Hi All,
Here is my situation, I have 3 IP’s all bought in the last 3 years, with the increase in interest rates, my losses per month average $1200 a month. That’s $14400 a year. I have done some calculations and determine that in order to break even, the 3 properties combine need to increase a minimum of 2% per year, which I think is fine and I am happy with that.
However, I do see my cost of living rising, and the amount I can save each month is dwindling, and the cashflow excess are starting to bite, especially if interest rates keep rising.
I need to fix the outflow of cash. So one thing I am going to do is fill in a variance form so I can get my negative gearing numbers given back to me each month instead of waiting til the end of the year for a big cheque.
I have 50K in savings and need to invest in cashflow positive investments to stem the losses. I currently have the 50K in a usaver account which makes me $200 a month or so, I need more than that, I am looking for something that generates $500 a month or more.
I have not looked into positive cashflows yet, is there such a thing? I think with this market and people holding out one can place pressure with low bid offers and see if one can strike gold…what do you guys think?
I guess my question is…from the experienced members on this board, what have you found to be the best cashflow instruments? Apartments in western sydney that have high rents yet low prices? Buying land, subdiving and building 2 – 3 townhouses? Is there another way?
Thanks all….please be gentle I am sure you all get these questions, but Im a newbie here
Thanks
Be_Rich_By_2012 wrote:I currently have the 50K in a usaver account which makes me $200 a month or so, I need more than that, I am looking for something that generates $500 a month or more.Can't help with the rest, but I saw this statement and it raised my eyebrows a bit. I'm not good with numbers, but assuming your $50K is earning you $200 per month or $2400 per annum in interest, then the interest rate is roughly 4.8%.
Consider opening up a 100% offset account that is linked to the loan of one of your IPs and then put the $50K there. Any savings you have in a 100% offset account reduce the interest on the loan accordingly.
So, if you have $50K in an offset account linked to a loan of $300K, you pay interest only on the balance of $250K. Plus, the $50K is easily accessible to you as if it were money in a savings account. The $50K as such, earns you interest at the same rate as your home loan rate (which would surely be higher than 4.8% by now), and tax free.
Just a thought, assuming I didn't miss the point.
Hey fword, sorry your right, Im earning $270 a month at 6.51%
How is an offset advantagous? Is it because I am saving on 7.16% (which the homeloan is set to) instead of 6.51%?
Be_Rich_By_2012 wrote:Hey fword, sorry your right, Im earning $270 a month at 6.51% How is an offset advantagous? Is it because I am saving on 7.16% (which the homeloan is set to) instead of 6.51%?Yes it will be saving on loan %.
That is what the benefit through offset account. However, you might have to pay for this service, yearly. I pay 300$ a year However, it includes credit card fee (yearly) too.
Hey Be_rich,
I've had a bit of luck buying student accommodation in QLD and getting positive cashflow from them. Last one I bought was a 4brm townhouse for $188k and it's positively geared with a 105% lend (admittedly I locked in a VERY good rate). Just search online for Sippy Downs and Sunshine Coast Uni.
It's certainly not as glamorous as a townhouse development or subdivisions but another 4 of these and I retire
Good luck,
AndyHi Be_Rich
I might be tempted to buy a property and on-sell it with vendor finance, so it generates, say, $500 per month positive cash flow.
We've been operating in the Vendor Finance niche since 2003 and it's worked for us as a great portfolio building tool. If you'd like to learn more about vendor finance in Australia, I suggest you do a search for Vendor Finance here and in the Somersoft forum. You'll get an immense amount of reading material in both these forums.
A few web resources that may help in your search for information about vendor finance are:
https://www.propertyinvesting.com/strategies/wraps
https://www.propertyinvesting.com/strategies/lease-options
http://www.jvpropertypartners.com.au/index.php?option=com_content&view=article&id=50&Itemid=75
http://www.vendorfinancelawyer.com.au/
http://www.vendorfinance.asn.au/ The Vendor Finance Association of AustraliaCheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hello Be rich by 2012
I have applied a couple of excellent strategies that have worked for me over the years – Subdividing is one of them as is building duplexes (another form of subdivision) – I am currently building 4 Duplexes in NSW – Total cost is $550k per duplex pair with an estimated market value of $660K on completion – rent returns based on current market of $360 to $370 per unit per week – so I create instant equity of $110k and end up Neutral to positive cashflow depending on how much cash I leave in the deal. I pay cash for my sites and use lines of credit to fund construction then refinance on completion – works a treat.
My current Qld project is a better – $800K total construction cost for a duplex – Estimated market value on completion is $550K per unit and the rent is an outstanding $1100 per week per unit (increased from $950 per week when I initially did my research late last year) – So again instant equity and cashflow positive.
Granny flats are a great way to increase yield in an existing property also – Have you looked at ways to increase the cashflow from your existing properties?
The deals are out there – its a case of seek and you shall find
cheers
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