All Topics / General Property / Positive Cash Flow Properties – Real world examples

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  • Profile photo of superAndrewsuperAndrew
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    @superandrew
    Join Date: 2014
    Post Count: 188

    A lot of starting investors find it hard to find positive cash flow properties and are looking for real world examples of these properties rather than the method of finding them. Steve’s book provides a very good starting point and method which most starting investors should be familiar with.

    Over time I will list the ones I find on this thread. I will only focus on houses, townhouses and units but exclude studio apartments but make an exception for a few 1 bedroom apartments.

    Let’s start it off with these 3:

    http://www.realestate.com.au/property-townhouse-qld-carrara-116682683
    http://www.realestate.com.au/property-house-tas-wynyard-113958007
    http://www.realestate.com.au/property-house-tas-somerset-112780415

    Please note that no one should just go and buy these properties without conducting any further research.

    superAndrew | Property Analyser and Finder Tool
    https://property-analyser.com.au

    Profile photo of EngeloRumoraEngeloRumora
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    @engelorumora
    Join Date: 2010
    Post Count: 618

    Hi superAndrew,

    I have been living and buying properties in the US for the past 2 years. The properties that Steve talks about in the first edition of his first book is pretty much whats going on in the US market at the moment.

    There are cash cow properties falling off trees. I do believe that investors that already have established and Australian portfolio should consider the US market due to the differences between the 2 markets.

    Thanks and have a great day.

    ps. The numbers on the links you posted look very decent for Australian investing standards.

    EngeloRumora | Ohio Cashflow
    http://ohiocashflow.com/
    Email Me | Phone Me

    F@#$ THE REST WORK WITH OHIO CASHFLOW TO INVEST

    Profile photo of BenBen
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    @albanga
    Join Date: 2014
    Post Count: 54

    Hey superAndrew,

    These look like some really decent finds. I myself am halfway through Steves book so still learning so much.
    Could i just ask what would be your sums on say the Wynard property to get the end positive cashflow result?

    Just roughly I would think 210k purchase including closing costs. So a 42k deposit to avoid lenders insurance which means an outstanding loan of 168k
    On an interest only loan of 5.5% over 30 years the annual payment would be say $9350.
    Rates and insurance around that area I really have no idea but roughly i would guess $1500.
    Then minus say 7% for management fees (I have never rented a property but understand its around that?) so lets say $20 a week which means the actual rent would be $260 per week.

    So my sums would be 260 * 52 weeks = $13,520 incoming
    $9350 loan + $1500 rates,insurance = $10,850 outgoing
    Total positive cashflow = $2670

    I guess you also need to factor in some maintenance and repair but i have no idea how to calculate that or a rule of thumb to use.

    Also just another quick question, could I ask what your search strategy is for finding these properties in realestate.com? What sort of criteria do you search for?

    Thanks :)

    Profile photo of superAndrewsuperAndrew
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    @superandrew
    Join Date: 2014
    Post Count: 188

    Sorry Engelo, can we please use this thread for examples of Australian positive cash flow properties that are currently for sale only? There are numerous other threads on US properties.

    There have been a lot of positive cash flow US properties for a few years now. I also agree that for established Australian Investors they could add value to their portfolio.

    I personally don’t know much about the US property market and economy. At least not enough to make a confident prediction of the market and therefore to commit in investing my money. I also never invest in a market that is generating a lot of buzz. But that is just my personal preference.

    superAndrew | Property Analyser and Finder Tool
    https://property-analyser.com.au

    Profile photo of superAndrewsuperAndrew
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    @superandrew
    Join Date: 2014
    Post Count: 188

    Hey Ben

    I am developing a positive cash flow property finder tool and am using that. I don’t have an online version of it yet but am working on it.

    For maintenance and repair I would make a provision for $800. Usually maintenance and repair mostly go towards kitchen and toilet related problems but there are of course others too.

    superAndrew | Property Analyser and Finder Tool
    https://property-analyser.com.au

    Profile photo of BenBen
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    @albanga
    Join Date: 2014
    Post Count: 54

    Hey SuperAndrew,

    I am really interested to learn more about your application. How far developed is it?

    Also how did my other sums stack up? Would you say i am on the right path? Or am missing a few key things?

    Profile photo of superAndrewsuperAndrew
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    @superandrew
    Join Date: 2014
    Post Count: 188

    I development the application for my own use but am working on a more user friendly online version. Can’t tell you for sure when it will be ready. I am in the process of doing a property development and haven’t had much time for anything else.

    Use this spread sheet as a guide if you don’t have your own:

    http://www.passgo.com.au/investment-property-analysis-tool.html

    with these inputs:

    Property value (1) $210,000
    Deposit (2) $42,000
    Rent p.w (3) $280
    Capital growth rate (4) 3%
    Inflation rate (5) 2%
    Interest rate (6) 5.50%
    Income tax bracket (7) 30%
    Property expenses (8) 25%
    Purchasing costs (9) $0
    Borrowing costs (10) $3,000

    Property expenses are estimated at 25% including management fees, etc. (see the notes section)

    superAndrew | Property Analyser and Finder Tool
    https://property-analyser.com.au

    Profile photo of superAndrewsuperAndrew
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    @superandrew
    Join Date: 2014
    Post Count: 188
    Profile photo of BenBen
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    @albanga
    Join Date: 2014
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    Thanks mate, that spreadsheet is fantastic.

