On the way to 2nd IP and trying to find the right strategy

It's hard to comment when we don't know the amount of equity/deposit/income you have.

regards

Mark

Income and serviceability is certainly important but one of the key factors in any successfully investing strategy is loan structure.

You can always look to source alternative funding with a lender more generous in its serviceability if the loans are set up correctly in the first place.

Debt recyling helps tremendously but there are also many risk management tools you can apply.

I built my portfolio from positive cash flow from instalment contracts and that has helped me fund and almost pay off entirely the debt on our 40 investment properties.

For everyone it is slightly different but i always say to many a virgin investor if the foundations are not sounds then you cant move forward. Lenders and many brokers have absolutely no idea how to structure a loan and without this the No Go sign appears quicker than you think.

Cheers

Yours in Finance

Hi Sam
Neutral and cash flow positive properties are more frequently available in regional areas, particularly in towns benefiting from the resource industry. The Hunter Valley in NSW and the Surat and Bowen Basins in Qld are prime examples. Also some of the port cities such as Mackay and Gladstone offer excellent opportunities for a combination of positive cash flow and potential capital growth. One option is to purchase a house or unit and furnish it to improve yields. By furnishing, you run the risk of reducing the number of prospective tenents, because of course many do not want to rent furnished, but in the areas where there is a lot expansion of existing mines, and new ones under construction, there is generally a high demand for furnished properties from itinerent construction workers on good incomes. The increase in yields on a furnished property is quite likely to push it into the cash flow positive territory, and the furniture is depreciable on tax as well. It may not take long at all to recover the cost of your furniture, and if demand for the furnished properties drops, you can remove the furniture and wherever it ends up, it has already earned it's keep.
  Another option to generate positive cash flow, especially in NSW, is to add a granny flat to a suitable property.

Tony

Mike

An instalment contract is simply what it says a Contract where the agreed purchase price is payable in a series of instalments.

Normally where a Vendor was unable to sell the property in the open market he/she may agree to sell the property by receiving from the potential buyer a given number of monthly payments. Interest would be charged on the initial purchase price and the balance would be reduced by the principal reductions amde over the term of the contract.

Title remains with the Vendor until such time as the final instalment (whether this be a number of contractual repayments or a lump sum payment) is made and the Title transfer to the purchaser.

Cheers

Yours in Finance

Richard Ive been considering vendor financing, do you set up the wraps yourself is there somewhere to find good advice on this set up?

Hi Sam,

Have you thought about Rockhampton? The entry price is a lot lower (can still get houses under $300k) and demand for housing from Gladstone is overflowing to this area pushing rental yields up as well which will help with cashflow. You would have to check the flood zones though. Pretty much okay on the north side and in Gracemere as Gracemere is set high so it may get cut off but homes do not flood. 
As well,  like Moxi said the Hunter Valley region in places such as Muswellbrook, Singleton, Maitland.  Muswellbrook is the cheaper option (again you can pick up property under 300k) with good rental yields and growth drivers one of the obvious being the Mangoola Coal mine under construction outside of Muswellbrook.  Properties in areas like these allow you to grow your portfolio without a big outlay of your own funds and with a good rental return will only be slightly negative beofre tax and overwhelmingly positive after tax.

Hi Sam,

Sounds like you have thought it through. Make sure you don't get overly excited about negative gearing – the more negatively geared your portfolio the fewer tax deductions (in percentage terms) you get.  This will limit your journey to varying degrees – even if you have a high income the brakes will be applied sooner or later.

Now I must admit I am not a reno type investor – so take what I say with a grain of salt – just make sure you know what you are doing. I have seen some renovation success stories where the story tellers have forgotten to factor in their labour and time along with general market movement into the profit calculations.

The other thing I would say is do not forget to factor a 'family' into your decision making. Dropping down to one wage with a negatively geared portfolio can be problematic depending upon how you have structure things.

Sam

Any reason why you wouldnt purchased them in a DFT?

Cheers

Yours in Finance