Positive or negative geared property?

Hi brmiau

You're right. Generally speaking – properties that are truly cash flow positive are usually found in regional/rural and/or mining areas. There are exceptions of course.

Personally, I look for properties that aren't overly burdensome too hold (so have a decent yield) but are usually slightly CF- (or close to neutral after tax) but are also likely to generate some growth over the longer term – or can be renovated easily/cheaply to gain value. I also prefer to buy in larger cities rather than regional (but it's different for everyone).

The problem with cheap, regional CF+ properties are that many are in locations where growth can be extremely slow – and in my opinion, without growth, it's going to be difficult to grow a portfolio. You might find that you've made a few thousand dollars in 5 years time – but your property may not have gone up in value.

Cheers

Jamie

Hi Brmiau,

At present you can buy nearly any investment property in any area and provided you earn around $75,000 per annum your investment property will  be positively geared with as little as a 5% deposit. 

There are obviously many variables that contribute towards a property being positively or negatively geared, however the major factors that are contributing towards properties being positively geared in city areas at present are higher rental yields (can get yields in investment properties of at least 5.5% p.a. in many cases now with very low vacancy rates) which have been increasing over the past 4 – 5 years due to the increase in renters vs buyers in many city areas and of course the historically low interest rates we have at present (Lowest interest rates in 54 years).

If you want any examples of current actual's to look over and review, contact me and I will issue you many current examples.

Granted I am biased but that concerns me!

Hi brmiau

I'm obviously a broker – so this will come across as biased but a lot of bankers (and brokers for that matter) don't know the first thing when it comes to loan structures for investors.

Your current bank will also be restricted to their own in-house products and you'll be at the mercy of their own borrowing capacity calculations.

Cheers

Jamie

1. Presuming your going for an 80% equity release – you have $112,000  usable equity –and this is based on the bank valuing your property at $440,000..

Not sure where your buying but from exp property under $150,000  falls into 4 groups ( im generalizing here…)

– Regional towns

– Low population

– Small units ( 1 bedroom or studio's  most likely) 

– Over 55's or service apartments.

^ Not the type of deal a standard bank will want on their books at 90% LVR- but as i said it depends on the location and type of property.

Gopod start- http://www.genworth.com.au/lender-centre/tools-and-resources/location-guide-australia/ type in the postcode here and if it's a cat 3 or not even on this list chances are your bank may not support that area at the LVR you want.

Possible; but you need good planning skills and speak to someone who has either done something similar or know what they are doing from an investors point of view. 

Property investing requires time, 1-2 mistakes could possible make stop you on your track.

You have a "end picture" now you need the plans to execute. if you know how to execute; all good…if you have no idea – seek help from someone who does- ie a property mentor or an experienced investor. 

Hey Brmiau,

My husband and I are also 28 and dream big and our plan is very similar to yours.

We currently own two properties and very much at the start of my investment journey.

One thing i found very useful is going to lots of free seminars and reading heaps of taxation books. (this is where you think… boring tax??) but the most important lesson i have learnt so far is how to protect yourself, with my favourite saying being "own nothing control everything"

(assuming your not an accountant?)

My view would be go see you bank manager ask him how much equity you can access (but don't sign anything) This is always something nice to know and there is no harm is asking.

The Main difference ive found between a broker and the bank manager is a broker generally have better knowledge on how to structure yourself to be able to purchase more property, they will suggest refinancing your p.i loan to a interest only loan so you have more spare income for the banks to approve loan after loan. 

Next and the most important is going see an accountant. if you wish to buy heaps of properties and wanting to hold them as investments then i would suggest you set up a trust. A trust is like an invisible person who's name is on all the properties so if someone sued u they couldn't access the value in your properties or force u to sell them. A trust is also useful to control how much tax you pay. The reason i suggest a trust before purchase is because to start a trust after you purchase you have to pay the land tax/stamp duty again to change the name. I am not an accountant so can only share the basic understanding i have but its also worth asking your broker about getting home loans through trusts. as some banks are harder than others and might advise a trust later down the track

Anyway good luck and i hope your dreams become a reality.

Hi brmiau,

This is very true what Jamie has stated. You need to make sure the loan structure is right for your circumstances and not just what the bank can provide you. We see it all the time with our clients coming to us to buy a property.

If you are looking to build a portfolio, your most important asset in the whole process is a good mortgage broker!

Hi, sounds like you are thinking along the right path. Keep reading and you will find things that click with you.

Don't forget that rents go up too.

I remember Nathan Birch telling me that his initial goal was to buy 10 properties. He planned on putting the rent up $10pw on each one every year, so after 10 years he'd have $50,000 a year to live on. Nice initial goal. I think he achieved that in a few years. He made his first million at 21.  He now has 150 properties and he's not even 30 yet.

Most people actually out surpass their goals. Set a realistic smaller goal and outline how you will get there. Then start at step 1 and go from there. The rest will follow.