Hi all,
What do you guys think about the possibility of finding positive geared property in the current market, or does the market itself not change the fact that positive geared investments exist? There is no secret that property prices are at a all time high, in my opinion we will probably see a crash in prices in the following years as did other countries have following a “bubble”. But the price of rent has not increased at the same rapid pace, hence making it more unlikely to find a property capable of returning a net positive cash flow.
I would like to know if anyone has recently seen any properties for sale, that given the 11 second rule in 0-130 properties would produce a net positive cash flow (in case you haven’t read the book its divide the rent by half, then multiply by 1000… eg 300/2 x 1000 = 150,000 is the price you should have bought to be a positive cash flow). If the property still for sale, could you point it out eg realestate.com.au…..
I recently bought an apartment, and if rented out it hits the mortgage pretty much exactly. But then I have to take into consideration the market management fee, body corp etc… So in essence its still a negative geared, but I felt like this is virtually as good as the market is right now?
My initial guess is that todays market does not permit positive cash flow properties.
Thoughts?
Joe
Positively cash flow properties definately exist, and yes I have seen many properties that fit into Steve's 11 second rule. Though I haven't seen any of these properties in capital cities, only in rural areas. But not so rural that you could never get anyone to rent it.
It Australia it seems that most of the positive cash flow properties have to be made rather than bought. Because everyone has wised onto the fact that positive cash flow investing is awesome prices are pushed up, meaning there is less chance of positive cash flow.
Look into creating a positive cash flow property through renovations, creating dual occupancy, subdivision, rent out a granny flat separately etc. If you use your creativity you can definately achieve a positive cash flow result.
As for the market being high I believe you are right. Australia is one of the most expensive countries to own a home in. But as for the market about to crash, I don't agree. The desire for people to own their own home is still massive! And with the government giving you a tax write off for negative gearing this will keep the market going strong. Just my opinion.
Good luck in finding an awesome property to invest in.
Ryan McLean | On Property
http://onproperty.com.au
Email MeHi Ryan ,
Thanks for the reply. I will start looking at rural properties, because certainly in all major capital cities I have had huge problems trying to find positive cash flow properties. I think your right about the renovation/value adding but you just need to think about that right combination of cost cutting for maximum profit but thats pretty obvious. I’m just thinking of a way to try improve rental on my apartment without overspending, it needs a kitchen and bathroom reno for sure but would you really get much more rent?
You make a fantastic point about the whole negative gearing, as I understand we are one of the few countries that allow this concept to occur as it does with tax ‘benefits’. It is not something I thought of about guarding against a price crash, that’s why I love hearing other peoples opinions. Is it enough to hold a house crash, well time will tell. Personally I hope the overvalued prices become more realistic for people, but anyway just my two cents.
Cheers
You probably would like to review the calc. formula that whoever have given to you 300/2 x 1000 = 150,000
You will never get such property; oh well if you are lucky then probably you wil have to fight one for it. The way you are thinking, I believe, many think in this way too.
Some rental properties in City, Sydney, pays 900-1000$ a week rent that added to 4000 that covers almost good amount for morgage of around 500-600 K.
Later, in long term, you will eventually make it to positive.Me and my wife are awesome at making a kitchen and bathroom look brand new with only spending a couple of hundred dollars on paint. It is amazing what a few coats of white paint can do. If you are willing to do the work.
If you have laminate kitchen cupboards that are dated you can paint over them. You have to use a primer for the undercoat (a water based one preferably) and then put your coat over the top of that. With a primer as the undercoat you can paint most surfaces…even tiles.
Once we had a blue bathroom where the walls looked like something you would find in a Winabago shower. We painted the whole bathroom white, except the floor tiles and we did the same in the kitchen. Painted a few other rooms and the rent jumped 10% after we were done. A 10% rent increase is pretty massive and can do a lot for your cash-flow.
If you put the effort in then you can get a good return on the money spent.
Positive cash flow properties do exist in capital cities. I often find them in Sydney. If you create a dual occupancy often you can turn one income into 2 or 3 incomes with not a lot of money. The more you search and the more experience you get the easier finding positive cash flow properties becomes.
Ryan McLean | On Property
http://onproperty.com.au
Email Mejoeandchels wrote:There is no secret that property prices are at a all time high, in my opinion we will probably see a crash in prices in the following years as did other countries have following a "bubble".Doom! Gloom! Doom! Gloom!
