I bought the book "0 to 130 properties in 3.5 years" and can honestly say that i like Steve's approach.
It seems honest and informative – and without the hype which i've seen in other guru's books.
I'm new to Brisbane (and Australia) – have only been here since Feb (am all the way from South Africa) and in that short time i've gained the impression that property here is extremely expensive and in short supply due to the shortfall in housing created by the influx of people not being countered with building enough housing in the region.
I also gained the impression that realtors here have an easy ride – which explains why they set inspection times to suite only themselves and not prospective clients. After all they can expect anything from 5 to 100 people to come to an inspection due to the housing shortage so why try to accomodate the prospective renter?
And its not just the rental market where those seeking a roof over their heads seem to be at a gross disadvantage (having to pay whatever rent is being asked).
From what ive seen of the seller/buyer market it seems much the same – a sellers market. Too few houses and too many people looking to purchase – which means that sellers are getting whatever they're asking, some even more as buyers fall over each other to secure a deal.
This is especially evident in real estate auctions – which are traditionally supposed to favour buyers – since bidding begins at the 'lowest' …
I have been amazed to see houses sell for more than the seller originally wanted through auction! I see this in the realtors offices where they record auction results of properties they have sold under auction. Amazing …
It is for all these reasons that i am puzzled as to how and where one could possibly in these conditions of housing shortages find positive cashflow properties? Especially around the Brisbane area…
I noticed a post by Jarrah about ++ cashflow properties in Brisbane and so emailed him my impressions of the marklet here so far – and he encouraged me to share this on the forum so here I am.
My perception thus far is that property prices in Australia are very expensive and are EXTREMELY negatively geared! This is certainly true in Brisbane.
Certainly the realtors ive spoken to think i'm an idiot for even trying to find + CF properties. They reckon they dont exist here in Brisbane!!
There is a similar forum to this on http://www.richdad.com which obviously is focused on the US market. From the posts i've read there it seems as if finding ++ cashflow deals in the US is easier than here. This is partly due to the genuine market cycles experienced over there – I recently read posts referring to "falling markets" in various areas. By contrast realtors tell me that there is no such thing as "downs" or "drops" in prices here in Australia – prices just keep going up and up and up – although at varying rates.
Is this true??
Prices do drop in Aus Neil;
realtors are good at spinning the market to beat it up. Always add a pinch of salt when talking to a realtor.
Historically, over the long term prices always go up – so if you are a buy and hold investor; no problems."I have been amazed to see houses sell for more than the seller originally wanted through auction! I see this in the realtors offices where they record auction results of properties they have sold under auction. Amazing …"
As for auctions; there has been an interesting argument between myself and a realtor called Jon Chown in the past few days regarding auctions on this forum. I like Jon and I enjoy his posts, but we disagree about auctions.
Look for the thread "I have a question on Past Auction/Sales Results???? under General Property.It probably takes 3 to 4 years for a neg geared average price property to become cash neutral and then slowly it starts to become positive as rents starts to increase beyond loan repayments.
The negative cash flow is offset against your income, so approx. half ends up tax deductible.
I therefore expect capital gain every year to outstrip my shortfall, in order to make the purchase worth while in the long term.
e.g.
purchased 2003, canungra (SE QLD),$249,000
Interest only loan, loan amount remains constant.
Cash flow negative until this year, now almost cash neutral, or minimal cash negative.
Rents have gone from 220 pw to around 340 per week.
Property value now around $350000.
Shortfall between expenses and rental income are about $20,000 over 4 years, or $10,000 with the tax deduction.
This still leaves me with a capital gain of around $20,000 per annum on average, if I exclude buying and possible selling costs.
From this year, the holding costs will become fairly minimal and probably cash pos in a year or two, if I continue to increase the annual rent.
an excellent deal, wouldn't you agree.
there is no miracle instant capital gain or cash positive, its a slow and steady process.
Your income will also steadily increase, so you can actually start to buy more property, without too much hassle.
You can generate cash positive in some country towns, but I am not sure if its worth the poor tenant hassles and poor capital gains. or perhaps buying a house with self contained bungalow.
another possibility is a cabin in a caravan park. We've brought one for under $100,000, holiday rental furnished it should return net around 10 to 12%.
Eventually the property with the capital gain will pay of the cabin loan and it will be a steady income.There is a lot that can be said about making rather than buying a cashflow positive deal. All of that has been well covered in many posts. The burning question that doesn't get answered is "are there cashflow positive deals available of the sort outlined in Steve's books?". We have found a place in reasonable proximity to Melbourne where you can buy lettable property on a good enough yield to make a purchase with up to 95% financing either cashflow neutral or positive. We have two houses there. Here are the numbers on one of them. We bought this in February. We paid $85,000 and the tenant was pating $115 per week in rent. He left and we spent a few weekends and about $2000 on paint and materials. Result $140 per week. A one and only? No we did the same thing down the road about 500 metres. Bought $84,000, untouched apart from new flyscreen mesh on a door this rents for $125 per week. These properties are two bedroomed and are on subdivisible sites. Friends have done the same 3 times in the last month.
