Hey Guys,
I'm 19 years old and am looking to start my investment portfolio. I have recently discovered a +Cashflow property in Mildura. Its a cheap place that rents for $180 and the loan repayments would be $111. It is currently being leased out for the enxt year. The property has obviously been flooded hence why its so cheap but appears to be in good condition and you could definately live in it.
MY QUESTION TO YOU GUYS IS:
1. Should I purchase this property?
2. does a +cashflow outway the risk of other reasons to NOT buy.HMB guys, gladly appreciate all the advice I can get.
Matt
Hi Matt,
congratulations on wanting to get into the market so early, I hope my kids will be the same at your age.
I’m no expert but I’d be checking a few things out about this property.
1. Do you know what your holding costs are for the property i.e Council rates, water bills, Landlords insurance – All of these things could add up to make your property not cash flow positive.
2. Are you sure you can get a loan on a property that has already been flooded, the bank may not be so keen?
3. What if it floods again – are you in a flood prone area?
4. The insurance costs will probably be very high due to the fact that it’s already flooded.
5. Have you checked out the structure of the house due to the fact it has been flooded? Again I’m no expert but I’d be worried about structural damage and costly water damage.I hope this is all useful for you.
TrishFirstly nothing wrong with an +clashflow property..i mean if it makes money why not? BUT cash flow isn’t the full juice of the deal; you need to look at the overall deal and capital gain ( where the real money lies) if the deal is so good why havnt it been sold yet? a few factors to look at it..
1. How easily is it to offload/sell – whats the average days on market for this area— this will determine what sort of capital gain to expect
2. Do you need a cash flow property in your current portfolio ?- are all your another IP cash flow as welll? do you have a cash flow issue?
3. This next point is debatable, but i believe the real value and wealth lies in capital gain and cashflow/rental yeild property is there to support the “capital gain property” to give it time to grow etc… so where does this property lie in your overall strategy?
4. Flood issue- this will be a deciding factor; bank will not finance it if it has a flood ratio of less then 1:50 + valuation will be an issue as well, not much of an cashflow if you need to use all your deposit or buy it at a low LVR of say 50%….
5. Insurance issue- as noted above
6. Tenancy- what sort of tenants do you get? how long? is it controlled by a company? how stable is this company and industry?Remember your risking an ~$40,000 punt (~ 20% deposit) to make $70 p/w without capital growth gonna take a while to get your money and return back.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
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