Seriously, not sure why this concept keeps coming up. Property is a supply and demand thing. Demand continues to go up because we humans continue to increase the population by means of breeding and immigration. Unless the immigration stops and the breeding reduces such that the population goes backwards, housing is going to be required in an increasing supply.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Thanks for the simple lesson in economics 101
I'm confused, did Americans stop breeding? No wonder they so cranky… hee hee hee (just playing
)ryan mclean wrote:Positively cash flow properties definately exist, and yes I have seen many properties that fit into Steve's 11 second rule. Though I haven't seen any of these properties in capital cities, only in rural areas. But not so rural that you could never get anyone to rent it.It Australia it seems that most of the positive cash flow properties have to be made rather than bought. Because everyone has wised onto the fact that positive cash flow investing is awesome prices are pushed up, meaning there is less chance of positive cash flow.
Look into creating a positive cash flow property through renovations, creating dual occupancy, subdivision, rent out a granny flat separately etc. If you use your creativity you can definately achieve a positive cash flow result.
You are spot on – I am in the process of building a duplex that meets and exceeds the 11 second rule – Market value will be $550K on completion and the rent is expected to be $1100 per week in today's market – The beauty of this deal is it only cost me $400k to build the unit and I am looking around to find more deals like this but some that are already existing – Thinking outside the square and having the right strategies certainly pays off
cheersHi KeyStrategist
Where is the duplex you are building? Melbourne?
Ive just purchased a positively geared property in NZ. There is no stamp duty in NZ and no capital gains tax. Also the rate of depreciation is 4% as opposed to Aus which is 2%.
Our property does not meet the 11 second rule, but it does still make a nice return.
In answer to your question, yes, there are still positively geared properties around, you just need to know where to look.Also, to the key strategist – who has the ability to pay $1100 in rent? I mean really?
RinHi rin,
Ryan did explain he built a duplex, so each of the duplex is renting out for $550 a week. In Sydney, that's pretty standard.
Take care.
Angel
JacM wrote:joeandchels wrote:There is no secret that property prices are at a all time high, in my opinion we will probably see a crash in prices in the following years as did other countries have following a "bubble".Doom! Gloom! Doom! Gloom!
Seriously, not sure why this concept keeps coming up. Property is a supply and demand thing. Demand continues to go up because we humans continue to increase the population by means of breeding and immigration. Unless the immigration stops and the breeding reduces such that the population goes backwards, housing is going to be required in an increasing supply.
When will we hear something different from a property bull?
That's the answer! Borrow more… moooooooore! Equity mate! Houses ALWAYS go up. Never mind your technically ridiculous market entry point.
Isn't it strange how middle class are the ones who usually get screwed over. Smart money ain't in property at the moment. Unless you're cleaning up in the USA.
Period.
krc306 wrote:JacM wrote:joeandchels wrote:There is no secret that property prices are at a all time high, in my opinion we will probably see a crash in prices in the following years as did other countries have following a "bubble".Doom! Gloom! Doom! Gloom!
Seriously, not sure why this concept keeps coming up. Property is a supply and demand thing. Demand continues to go up because we humans continue to increase the population by means of breeding and immigration. Unless the immigration stops and the breeding reduces such that the population goes backwards, housing is going to be required in an increasing supply.
When will we hear something different from a property bull?
That's the answer! Borrow more… moooooooore! Equity mate! Houses ALWAYS go up. Never mind your technically ridiculous market entry point.
Isn't it strange how middle class are the ones who usually get screwed over. Smart money ain't in property at the moment. Unless you're cleaning up in the USA.
Period.
I ain't a bull and I ain't a bear. Call me a Bearull.
The reality is, some areas will boom, some areas will bust. Australia is a different market to the U.S. Read any of the forum posts from the people investing there, they will all tell you the same.
The middle class aren't getting screwed over. They just aren't trying hard enough to change their circumstances. Far as I can tell, the global standard of living keeps rising and the poverty levels keep dropping. Google around a little.
Unless you are a global conspiracy theorist, then we need to be harassing each other on another forum!Folks compare the GFC to the Great Depression. Are you kidding me? Us GFC kiddies have no idea what difficult is!
emptyvessel wrote:Folks compare the GFC to the Great Depression. Are you kidding me? Us GFC kiddies have no idea what difficult is!Seconded. No offense to those who suffered the effects of the GFC, as I'm sure many have, however the GFC had far less of an effect that I expected. I expected to lose my job, and for my parents to lose my inheritance through failing investments (just kidding, but you get the picture). At the beginning of 2009 I remember talking with a bunch of family friends about where the property and share market was headed. All of us had expected interest rates to drop further and property and share prices to fall through the floor. Guess what? We were all wrong.
