My definition of CF+ is the ruling interest rate (currently about 7%) PLUS running costs (usually about 3%).
This makes 10% at present. I use 10% of the LOAN amount (not my 20% deposit). HOWEVER the property must be capable of recycling my 20% deposit (By value adding and creative development and then re-valuing) within ONE YEAR. Hence I accept the holding costs on the deposit money but only for a limited time.I don’t think it is probable at present to get 10% return on the entire value of residential property from the outset. There will be some holding costs which could be viewed as “Negative gearing” for a limited time. However I don’t consider this as negative gearing because I have the money available/organised to cover this period. i.e. I don’t have to rely on my income from a job to support the property. Tax deductions for depreciation are only tax deferral systems. They do not make a property CF+ in my view.
Robert Kyosaki’s definition (puts money in your pocket) is very simplistic but it works as a philosophy. To his definition you could add “do I need to have a job to support the property or will the property support me”
pS I break these rules regularly based on no more than a gut feeling. So who’s perfect?
LawmedMy definition of CF+ is the ruling interest rate (currently about 7%) PLUS running costs (usually about 3%).
This makes 10% at present. I use 10% of the LOAN amount (not my 20% deposit). HOWEVER the property must be capable of recycling my 20% deposit (By value adding and creative development and then re-valuing) within ONE YEAR. Hence I accept the holding costs on the deposit money but only for a limited time.I don’t think it is probable at present to get 10% return on the entire value of residential property from the outset. There will be some holding costs which could be viewed as “Negative gearing” for a limited time. However I don’t consider this as negative gearing because I have the money available/organised to cover this period. i.e. I don’t have to rely on my income from a job to support the property. Tax deductions for depreciation are only tax deferral systems. They do not make a property CF+ in my view.
Robert Kyosaki’s definition (puts money in your pocket) is very simplistic but it works as a philosophy. To his definition you could add “do I need to have a job to support the property or will the property support me”
pS I break these rules regularly based on no more than a gut feeling. So who’s perfect?
LawmedIn my view if you’re going to be working for a number of years and really want to make money in property then forget cash flow and focus on location of the property in terms of growth. Whilst a 10% yield on say a property that you’ve borrowed the whole purchase price of say 300k on gives you a positive return. That is, 30k pa (that’s a rental of $600 per week!) less the loan 21k and the rates, land tax, maintenance costs that might be another 8k giving you a grand net of 1k sounds like something for nothing but you would need 50 of these properties to even think about “I can stop soon”. In my view the aim is to buy properties that might cost you via losses (ie negative geared to start with) but have the potential to grow in value. If you can achieve both the cash flow and the growth then you’re definitely on a winner but if its just an insignificant cash flow then is it really worth all the drama? In the example above even if you made a cash flow of 10k net per year over and above the costs (rental at $800 pw) that sound good but if the value of the property hardly moves then it doesn’t look good to me. If it doesn’t have a significant growth factor then you might be better off putting your borrowed money into shares.
Cheers Carpehey guys, this is my first post. I’ve just read every post on this topic and i’ve learnt so much. Thank you to everyone for sharing the knowledge.
i’m a newbie and looking around for my 1st investment property.
House prices in sydney are expensive…therefore I am looking interstate for an investment property.
Do u guys think it’s worthwhile taking advantage of the 1st home owners grant? From an investors point of view, it shouldn’t really matter if u use it or not as long as it is cash flow positive. But it’s rare that u get money from the government.Also, does anyone know of any good books/learning material/courses that goes into detail on renovations and what’s involved and costs etc?
thanks everyoneHi, i have found a commercial/residential premises in regional NSW for 70-80 thousand with a current lease of 200p/w and rates of 960 per annum. When you run the numbers is a CoCR of approx 12% and a ROI of approx 4%. Im only a student and as such have a lot of time and no money. If anyone is interested in this property i would gladly hand over the details in return for a fair spotters fee should you purchase the property. If you have any questions please dont hestitate to ask.mailto: [email protected]
I know a place for sale today with a 3 year lease in place rented for $350/week and cost is $149K. Interetsed email fee and I will take a spotters fee of $1,000. [email protected]
Originally posted by mcollins:I know a place for sale today with a 3 year lease in place rented for $350/week and cost is $149K. Interetsed email fee and I will take a spotters fee of $1,000. [email protected]
Nice rent return – why are they selling??
Some further info please;
1. where is it
2. what is the town population
3. what is the population movement; increase/decrease
4. what is the main source of income/s in the area and unemployment rate for the town
5. what is the current rental vacancy rate in the town
6. how old is the property and construction material
7. what size is the building and land
8. is it on a main road
9. is it near amenities – parks, schools, shopping malls, transport beaches/lakes.
10. is the current tenant a govt dept
11. is it managed
12. what are the total outgoings including insurances and management fees
13. how long has it been for sale
14. what is the zoning for the property.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
To those people that say they don’t exist CHECK this one out.
I don’t think that as a rule you can buy a cash flow + property. I think you have to create it. You may be able to buy something as close to land value as possible – it will be a dump which is why it will be cheap. Do your due diligence. Tart the dump up with some good old fashioned hard yakka (or employ someone else to do it for you) new fence, coat of paint, new fence, new 2nd hand kitchen (half of them come with new appliances etc etc and then get the property revalued. You will probably been unlikely to find one in any capital city so look in major regional centres for areas with various economic input to the place (especially gov spending on infrastructure). You may be able to buy a large block with one house subdivide and sell the land and pay off the mortgage on the remaining house (or PPOR I hear the finance wizz’s saying) and rent out the remainin house. It will probably still be worth a similar amount as most people dont have time for large yards and most of us don’t have enough water anyway for gardens and lawns…Ah the colour green…I miss it……Get out there and tell a couple of real estate agents what you are looking for and if you have your finances sorted and they now you are a serious buyer then you may get a call before a potential buy even gets listed (it happened to us this week). It’s not always what you know but who you know (and how often you call them to say g’day). Cash flow positive homes are never in the best suburbs but they could be in the ‘burbs’ next door so look around a bit wider and you might beat the rush. A few months ago I didn’t think that I could find cash flow + but maybe we can if you we are patient and are prepared to buy some ugly ducklings. You could even depreciate some of the repairs/reno’s. Read Margaret Lomas’s books, not for everyone but gives you and idea on how to work out if something will be cash pos or not.
Julie
You must be logged in to reply to this topic. If you don't have an account, you can register here.
