At the moment i am reading the book How To Grow A Multi-Million Dollar Property Portfolio – In Your Spare Time by Michael Yardney in his book he says that "The value of capital growth over the long term will blow comparable cash flow returns out of the water" Also that rent is often a couple of years behind and that it will eventually become positive cash flow in the long run. Since i am only new hear i only have read a few posts but what i have found is that a large majority care about positive cash flow, what i want to know is what argument could the people who believe that short term cash is better than long term capital growth when buying a property since you get taxed every time you get money in your pocket.
P.S. I do not own any kind of property what i am trying to do is see both sides of the argument also i have only read a small number of posts and what the information was telling me that a majority of people just care about the short term gains. Also it is obvious that there will be a lot of people that will say you can do both if you have the knowledge of the market but in the book it says that most properties will allow you to maximize either growth OR cashflow. Now i am not trying to say that this book is the only way to invest in property because for a number of you it may be quite the opposite. What i am trying to do is get other people's point of view on the subject.
Thanks.
Hi Mdm, I dont think there is an argument about which is better growth or cashflow
both have there uses, my mrs and I using a combination of both
we have 3 cash pos IPs an 5 (inner-city) that arent and the cash pos ones definately help offset the others
but I had some awesome growth on my inne- city ones in the last 18 months in Sydney..hello,
Both need to be considered; the rental yields + the anticpated capital growth = your % total return. you should not compare one over another. Both need to be in your calculations. One pays you now and other pays you later. BOTH are yours!!
Holding a property is a very differnet questions to which is more relevant. Most (80%) investors sell their property within the first 5 years because they CAN NOT hold on to it for long term (say 15 years). Hence (sadly) end you not making any real money.
Hope this helped.
AA
I think the cashflow argument runs along the lines of you can't live on capital growth now, where you can live on cashflow sooner.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I say buy LOCATION, LOCATION, LOCATION. I have never cared about cash flow positive and I have been buying properties for over 20 years. Prime waterfront, harbourfront & beachfronts are what I call Location. The best value at the moment is in Maroubra. Prime beachfront 2 b/r units still selling under $600K, suburb next door, Coogee 2 b/r selling $1mil +. These Maroubra places will be $1mil in a couple of years. Only my opinion.
sounds like good advice.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I would love to be able to buy in maroubra, however as a single mum with three children, supporting my children myself, and only earning $57k a year, buying in maroubra is not an option for me. therefore i choose to buy the best cashflow positive properties that i can find, that allow me to be in the real estate market and earning some money now. I have a buy and hold strategy, i don't plan to ever sell. In perhaps 5-10 years time i can pay down the loan on my PPOR and then the loans on my IPs so that i am living off the rental income.
cheers
Sonya
Ideally we want to have 50/50 balance i.e. cash flow positive to fund the negatively geared growth property.
However there is possibility to invest in growth area with minimum cost if you can build unit development and sell some just enough to keep one or two remaining unit for cash neutral.
For my own experience I started with buy and hold strategy 10 years ago from unit, townhouse, house and now moving towards renovation and development.
All the best with whichever path you take.
prusli wrote:Ideally we want to have 50/50 balance i.e. cash flow positive to fund the negatively geared growth property.But couldn't you just use the equity in your current home or one of the IP's to fund the negatively geared properties?
If I understand correctly, you still have to pay interest for the money you take from PPOR and it is not tax deductible. It wont matter where money goes because we treat them as one portfolio.
Hi Blackhotel, can you please suggest some good agents I can get in touch with to buy IP in Maroubra?
You must be logged in to reply to this topic. If you don't have an account, you can register here.