Hopefully this will show it can be done with a bit of research. We are going to build on the subdivided land which will make the deals all the sweeter.
Have a look at Morwell. Have a look at Morwell. Have a look at Morwell.
There I've said it three times so you can't miss it.I noticed in the past year or two, it has been getting easier to find +ve geared properties with little or no work needed to make them so. This is especially true in the regional areas.
Most probably because of the drought people are panicking and selling their properties. So the prices has levelled off or even dropped, while rent has remained constant or even increased due to lower investment. Thus, making ROI excellent.
A quick search of regional VIC (because this is where i live) real estate in towns like Morwell, Horsham, Ararat, Moe, Stawell, etc throws up tons of potential +ve geared properties.
adambc wrote:Hi everyone, I, like most other forumites who have visited the forum once or twice, sometimes get a little bored with the good old stock standard question "where can I find CF+ deals?". So I decided to start a thread with suggestions for the people who ask this question, so in future this thread can be the "one stop shop" for this question. My intent is certainly not to give town names, postcodes or geographical areas, but rather to assist these people to make a start so they can get out there and look for themselves. I have a couple of pointers, and then if anyone else has anything to add please feel free. This way, the next time a new forumite asks this question, we can refer them here. So here goes… – Start by narrowing down your search, as follows: – Look for properties under $200K in your region (eg. SE Qld, NE Vic, Western NSW, etc etc). CF+ deals CAN be found in any price range (apparently), but for those just starting out it's generally best to "start small" and work your way up. Also, if you are concentrating purely on residential property (as I would imagine most people do when just starting out), you are far more likely to find yields of 10% plus in the less expensive end of the market. As a general rule, the higher the price, the lower the yield (having said that – this rule is kind of like learning English spelling and grammar. There are more exceptions to the rule than there are abiding by the rule! But it's a good start…). Another reason to start here is because this is the lower end of the market. There will never be a shortage of tenants in the lower third of the price demographic. When times are tough, people tend to "downsize". And where do they go? The lower third of the market. – Look for properties within the above price range within 10km of a regional centre. You may be able to find lots of high yielding properties in the middle of nowhere, but if the current tenants leave then you may be faced with long periods of vacancy. Also, you may find it difficult to get finance for these places. So a good rule of thumb is to look for regional centres and concentrate your search around them. – Now that you've narrowed your search down to a particular area or areas, get to know those areas. Every chance you get, drive around them. Learn the streets in your areas. Learn where the schools are, the parks, the pigfarms (!), the good streets and the bad streets. – Visit every Real Estate Agent in the area, and tell them what you're looking for. Get to know them. Establish a relationship. Develop it so that they start calling you first, before they go public, when they get a listing that sounds like what you're after. – Keep a look out for "For Sale By Owner" signs. Check them out – sometimes they can be more flexible on price or terms than those dealing through a REA. – Inspect lots of houses. Lots of them. And then even more. Each one you inspect you will learn more. And don't just wonder through them with the agent. Develop a checklist of things to look for when you are inspecting them (advertisement – Steve's "Buyer Beware" templates are great!). – Each time you find a potential property, think to yourself "what can I do to this house to improve the cashflow or add value?" Or to borrow Steve's formula from his new book "Problem + Solution = Profit". So ask "what is the problem here, and how can I solve it?" – To elaborate on the above point – LOOK for problems. Ask the agent "what is the property you've had on your books the longest?" "Who is your most difficult vendor?" "What listings do you have that you think will be hard to sell?" And then ask "why" when they show you the property. That will be the problem. Then ask yourself (silently, not aloud – the agent might think you're strange otherwise!) "how can I solve this problem?" If you can come up with an answer, do something about it – more research, confirmation on various points, etc etc. Then if you're still happy that you can solve it – make an offer! Okay – that's a couple of suggestions from me. As I said before – please feel free to add to this. I certainly haven't covered everything I'm sure! If we can make this a good comprehensive resource for the new forumites who ask this question, we will definitely be doing them a service I think. Cheers, Adam Oasis Finance for your Vendor Finance solutions Achieve the Dream! [email protected]hi adam i was wondering if the 11 second solution can still work in this day and age? i have been looking for properties and have found a few that i liked but when i did the 11 second solution it seems that it doesnt work out to be positively geared. for example a house selling for 169000 making a potential 260 dollars a week rent doesnt work out for positive gearing it says you should not be paying more than 130000.so does it still potentialy work? thanks mat.