    Cheers and i look forward to hearing more about your application.

    Cheers

    Profile photo of superAndrewsuperAndrew
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    @superandrew
    Join Date: 2014
    Post Count: 188

    None of the other members want to contribute to the list?

    http://www.realestate.com.au/property-house-qld-east+innisfail-116014499

    Vacancy: 1.7%

    Spend $5,000 and rent it fully furnished for at least $300.

    • This reply was modified 10 years, 6 months ago by Profile photo of superAndrew superAndrew.

    superAndrew | Property Analyser and Finder Tool
    https://property-analyser.com.au

    Profile photo of Tony FlemingTony Fleming
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    @the-dark-knight
    Join Date: 2008
    Post Count: 396

    So a 42k deposit to avoid lenders insurance [/quote] LMI can be very useful ally if you want to continue to build your portfolio.

    Tony Fleming | Triumphant Property Group
    http://www.triumphantpropertygroup.com.au
    Email Me

    NSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury

    Profile photo of superAndrewsuperAndrew
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    @superandrew
    Join Date: 2014
    Post Count: 188

    http://www.realestate.com.au/property-house-qld-dirranbandi-116828331

    Price: $85,000.00
    Rent: $150 per week

    superAndrew | Property Analyser and Finder Tool
    https://property-analyser.com.au

    Profile photo of BennyteeBennytee
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    @ten_burner
    Join Date: 2006
    Post Count: 243

    So a 42k deposit to avoid lenders insurance

    LMI can be very useful ally if you want to continue to build your portfolio.[/quote]

    Agreed, on another note (not trying to be negative) I don’t think I would want to tie up 42K in most of the properties that have been listed, not sure you would get it back easily.

    I know its tempting when you see good cash-flow especially in Australia, however I would advise against investing in hick towns (I am generalising) in the middle of no where.

    Profile photo of BennyteeBennytee
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    @ten_burner
    Join Date: 2006
    Post Count: 243

    http://www.realestate.com.au/property-house-qld-dirranbandi-116828331

    Price: $85,000.00
    Rent: $150 per week

    Dirranbandi has population of 437 people, although it positive cash-flow, in my experience the rent and value will most likely be the same 5 years from now.

    Profile photo of BennyteeBennytee
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    @ten_burner
    Join Date: 2006
    Post Count: 243

    Hi superAndrew,

    I have been living and buying properties in the US for the past 2 years. The properties that Steve talks about in the first edition of his first book is pretty much whats going on in the US market at the moment.

    There are cash cow properties falling off trees. I do believe that investors that already have established and Australian portfolio should consider the US market due to the differences between the 2 markets.

    Thanks and have a great day.

    ps. The numbers on the links you posted look very decent for Australian investing standards.

    Agreed the US is where its at for cash flow, its the stuff you dream about back here in Australia. I have not had a single issue with tenants, rent etc in the US.

    Profile photo of superAndrewsuperAndrew
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    @superandrew
    Join Date: 2014
    Post Count: 188

    I saw a post on this forum not so long ago which was posted in 2006 that is talking about +ve cash flow properties in the US.
    https://www.propertyinvesting.com/topic/4385123-usa-positive-cashflow-properties/

    This is 2 years before the financial crisis. So the US has been full of +ve cash flow properties for over 8 years now… where are all these +ve cash flow properties coming from?

    I am not trying to be negative and I believe that there are +ve cash flow properties in the US but here are some of the reasons that deter me from US property.

    People are reporting 30% gross yields in the US. I wonder why the tenants don’t borrow (even at 10% interest) and buy these properties instead of renting. An example I saw was a property that cost $50,000 and was being rented out for $300 per week. Borrowing at 10% would cost the tenant less than $100 per week in interest. 1/3 of the rent. Seems weird to me why they would pay these high rents and not purchase the properties.

    One reason could be that banks won’t lend to them because they don’t meet their lending criteria. That would be a worry to me. How can they afford $300 rent per week when the bank thinks they can’t afford $100 interest.

    Maybe the US banks don’t lend for these properties because of whatever reason they might have. So as an Aussie you will need to borrow locally by using cash or equity (I doubt that Aussie banks will lend to buy US properties).

    So essentially you are helping pay off US debt or transferring it to Australia.

    Also why would someone sell an investment that pays 30% yield?

    Agreed, on another note (not trying to be negative) I don’t think I would want to tie up 42K in most of the properties that have been listed, not sure you would get it back easily.

    Actually I would prefer to tie up my money in Australian properties than in US properties that US investors don’t want themselves.

    Dirranbandi has population of 437 people, although it positive cash-flow, in my experience the rent and value will most likely be the same 5 years from now.

    That’s 9.2% yield for 5 years. Doesn’t sound too bad to me even though these properties are supposed to be examples only and not investment advice.

