slightly confused – negative gear or cashflow positive ?

I would treat each property on there own merits, are both properties similar in terms of the future capital growth potential? Does one have even further rent potential with a few developments and/or does one need more spent on it in terms of up-keep?

Also, for property #2 is that projected rent return based on a renal appraisel and taking into account all months of the year (i.e. is it student accomodation)?

Also, looking towards the future, what do you forsee will be your barrier getting into investment property #2. Will it be cashflow/serviceability or will it be pulling together the next deposit. All other things remaining the same;
– starting with a positive cashflow property will position you well to move onto investment property #2 (in terms of loan servicability),
– wherease starting with a high growth potential property will provide you with some equity to leverage for IP#2 deposit.

ps they are great returns!  i'd love to know what town this is in!

Thankyou heaps for your reply!

Something you might want to consider is not putting all your eggs in one basket.  In other words you wouldn't want all your property in one town or reliant upon one industry.  If something happens, your entire portfolio is exposed.

Hi Yaldwyn…

wouldn’t happen to be Emerald? Only asking because I have property up in Emerald.

JT

Hi Nick

Coming in a bit late in the peace but heh here goes.

Firstly i will assume that you have already got pre-approval for a 95% lvr as that sort of lvr in a regional town might prove harder than you think. I can think of a couple of lenders but thats about it unless your existing customers.

Over and above this if the properties have been renovated then you would expect to be able to claim on both the Capital Allowance / Depreciation which being a non cash deduction will help defray some of the monthly shortfall. 

Hi again

I have not researched your area at all, nor areas near mining.  So I couldn't comment on whether either of these buys are a good idea.  You'd be far more qualified to comment than I would.  If you have done your research, then you will already know the answer.  I recently bought into an area which I had tracked for about a year by means of watching the stats in the rear pages of API magazine to watch capital growth, rental yield, and vacancy.  I spoke to council a lot about what was happening in the area, and what was allowed in general in terms of minimum block sizes, development etc etc.  I also watched http://www.realestate.com.au very closely – the for sale and rent sections, to understand prices, and how quickly stock moved.  I also spoke to many local estate agents about demand.  I went to heaps of open for inspections.  Eventually I found I knew how long it would take for a property to rent, and what it would rent for.  I'd paid enough attention to be rock solid in my understanding of the area.  The point of the story is, do your monitoring until you are sufficiently confident in what you are doing.

I myself have a number of "thoughts" that I have about investing.  And one of them is the concern about putting all my eggs in one basket.  Let's say I sunk all my cash into a mining town, and then that business closed.  All of a sudden my entire portfolio would be a little value.  Or something else like let's say a storm rips through town and damages the rooves of all your properties, and insurance either won't pay out, or takes too long to do so and you are forced to find the money to fix them yourself.  Flood.  etc etc.  The point is that if all your stuff is in one area, you are VERY exposed if something unfortunate occurs.  You don't have properties in other towns to pick up the slack when one stumbles.

I really couldn't say whether you should go 100% cash flow positive, or all negative geared.  Some people are in the positive cash flow camp.  Others are in the negative gearing camp.  Others do a mix.  First and foremost though, you need to do SOMETHING.  You can't have a property that grows in value if you don't have a property.  And also you should purchase in a manner that you can afford. No point buying property that doesn't give you room for coping with a quarter of a percent rise in interest rates.  Or an unforseen dental bill.  Or any number of other things.  A mortgage tends to last for about 25 years.  Sure you can tighten your belt for a couple of years.  Be stingy with where you'll go out due to cost etc etc.  But can you live your life this way for 25 years?  Probably not!  Purchase in a manner that you can afford, and that allows you to have a bit of a life at the same time.