Hi,
I've just finished reading 0 to 130 propetrties in 3.5 years and I thought the book was easy to read and very informative. I was a bit confused about the negative spin on negative gearing, however, it all makes sense. Buy property that makes money from day 1. I have 2 investment properties, 1 is negatively geared and 1 is positively geared as I've been paying principal and interest over the past 10 years and I have just recently bought another negatively geared property after reading Seven steps to wealth by John Fitzgerald, if only I'd read Steve's book first I would have thought twice about negative gearing again.
What I would like to do now is buy positive cash flow properties that will help fund the payment on the negatvely geared properties.
The only properties I can find that appear to come close to positive cash flow are 1 bedroom apartments in CBD areas as the rental is high. My question is are 1 bedroom apartments a good investment? If they are producing a positive cash flow (or break even) I would think yes.
Does anyone have some experience or advice in investing in CBD apartments that they can share.
Regards,
Phase 4.Hey Phase4,
Welcome to the forum. I'm glad you enjoyed reading my book.
First of all, John F. and I have different approaches to property. Not better or worse, just different.
John advocates a growth focus, and then redrawing equity to buy more. Provided you buy well and have a medium to long term outlook, this can work well.
When I wrote 0 to 130, my approach was to buy +ve cashflow for income and any growth was a bonus. However, as you have identified, such properties are now difficult to find.
To answer your question directly, I wouldn't be a fan of 1br inner city apartments. I don't think there is scarcity and the rental pool of potential tenants is quite small.
This doesn't mean that property investment is a thing of the past. You can still buy +ve cashflow properties. Residential ones are mainly in regional areas, but there are good quality commercial properties that provide attractive returns.
Failing that, I suggest you build your bank doing quick turn deals, and then cash in your accumulated profits and acquire good quality commercial property.
Finally, I don't feel my first book is out of date so much as it reflects how the property market has changed and how we all need to change with it. I continue to use the information included in that book with my current day-to-day investing.
Thanks for reading the book, and for your feedback.
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
I'm also not a fan of 1 bedroom apartments especially if they are amongst 100s of others. I've got a friend who bought one 7 years ago and after owning it for 6 years sold it for about the same price as he paid for it. Unless it is something different such as next to water I wouldn't go near them.
Steve has acknowledged that it is not easy getting cash flow positive properties. So do other respected property authors such as Margaret Lomas, Michael Yardney, Melvin & Chan, Jan Somers and John Fitzgerald. Before you decide to concentrate on cash flow positive properties read a few other books. I have just read Michael Yardney's "How to grow a multi-million dollar property portfolio in your spare time" and am part way through Melvin & Chan's "How to achieve wealth for life through property investing". Both are easy reads. Both, like Fitzgerald, advocate growth based investing.
Steve McKnight's strategies are great if you are willing to put the time into his type of investing. Fitzgerald's approach suits me a lot better as I'm too busy working to put too much time into property investing. Most one bedroom apartments are definitely not growth based investments.
hleung wrote:I'm also not a fan of 1 bedroom apartments especially if they are amongst 100s of others. I've got a friend who bought one 7 years ago and after owning it for 6 years sold it for about the same price as he paid for it. Unless it is something different such as next to water I wouldn't go near them.Steve has acknowledged that it is not easy getting cash flow positive properties. So do other respected property authors such as Margaret Lomas, Michael Yardney, Melvin & Chan, Jan Somers and John Fitzgerald. Before you decide to concentrate on cash flow positive properties read a few other books. I have just read Michael Yardney's "How to grow a multi-million dollar property portfolio in your spare time" and am part way through Melvin & Chan's "How to achieve wealth for life through property investing". Both are easy reads. Both, like Fitzgerald, advocate growth based investing.
Steve McKnight's strategies are great if you are willing to put the time into his type of investing. Fitzgerald's approach suits me a lot better as I'm too busy working to put too much time into property investing. Most one bedroom apartments are definitely not growth based investments.
Since you quoted me I thought I would reply – firstly thanks for the kind words about my book – the new edition is selling very well.
I am happy to invest in 1 bedroom apartments as long as they are of a reasonable size – 50 sq mts or more and are in a top location. There's a huge tenant market out there looking for them and more are being bought by 1st home buyers (if they are in a good location).
I don't know why your friend's apartment didn't go up – it was either in a poor location or he paid too much.
I bought a whole block of 14 of them – settled in Feb 2007 – they are in the inner eastern Melbourne suburb of Glen Iris and have gone up 15% in value since I bought them (less than a year ago.)
But as I renovated the block inside and out and added courtyards to 5 of the apartments the value of this investment has gone up close to 30%.
Now if you think about it – that's about 100% on my money as I put in a 30% deposit.
I'm not telling you this to boast, but to illustrate some sound investment principals.
1. Time your purchase well.
2. Buy in an area which has a long history of strong capital growth.
3. Buy properties to which you can add value.
and sorrry to say it…
4. Cash flow is of minor significance – if you can make this type of capital growthMichaelYardney wrote:I don't know why your friend's apartment didn't go up – it was either in a poor location or he paid too much.I bought a whole block of 14 of them – settled in Feb 2007 – they are in the inner eastern Melbourne suburb of Glen Iris and have gone up 15% in value since I bought them (less than a year ago.)
But as I renovated the block inside and out and added courtyards to 5 of the apartments the value of this investment has gone up close to 30%.
Now if you think about it – that's about 100% on my money as I put in a 30% deposit.
My friend's unit was close to the Melbourne University, one of many which was suited for student use. Yes, it was probably too small but appeared to be well located.You've reinforced my point that you generally shouldn't buy one bedroom apartments which are part of a large complex, unless they have got some special features such as water views. I'm also a great believer that you should buy something in which you can add value.
Loved your book, Michael. It should be a standard read for anyone who is interested in property investing.
Great that we can get feedback from Michael Yardney and Steve McKnight, 2 of the most respected thinkers and successful doers in property investing in Australia.
Thank you all for your prompt responses and sharing your experience and advice.
I have been self-managing a cluster of 1 & 2 bedroom apartments in the Melb CBD near Vic Markets for my family, all in the same building. It does tremendously well and achieves close to 10% gross rental yield. It rents out like hot cakes as it attracts both students and professional working people alike. In agreement with the other comments, apartments are not great capital growth assets, however the ones I manage are great income assets that supplement a greater property portfolio. Only a handful of apartments are worth having. I have searched most of melbourne CBD but cannot find apartments in other buildings that justify further investment based on rental yields.
To summarise, good 1 bedroom apartments could be a good stepping stone towards bigger capital growth assets. In my experience they have been greater income producing that 2 bedroom ones. I wouldn't even contemplate 3 bedroom in the CBD.
Hope that helps.
hleung wrote:
My friend's unit was close to the Melbourne University, one of many which was suited for student use. Yes, it was probably too small but appeared to be well located.You've reinforced my point that you generally shouldn't buy one bedroom apartments which are part of a large complex, unless they have got some special features such as water views. I'm also a great believer that you should buy something in which you can add value.
Loved your book, Michael. It should be a standard read for anyone who is interested in property investing.
Great that we can get feedback from Michael Yardney and Steve McKnight, 2 of the most respected thinkers and successful doers in property investing in Australia.
Student accomodation is not the same as one bedroom apartments. Most is considerably smaller than a one bedroom apatrtment – in larger complexes and has less general market appeal.
Many compexes were sold by developers at highly inflated prices to inexperienced investors.
By the way – thanks for the kind words about my book
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