    Just out of curiosity. How much capital and rent growth has there been in the US in the last 5 years?

    superAndrew | Property Analyser and Finder Tool
    https://property-analyser.com.au

    Profile photo of superAndrewsuperAndrew
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    @superandrew
    Join Date: 2014
    Post Count: 188

    Here is one in Brisbane City. Under contract.

    http://www.realestate.com.au/property-unit-qld-brisbane+city-115644295

    Price: $250,000 neg
    Rent: $360 per week

    superAndrew | Property Analyser and Finder Tool
    https://property-analyser.com.au

    Profile photo of BennyteeBennytee
    Participant
    @ten_burner
    Join Date: 2006
    Post Count: 243

    I saw a post on this forum not so long ago which was posted in 2006 that is talking about +ve cash flow properties in the US.

    https://www.propertyinvesting.com/topic/4385123-usa-positive-cashflow-properties/

    This is 2 years before the financial crisis. So the US has been full of +ve cash flow properties for over 8 years now… where are all these +ve cash flow properties coming from?

    I am not trying to be negative and I believe that there are +ve cash flow properties in the US but here are some of the reasons that deter me from US property.

    People are reporting 30% gross yields in the US. I wonder why the tenants don’t borrow (even at 10% interest) and buy these properties instead of renting. An example I saw was a property that cost $50,000 and was being rented out for $300 per week. Borrowing at 10% would cost the tenant less than $100 per week in interest. 1/3 of the rent. Seems weird to me why they would pay these high rents and not purchase the properties.

    I suspect the credit crunch played a largest part post GFC, however I believe it is similar to reasons why people in Australia don’t own property, no deposit, wages are lower, more interested in lifestyle. However I try not to over analysis on a macro level, I have found places in the US where I can safely walk down the street an my property manager is happy to manage them & I get my rent(20% gross)each month.

    One reason could be that banks won’t lend to them because they don’t meet their lending criteria. That would be a worry to me. How can they afford $300 rent per week when the bank thinks they can’t afford $100 interest.

    Maybe the US banks don’t lend for these properties because of whatever reason they might have. So as an Aussie you will need to borrow locally by using cash or equity (I doubt that Aussie banks will lend to buy US properties).

    I only use cash at this point in time, however I believe it is extremely difficult to get mainstream finance on resi property as a foreigner

    So essentially you are helping pay off US debt or transferring it to Australia.

    Also why would someone sell an investment that pays 30% yield?

    The same reason people in Australia sell property.. to realise a gain, retire, death, divorce, perhaps its their investment strategy.

    Dirranbandi has population of 437 people, although it positive cash-flow, in my experience the rent and value will most likely be the same 5 years from now.

    That’s 9.2% yield for 5 years. Doesn’t sound too bad to me even though these properties are supposed to be examples only and not investment advice.

    That 9.2% gross rental sounds average, once you minus property management fees, rates/ water, the inevitable long term vacancies you get in hick towns. Compounded by the fact of no property growth and the unlikeness of extracting your money back out of it. I suspect in a town that small, you might need a lower LVR so your 20% deposit could be 30% & some lenders might not even touch it full-stop. I suspect your money would be safer in the bank (at least you can get it back)

    Just out of curiosity. How much capital and rent growth has there been in the US in the last 5 years?

    [/quote]

    As a cash-flow investor I don’t monitor property growth as I believe the US is still a cash flow play, however I believe the median house price has risen, see link. http://www.propertywire.com/news/north-america/us-property-sales-prices-201404249047.html

    • This reply was modified 10 years, 6 months ago by Profile photo of Bennytee Bennytee.
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    Profile photo of BennyteeBennytee
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    @ten_burner
    Join Date: 2006
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    sorry about the edit, I am learning BBCodes

    Profile photo of superAndrewsuperAndrew
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    @superandrew
    Join Date: 2014
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    There is a reason why banks don’t lend or only lend at a low LVR. Banks are very good at assessing risk. At least they should be since that is their job. When a bank lends you money it needs to make sure to get it back from you and earn interest on top of it.

    Australian banks will lend in general 80% because should you not be able to make the payments anymore they will put the property on the market and should get at least 80% below the market value (the amount they lend to you) back from the sale. So they believe that Australian property is quite safe. This also explains why they lend 50% or less for share investment.

    So the fact that US banks don’t lend on their own properties or lend at lower LVR should be an alarming factor and reflects the risk of US properties.

    I only use cash at this point in time, however I believe it is extremely difficult to get mainstream finance on resi property as a foreigner

    The fact that you are a foreigner in the US doesn’t have much to do with the difficulty of getting finance. Like I said the US needs other countries to pay off their debt and they need foreign cash to do that. However I have heard from people that they do lend but I think it depends in the area you are investing in and only less than 70%.

    In Australia Chinese foreigners can borrow 80% and more with insurance. All they have to do is proof they have regular income.

    The same reason people in Australia sell property.. to realise a gain, retire, death, divorce, perhaps its their investment strategy.

    There must be a lot of gain realists, retirees, deaths, divorces, etc in the US and only in certain areas.

    What is your net yield?

    I am not saying that investing is US property is good but it’s not as good as everyone tries to make it to be.

    superAndrew | Property Analyser and Finder Tool
    https://property-analyser.com.au

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