Hi, I am halfway through reading Steve's book so may be jumping the gun, but having read all the funadmentals of positive cashflow property, can someone tell me how it is that you create enough equity in these properties to borrow more to buy more? Given that in some circumstances the positive cashflow property might be in a low capital growth area. Surely bringing in $50 net cashflow a week isn't going to create a heck of alot of equity with the bank? Appreciate someone telling giving me some indication of the contributing factors of equity in PCF properties and the time it takes. Is equity for PCF properties solely through earning more through additional income streams? I guess this is the trade off or the "sticking point" between both capital gain and pcf, both require an increase in earnings from some other sources to enable expansiion… interested in your thoughts…..
Try writing a book, and selling it. The income you get from book sales should help you buy more properties…
You could call the book:
0 to 131 properties in 3.4 years.Buy under market, reno and there you have it. Equity. Reval and buy again same, same.
Not all CF+ deals are in low CG areas. You MAKE them CF+ by buying low, do a reno and THEN they attract more rent, MAKING them CF+.
Without CG it wil be impossible to create equity other than by improving the property to increase its value – or paying the loan down.
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
Just because a property is out bush doesn't mean that it won't get great capital gains. For example:
You buy a property for $300,000 near the city and it now worth $360,000, you would have made 20%
Instead you buy a cashflow property for $120,000 it only has to be worth $144,000 to have the same capital gain of 20%.
In short you will have to do more deals but you will get both cashflow & capital gains from a cashflow property.
Hope this helps,
Your CF+ property will see capital gains – chances are they just won't be as high as those in a metro area.
Have a read of Margaret Lomas's "20 must ask questions" – she talks about finding properties with both CF+ and capital growth.
Like Catalyst said above – adding value through renos (or buying at a discounted price) adds equity.
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Lloyd
All the above approaches work but we like to fix both our capital gain and positive cash flow.
For example, I would buy a "standard" family home, in a solid working class area, i.e. well away from housing commission areas and with a low percentage of rental properties. Preferably brick & tile and 3+ bedrooms. I'd then on-sell this property with vendor finance so it generates income at three points, i.e. around $15K as a deposit when the new vendor finance buyers move in, around $500 per month positive cash flow (after all expenses on the property) and the "back end profit", e.g. you buy the property for $300K and on sell it for $335K. All income from this property is declared as "investment property income".
The above property then has the potential to support your next, probably negatively geared, long term buy and hold.
We have found that starting off with a positive cash flow property first, followed by a negatively geared buy & hold, has been a great way to build our portfolio, without having to wait for market driven capital gain, i.e. we fix our own capital gain and cash flow.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
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