/subdivisions etc… and then selling.
Apart from NZ, nobody on the MAP were buying in “REMOTE or RURAL” areas, (some did buy in large regional towns).
The moral of most of the book was – “find a problem and fix it”. I think Steve was referring to cashflow properties, as properties that will make you money in a short space of time. Not longterm buy and hold and hope.
Good luck,
Del (ex mapper)..
I don’t think Steve suggests people buy in small regional towns. I would not suggest this either. Making $20 per week cashflow with no growth potential is pointless. What happens if rates rise, or the hotwater system bursts – there goes your cashflow. And what happens if prices drop?
However you can get both cashflow +ve and high growth. I’ve seen it happen, and have done it myself.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Giddo,
I have to agree with Shaztaz and say get Peter Spanns $10M in 10 years. Particularly if your into development. His methodology is that you buy good CG potential property based on the area and gives good advice on how to select the area. He then says spot the bargain property in that area where you can add value through a reno relatively cheaply. Then revalue to free that equity for the next deposit on an IP. He calls that the endless deposit process. You’re then holding a property with good equity straight away and improved rent. You may be negatively geared but the CG potential beyond that already realised is significant.
If you follow that approach you might eventually run in to servicability problems, but that’s when you can round out your portfolio with some CF+ properties. Or you could do what Steve Navra suggests which is to use some of your equity to purchase some cash bonds or some shares which have growth and cash flow potential and are obviously more liquid than property.
There’s a lot of ways to play the game and everyone’s just got to figure out which way suits them best. Dare I even suggest wraps for CF+?
Cheers,
Michael.Thank you all,
Yeah Wilandel you are probably right, I probably did notread the book very well. Actually I enjoyed the section of the book about the mappers and can see that this is the way to go.
There were other parts of the book that described the cashflow positive concept; seems to me to be a whole different concept to what the mappers were doing. So the book did confuse me a bit in that way; but it was still useful though.Terryw and Michael white, what you say makes sense to me.
Maybe I should sit down and read the book again. It seemed to me the book was suggesting two conflicting strategies. i.e. looking for a heap of CF+ properties to get a cash flow; or finding a place where value can be added reasonably easily, and selling on. Certainly I am not in favour of buy, hope and hold. That will only work if I buy just before a boom.
Tell me if I am being too negative about the concepts Steve espouses. Anybody out there get cashflow positive property and then add some value through thoughtful changes and sell on for a good profit? I am talking about now, not last year or the year before?PLeaseeee tell me I am wrong and it can be done.Gidday Giddo[biggrin]
Here is the link for one of the mappers websites… They look like they are still powering ahead doing renos, adding value etc.
Maybe you could contact them through their website to see if it is indeed possible today.[biggrin]…http://www.dynamicduoinvestments.com/about_us.asp?cat_id=18
Regards,Sharon
go for CG what is the point in owning property that may be worht the same as what u paid for it in years too come …that is if you can find someone to buy. Everyone seems to believe that by renovating the cheep houses in rural areas they can get great rents or sell and cash in. It sounds like there may be alot of over capitalizing going on and interest rates rise
(and i would like to bet they will within 3 months) there will be less buyers able to purchase.Patience and any well located property will eventually turn cf+ but you may need to wait 5 years or so, and you will have the benefit of high cap growth.
Example 1 I bought in Scarborough WA 7 years ago $126k now worth 300k+ returning $230 a week. Time is the key.
results may vary and this is just my opinion so take the advice with a pinch of salt, what do i care[argue]
Originally posted by Michael Whyte:Dare I even suggest wraps for CF+?
Wraps work well in a rising market because you are insured against wrappee default with the equity in the house. In a falling market the wrappee can just walk away if he/she gets uncomfortable with the figures, and the wrapper cops the capital loss. Very risky. Alternatively you could skew the contract even further in your favour, but don’t expect to be treated well by ACA / Today Tonight when you haul one of their ‘battlers’ through court to chase your loss…[cap]
Hey Giddo,
I always like to have my cake and eat it, of course you need to be creative to do this.
One way to get both and remain cashflow positive is to buy 3 or 4 CF+ to every 1 CG. You have to do the sums and keep the formula ‘+’. This is an old Brad Sugars strategy.
Timing is important, the market is very patchy, but get to know your areas.
Ciao,
Aaron
]
You must be logged in to reply to this topic. If you don't have an account, you can register here.
