Answers to “Where to Find CF+ Deals”

Thanks for the amazing advices Dazzling! I guess your comments will be helping us in many ways!

saw the page in Steve's book that said effectively the way to CF+ve earnings is to find properties yielding in excess of 10%, I thought, "OHHHHHH OK, that's what I have been missing, the key to wealth generation is spotting non-existent undervalued asset opportunities". I am a believer in efficient markets. Rental yields are at historical lows (hello, anyone hear of the property boom???), because interest rates are low and capital gains are taxed concessionally. Having done a quick scoot around the market even country properties sub $150k are yielding 6% max. So in answer to the question "where do you find such properties

William – I’m new to all this and have been looking at the market myself to try and familiarize myself with what’s available and I’ve come to the same conclusion as you…..well almost.

It appears that you’ve read Steve’s book and have had a quick look on the internet and amazingly didn’t find a property advertised that will actually make you money without having to do anything. If it was as easy as that everyone would be doing it. I think that a lot of work, time and investigation and a bit of luck is required to get a true CF+ property, it’s not something flicking through 2 pages of Domain.com will get you.

The current market with the low interest rate will certainly be making this situation worse, however, it isn’t likely to stay like that forever, so maybe a change in your short term strategy is required

Steve

Great post quickchick!

It sure does work To find positive cash flow deals you first have to be open to it, and believe that they are out there. I have seen it many times before – If you dont think it is possible, then you wont find them, or be able to create them.

Hi Sean

Sounds good from the surface.
What expenses? strata (if not, building insurance)? council rates? water?
Are any rented, what is the ACTUAL rent?
What is the area vacancy rates, especially for studio's ie limited appeal, got to be singles who can't afford bigger.

What interest rates can you borrow at?
Presuming you need to borrow.

Which brings up a major issue…
Will your bank lend for studios?
If area less than 50-60m squared, per apartment, you may find bank will not fund you. They don't like studios (too small).
Unless you put up maybe 30-50% equity (if you can afford to).
 
Ask your banker/ broker.
Put any offer in "subject to finance approval" as a safety clause.

quickchick 

Hi There,

For those of you interested, I have access to Cash flow positive properties in WA with prices well below median prices for this suburb.

If interested please email me :  [email protected]

Hi Financial freedom,

Just done some numbers on the Liverpool flats as quoted above (and I know the area, rents maybe likely to go up I imagine?)

52 weeks x $260pw = $13,520 rent income pa.
(Deduct for strata fees, water, council, and maybe 7%  ie $946.40 pa, for management)

$13520 pa rent divided by $220,000 purchase price gives 6.1% return less expenses.
If you can borrow at 6.5%, you have already made a loss before paying your expenses.

So at these numbers, it will still be negatively geared. Unless you put a 20% deposit down.
So $220,000 – $44000 deposit = loan $176,000.
At 6.5% interest repayments on $176,000pa  total $10560.

$13520 – $10560 = $2960 "CF+"pa.
Dont forget to deduct expenses starting $946 pa management.
ie If you have $44,000 deposit this unit will be approximately neutrally geared if you can borrow at 6.5%

If interest rates go up, it will become slightly negatively geared unless rent increases match rates. 

quickchick 

Hi Sean,

– other costs, ie managing real estate agent, council rates, water rates.
Get your solicitor/conveyancer to enquire about how much the Body Corp has in its account, what expenses it has paid in last 2 years.

– "one bed studio" bit confusing… a studio usually means bed is in the only living room.  
either way, under 50 m area, you may well have trouble getting a loan. Check with a broker!
(Easier to get loan for 2 or more bed unit or house.)

Do your research.. is $10294 ie $198pw the going rent for that building, that area?
Likewise, is $79,000 about the right cost to purchase a similar one bed unit there?
If either figure is too much, an artificially high rent will leave you with an under-performing property when "guarantee" runs out. But if that is the going rate for both, fair enough. (If you think that the area will continue to be sought after by tenants and investors in next few years.

(This may not be an exhaustive list, just what comes to mind right now.)

quickchick 

Hi Everyone, this is my first post. I have spent the last 2 days reading the whole thread. I plan on moving to regional areas after my first project listed below. Please take the time to have a read

Im 21 and have been learning/researching/networking property as a whole for the last 6 months now. I have just finished Steve's book '0-130'. I think the concept of cf+ property investing is the way to go for sure! I absolutely love property and I believe strongly I have found the area I want to put my time towards.

In September 09 I purchased my first piece of property in New Norfolk Tasmania, overlooks the Derwent River, mountain and snow views (winter), about 25-30 mins from Hobart. It's a large block on a bit of a slope that can def be subdiveded as others on the street have done so. $45000. I was going to try and build but talked myself out of it as I was even more of a noob then. Currently holding a bit under $250 p/m interest only repayments.

As i was so excited over my first property investment i naturally wanted to do more. I bought a 3 bedroom, 1 bathroom in Central Frankston, down the road along the beach from Melbourne $310k. It too had a large block which I have commenced the process of subdivision, plans and permits are being worked on currently. Unfortunately the previous landlord hadnt pushed for a rental increase for sometime so it was a little under market value. Current tenants have been asked to leave by 1st of May where I will do a 2 week clean up, paint the inside and get fresh tenants in and the prop will be back at market value for approx $300 p/w. (thats the plan anyway).

Now obviously I have 2 negatively geared properties. After the increased rent out by over $400 p/m. The company that is doing the s/d guarantees council approval otherwise money back. So.. With the gained equity of the backyard as a seperate piece of land- proposed value anywhere between $120k-$150k plus a portion of my salary. I intend to construct a 3 bedroom unit or townhouse. Finance obviously like always will be the major issue. Speaking to my broker and the s/d company i should be right.

Proposed rent will be $315-$325 + $300 for existing dwelling. Conservatively $600 p/w.
Construction $200k??? – equity gained over 100k.     funds needed $100k loan
Final result = 2x dwellings $2500 p/m rent.   Interest repayments for 2 dwellings + tassie block $2100 around.
Equity gained approx $200k.

Can anybody please give thoughts, crticism, anything!!! On this idea.

P.S Frankston is an area that is set to boom. $500million marina being built (Melbournes new port), Freeway extension (18 minutes closer to city), new state of the art huge golf course, the list goes on.

Thankyou immensely.

Thanks quickchick!

There are so may little things involved and extra’s that pop up. Especially when your a total freshman.

The land in Tassie I am waiting for a while as the subdivision has to be timed. Waiting for access from the top of the block aswell as the bottom.

You made a good point, I will email the s/d company and ask them about gas, water etc.

I appreciate your response.

Sasha