fatboy1730 wrote:There is a lot that can be said about making rather than buying a cashflow positive deal. All of that has been well covered in many posts. The burning question that doesn't get answered is "are there cashflow positive deals available of the sort outlined in Steve's books?". We have found a place in reasonable proximity to Melbourne where you can buy lettable property on a good enough yield to make a purchase with up to 95% financing either cashflow neutral or positive. We have two houses there. Here are the numbers on one of them. We bought this in February. We paid $85,000 and the tenant was pating $115 per week in rent. He left and we spent a few weekends and about $2000 on paint and materials. Result $140 per week. A one and only? No we did the same thing down the road about 500 metres. Bought $84,000, untouched apart from new flyscreen mesh on a door this rents for $125 per week. These properties are two bedroomed and are on subdivisible sites. Friends have done the same 3 times in the last month.
Hopefully this will show it can be done with a bit of research. We are going to build on the subdivided land which will make the deals all the sweeter.
Have a look at Morwell. Have a look at Morwell. Have a look at Morwell.
There I've said it three times so you can't miss it.True, our house (which is for sale) recently rented for $180 in regional NSW, after painting a couple of weeks ago, new rental valuation of 180-220 with 200 being base (think they just put the 180 because they knew it rented for that recently) They have actually told me, they will tell prospective tenants $200+ Mind you, we aren't throwing it away at the prices you paid, but still our asking price of 148000 is quite low, specially for Narrabri right now!
Amazing what a new coat (or 2 or 3….lol) can do to a place!mathew aiken wrote:hi adam i was wondering if the 11 second solution can still work in this day and age? i have been looking for properties and have found a few that i liked but when i did the 11 second solution it seems that it doesnt work out to be positively geared. for example a house selling for 169000 making a potential 260 dollars a week rent doesnt work out for positive gearing it says you should not be paying more than 130000.so does it still potentialy work? thanks mat.I think you will find that the 11 sec formula is pretty much useless these days. Read Steve's subsequent books on his change in strategy.
However, if you lower your expectations to about 10% COCR, you will find that there are still many out-of-the-box solutions out there. Frankly this is my strategy right now. Sure I can get better returns if I try to be more creative and put in a bit more effort and running around.
But I value my time a lot, so I don't mind compromising and getting decent returns (as opposed to mind blowing returns) if it means that I can save time and spend it with my family.
"It's about time someone said it. Well done!
I too believe it is impossible to find these CF +ve properties."
You can always "create" a CF+ property. Knowing you've got the backing of the bank, you can make unconditional offers and buy at a bit of discount, go for the highest number of bedrooms on the largest block of land you can afford. Also check out the sudivision potential. Example: $270K plus $11.5K stamp duty paid for 4 BRM on 1/4 acre, 28 km from Melbourne CBD (walk to school, train, shops). Cost of new kitchen: $10K, we gave the interior a coat of paint to refresh and it was rented for $250 pw ($13,000pa)Land was consequently subdivided (cost 15K) and back block sold to a builder for $103K after agent fees). Additional costs expected around $15K for the outstanding siteworks and dbl lockable carport. If the original house is kept, over 70K of the proceeds of the sold block can go towards reducing the mortgage making it a CF + investment or that amount pays the deposit on a slightly larger property, you can do the sums and let me know if I'm wrong. (worst case scenario: you can't subdivide the land – you still have a great block which will be always in high demand and will appreciate well, and a fairly good return on your investment, so if you are not over-leveraged, your future gains are secured).
fatboy1730 wrote:There is a lot that can be said about making rather than buying a cashflow positive deal. All of that has been well covered in many posts. The burning question that doesn't get answered is "are there cashflow positive deals available of the sort outlined in Steve's books?". We have found a place in reasonable proximity to Melbourne where you can buy lettable property on a good enough yield to make a purchase with up to 95% financing either cashflow neutral or positive. We have two houses there. Here are the numbers on one of them. We bought this in February. We paid $85,000 and the tenant was pating $115 per week in rent. He left and we spent a few weekends and about $2000 on paint and materials. Result $140 per week. A one and only? No we did the same thing down the road about 500 metres. Bought $84,000, untouched apart from new flyscreen mesh on a door this rents for $125 per week. These properties are two bedroomed and are on subdivisible sites. Friends have done the same 3 times in the last month.
Hopefully this will show it can be done with a bit of research. We are going to build on the subdivided land which will make the deals all the sweeter.
Have a look at Morwell. Have a look at Morwell. Have a look at Morwell.
