Hello all,
I'm new here as well and I like reading this forum as I see plenty of intelligent insights! I have recently began studying anything I could get my hands on about investment properties as I want to be a professional invester eventually in my own right. I recently came across Steve's second book (1 to 130 properties…) and I think positive gearing is the way to go for me. I have recently written down my ideal investment to be the following:
A residential property, ideally a small three bedroom home (maybe ideal for a small family).
Positively geared (not for capital gains)
Earning minimum 40 dollars per week (positive cashflow after all expenses paid).
Located outside suburbs of Melbourne and rurals areas (idea here is to get a cheaper property to start, up to $150,000 in value).Any suggestions on specific areas to search so I can find my ideal investment property would be greatly appreciated! I am aware of the daught being a major affect in rural areas, so I've done a search online at realestate.com.au in areas like Shepparton and by using the 11 second rule didn't find anything worth pursuing at this time. I would prefer an area closer to where I am, in the eastern suburbs of melbourne, but price range is important thus my reasoning for searching the outskirts of melbourne and rural areas just outside.
Any suggestion on the above (or flaws!) would be appreciated.
My second query is are there investment clubs in melbourne (for property) as I would like to meet like minded people face to face to create business contacts in the field?
Thanks again.
Hi rjm_22.
First thing; can you tell us your name or a nick-name – your posting name is a nightmare to type after 3 chardys! What about just 22?
Sorry to tell you this, but Steve's book with the 11 sec rule is all but a distant dream in Aus these days. You have to create the pos cashflow through adding value, subdividing etc. You can't simply buy it "off the shelf" any longer.
An easier (still not that easy) strategy is to buy a property that is cashflow positive AFTER TAX.
I have talked of this already on this site, and it still seems that it is not well known.
Basically, you buy a property that is neg geared initially, but through the "on paper" deductions associated with the right type of property, the cashflow of the property ends up being positive after tax. This means you will not have to put your hand in your pocket to hold this property, and there is no tax to be paid on the profit; unlike a property that is positively geared.
There are several factors which combine to make a property arrive at a pos cashflow after tax; your personal tax rate, the rent return, the depreciation amounts, the loan interest rate; they all have an influence, but it can be calculated ahead of the purchase to ascertain whether the property will fit the criteria.
Ideally, you would buy a property in an area that has good potential for cap growth, as well as a good rent return and the on paper deductions so you can maximise your investment returns.
The building needs to be constructed after 1987 to qualify for the "on paper" deductions, and a "depreciation schedule" prepared by a quantity surveyor for the accountant to use for the tax returns.
This is the very basic over-view of the strategy. Read all the Margaret Lomas books to find out the nuts and bolts of how to do it. They are excellent.
hey LA aussie,
Thanx for the advice… sorry about the name, lol! Well i understand the 11 second rule might be outdated, hopefully not too much else is in this book tho since ive just bought it!
Ok so there is an akternative method which is good. Is there any simple filtering method you use to find property where you can thus you then break down the figures further. So you recommend Margaret Lomas books? Which ones specificly should I buy for the current market? Would you recommed any of Steves other material?How did you get started La aussie and where has it gotten you now? If you could give me an idea of how you gone about it this may help me some more. Any info would be great, and I'll buy you a beer some time!
Cheers mate
Just a suggestion – there are so many Australian books with good advice. Why don't you go to your local library and borrow them – then just buy your favourites. I think we have to tailor our investment stragegies to our particular situation, and sometimes that calls for a combination of methods. Good luck! Trish
Wow to have such a fine criteria that it "has to generate exactly $40.00/wk after costs" I wish you good luck. It is too hard for me to find these things easily and with so many sources for property and advisers and new properties out there with not much more than 6.5% return these days in good growth areas, I think you are a bit too unrealistic and are seeking the holy grail.
Please let me know if you find these properties, I will be pleasantly surprised.
DD
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