Those of us who wanted to buy a family home eventually did get one, but a number of months of opportunity passed by our very eyes, and we were so hopelessly uneducated as to not even have seen it. For that, I am particularly regretful. The sharemarket too, seemingly rebounded (without good reason) overnight and suddenly the whole storm had apparently blown over. That made me feel stupid as well, to have missed the boat. My guess is, the 'GFC' was blown completely out of proportion and people made a mountain out of a mole hill (and the media made a killing out of a story while people were fearfully making water in their pants, sitting in their little hidey-holes and preparing for the apocalypse), or the real GFC has yet to hit. The past 'GFC' turned out looking more like a 'blip' then a full-on collapse. Believe me, I was hoping for the latter so that I could go in and mop up the bargains.
After the coming crash, cashflow positive deals shall be found everywhere, you shant even need to look hard!
Sometimes it’s hard to believe this property boom kept going for as long as it did. It should have popped last time but a round of unprecedented stimulus forced a last gasp of air into the bubble. All they did was kick the can down the road and now the collapse will be even worse. Posters on http://www.AustralianPropertyForum.com have been predicting this outcome for some time, and now the scale of this coming collapse will surprise the majority of commentators, in the same way the GFC surprised most economists. Of course, there will be revisionists who will claim they predicted it all along but the truth is the majority of economists are blind optimists who couldn't see a coming train before it plows into them!
I predict that there will be a boom.
I predict that there will be a bust.
Rinse. Repeat.I am now the ultimate cause I predicted the future of the property universe accurately. Albeit at extremely low resolution.
Good news is, I am going to get richer no matter which one happens.
It's all good brother, it's all good.
emptyvessel wrote:I predict that there will be a boom.
I predict that there will be a bust.
Rinse. Repeat.I am now the ultimate cause I predicted the future of the property universe accurately. Albeit at extremely low resolution.
Good news is, I am going to get richer no matter which one happens.
It's all good brother, it's all good.
Hahahahaha!!!!!!!!!! Pure gold!
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
joeandchels wrote:Hi all, What do you guys think about the possibility of finding positive geared property in the current market, or does the market itself not change the fact that positive geared investments exist? There is no secret that property prices are at a all time high, in my opinion we will probably see a crash in prices in the following years as did other countries have following a "bubble". But the price of rent has not increased at the same rapid pace, hence making it more unlikely to find a property capable of returning a net positive cash flow. I would like to know if anyone has recently seen any properties for sale, that given the 11 second rule in 0-130 properties would produce a net positive cash flow (in case you haven't read the book its divide the rent by half, then multiply by 1000… eg 300/2 x 1000 = 150,000 is the price you should have bought to be a positive cash flow). If the property still for sale, could you point it out eg realestate.com.au….. I recently bought an apartment, and if rented out it hits the mortgage pretty much exactly. But then I have to take into consideration the market management fee, body corp etc… So in essence its still a negative geared, but I felt like this is virtually as good as the market is right now? My initial guess is that todays market does not permit positive cash flow properties. Thoughts? JoeResponding this time to your original question.
Yes, there are positive cashflow properties to be had. All over the place. Even in capital cities. You just need to search very very hard and be ruthlessly methodical with your number crunching. That's what I do. But only in large regional centres. I haven't found them in my price bracket in the capitals are renno's, which I haven't got the time, skill or contacts to do. If interest rates go up again, I reckon a few will start appearing for me.
There are even positively geared properties to be had, but I reckon these are only in mining towns, tiny country locations. Not my cup of risk tea. My properties will go from cashflow positive to positive geared over time. I can wait.
Make sure you are 100% certain that you understand the difference between positive cashflow and positive geared. And then purely negatively geared (which I would more accurately describe as negative cashflow).
I love making comparisons to the fruit and vegetable market .. or the fish market
(they are both good examples of markets at work)So … in the off season .. its harder to find a perfectly shiny apple … with no marks or bruises … for a low price. Well .. it still is possible to find one .. its just now a lot harder than the times when you have lots of fresh fruit available to the market at a good low price.
In that same way, in the property market post boom, you'll still be able to find your positively geared properties. It's going to take a little more legwork .. and a bit more bargaining, but not only are they out there .. as the market sours in some areas .. gradually there will be more good deals out there than .. average ones.
Thats where you want to be .. armed with cash or equity so you can rush in at a moments notice .. plonk a deposit down .. and get the good deals. So if you are being smart now .. you should be either frisking around for the positively geared properties a little harder, or starting to put a little more into your loans so you have a little less liability and a little more equity for when you approach the banks later on .. for the bargains. Or even .. GASP .. doing both !!! How creative is that !!!Just like the fruit market .. when times get tough you may not be able to find exactly what you want on the market .. as people hold out for a better price. But again … like the fruit market … the best deals dont happen on the market floor anyway. Be creative .. be belligerant .. be a dealmaker. And you'll be surprised at what deals there are out there.
Time to get out all those books on how to negotiate properly. They actually DO have a use.
)
Unless you are a global conspiracy theorist, then we need to be harassing each other on another forum!
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