There I've said it three times so you can't miss it.hi fatboy,
these houses in morwell, are they in a commission area?
and if so , do you think there will be much capital growth there?would it really be worth building new in a commission area?
you would have the best house in the worst street, so to speak, (after subdividing).bicky
bicky
Have a look at Morwell. Have a look at Morwell. Have a look at Morwell.
There I've said it three times so you can't miss it.Have a look what happened to prices in the Latrobe Valley during the 1990s, have a look what happened to prices in the Latrobe Valley during the 1990s, have a look what happened to prices in the Latrobe Valley during the 1990s.
There, I've said THAT three times so you can't miss it.
Not to mention the drug problems, crime problems, unemployment problems, social problems, hoon problems, poverty problems.
I have been lurking around for awhile and there seems to be properties out there that are CF positive, unfortunately they are in areas I don't want to live in. There have been a few sales in Leonora WA so I suppose the goldfields there are picking up after the collapse of Sons of Gwalia. Is anyone familiar with the area??/
Robbie
Hi All,
New to the forum and just wanted to chip in my 2 cents and share an area that I know of which has CF+ properties (7%-11%). The area is Dysart in QLD and I believe was rated as one of the top ten boom suburbs in Australia by Terry Ryder from Hotspotting.
There is also a new mine (http://www.abc.net.au/news/stories/2007/10/01/2047736.htm) planned to open which will add to the overall growth of the town, and from this may follow the trend of some of the already boomed resource towns of W.A reaching up and over $1 mil.
Cheers,
Kass
There are cf+ properties out there….I could, in theory, build on a block I bought, get it rented and together with the depreciation, would be cf+. I think land is the key…
Building is still fundamentally the cheapest way to create an instant cf+ IP, in my opinion. In terms of "finding" a property, yes I think these days are generally over in the CBD locations, rural areas seem to be out of reach also. However, there are occasions when a dogbox pops up, and with a lick of paint, presto, it becomes cf+. Good luck all…To the people who talk about Steve's books, would you read the 5 year old paper for today's news? I don't think so…
Thank you to everyone who has been putting across all your different and diverse points in this forum, it really does create alot of thought provoking ideas for a newcomer to Property Investing (as I am).I am in Brisbane and having seen the great conversation and ideas/learnings that have been generated from this forum I was wondering if anyone in the Brisbane area would be interested in getting together over a coffee with the objective to learn and improve our own knowledge, as well as bounce ideas off each other, in an attempt to get out there and start putting all this talk into action.
I know that starting out in the area of IP is dawnting (well it is for me) so I thought that if like minded (or not so like minded people) with similar objectives (don't get me wrong I totally understand everyone will have their own individual plans and goals) got together to talk, share experience and interact with each other, it may see some of us moving from "talking about it" to "doing it and making it happen".
I know for one I need to start "making it happen – again" (having done 2 IPs in SYD) and would love to share my thoughts/idea/experience/lack of experience with others who may or may not have "done it".
Thank you once again to everyone who has posted in here, I know for one I greatly appreciate all the
ideas/thoughts/suggestions – conflicting or not!If you are in Brisbane and you are interested in getting together over a coffee please email me: [email protected]
Hi Jodie
If you ever want a sounding board in Brisbane feel free to give us a call.
I have a few IP's to say the least and am always happy to answer any questions you might have on loans structuring etc
Richard Taylor | Australia's leading private lender
Hello,
I'm extremely new to property investing (just getting to the end of reading books and starting to research locations).
I'm looking primarily for cashflow +ve deals in Melbourne's North – North/West suburbs. Could really, really use some advice from anyone who is currently investing in this area or who has previously explored this option.
… A little short on mentors in my friendship group (though many inexperienced people keep trying to tell me what to do!)
Any help greatly appreciated.
PS. Will happily buy a beer for anyone willing to share success stories relating to our chosen area!
Sarah
Dazzling… Those CF+ deals that dont meet your criteria… feel free to shoot them my way:) Im from Perth and wouldnt mind seeing examples of these properties around here! The only examples I've found are miles away and due to there rural nature are not very viable. Your help and motivation would be greatly appreciated!
g_man08
Also a newbie – and finding it fascinating
. Maybe I'm really dumb (sorry also a blonde) but have just looked at a property – small. Price $105,000. Next to a madly developing suburb. Rented for $175 a week currently. Body corp $58 – bit high. Can use $40k equity and cash of $30 – 40K. It seems like a CF++ to me – or am I dumber than I think?
Building is still fundamentally the cheapest way to create an instant cf+ IP, in my opinion. In terms of "finding" a property, yes I think these days are generally over in the CBD locations, rural areas seem to be out of reach also. However, there are occasions when a dogbox pops up, and with a lick of paint, presto, it becomes cf+. Good luck all…
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