All Topics / Help Needed! / positive versus negative investing

Viewing 20 posts - 1 through 20 (of 24 total)
  • Profile photo of OllieOllie
    Participant
    @ollie77
    Join Date: 2014
    Post Count: 30

    Hi all,
    I’m newbie to investing and would gladly accept some direction on investing strategies. I own my home and have $300,000 to invest into property as not sure an investment fund has the same returns. The question I need the answer for is do I purchase just one property and have a positive geared investment or buy 2 and negative gear it? I haven’t a large sum of residual cash flow from my wages to prop up a large IP loan?

    At the moment I’m considering buying one property and some shares with the rest for diversification purposes.

    Cheers
    Ollie

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hi Ollie

    Welcome aboard :-)

    It’s a tough question to answer without knowing more about your situation.

    I’d take it back a step and begin with educating yourself about property investing. There’s no need to jump straight in – take some time getting clued up on all facets of it. By that point, you’ll have a better understanding of what your goals are and what you need to do to get there.

    It’s not so much a matter of buying a positive or negative cashflow IP – it’s about purchasing the right IP (or IPs) that fit with your overall strategy.

    $300k is a lot to play with – and if used correctly could achieve some good results.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of OllieOllie
    Participant
    @ollie77
    Join Date: 2014
    Post Count: 30

    Thanks Jamie, basically I have about $800,000 in equity in my home but only earn about $750 a week in wages so just want to start building a portfolio in property for when I retire in 14 years time as my super is quite low?

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    As a general statement, if your income is relatively low and you’re wanting to grow a portfolio you’ll need to look at positive (or neutrally) geared IPs. A negative IP or two will be a real burden on your cashflow.

    It’s all about getting the correct finance structure in place and investing wisely – anythings possible, even on a small income.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi Ollie

    You would be surprised how many forum clients we get in the same position to yourself.

    Building a sustainable long term property portfolio is more about structuring the loan correctly and then selecting the appropriate property to allow you to keep investing.

    We are having more and more clients wanting us to source properties that meet this criteria and done properly there is no reason why you can’t have a healthy income come retirement.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of OllieOllie
    Participant
    @ollie77
    Join Date: 2014
    Post Count: 30

    Thank you for the responses. Would I be correct that when I search for a property it’s best to look at ones that over a 5 year period have shown minimal growth against one that is currently achieving a high 23℅ growth?

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi Ollie,

    I think a common goal of all investors is to make money, but few ever really stop to think ‘how’, ‘when’, and ‘why’.

    So let me ask some questions, with your answers then providing guidance on what direction is best for you in respect to the property and strategy to adopt:

    1. What profit do you want: income or growth (pick one)?
    2. How will this profit be made (market or investor driven)?
    3. How active do you want to be with your investing? Specifically, how many hours a week can you allocate?
    4. How would you rate your risk tolerance: low, medium or high?
    5. What time frame do you expect your profit to be made in?

    Have a go at answering those points and I will reply back with further thoughts, time permitting.

    – Steve

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of OllieOllie
    Participant
    @ollie77
    Join Date: 2014
    Post Count: 30

    Hi Steve and thanks for the response

    In response to the questions.
    I’m trying to achieve a supplement income as I head to retirement. Not a huge income at present but hopefully in 10 years I might be able to achieve a reasonable amount. Hopefully the profit will be market driven. I can allocate one day a week to achieving my outcomes. My risk tolerance I would say is medium at present, and hopefully as mentioned I hope to achieve this in 10 years.

    I also can allocate more hours to this if or when it becomes productive. Any feedback is appreciated.

    Ollie

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hey Ollie,

    Here’s the problem… back when I started investing in 1999 you could acquire positive cash flow properties with a small capital base.

    For instance, buying $40k to $50k houses in Ballarat / La Trobe Valley meant that with $500k of capital and 80% financing, you could pick up 8 to 10 positive cash flow properties and pocket net cash flow of about $8k to $10k per month.

    As you know though, prices have increased substantially, and in excess of rent increases.

    For a while it was very hard to buy positive cash flow at all (when interest rates were >7%), but as interest rates have fallen (and with them interest costs), positive cash flow property opportunities have re-emerged, but at a higher price point.

    So, unless you have significant capital (now $1m+), buying incremental positive cash flow residential property can take a long time.

    That’s why I recommend a new approach, which as I explained in ‘From 0 To Financial Freedom’, broadly follows this path:

    1. In the first instance, concentrate on value add residential property to build your capital base
    2. Supplement your income with an income accelerator
    3. Once you hit your required capital base, migrate out of residential into commercial property where there are higher yields.

    If you’d like to know more then pick up a copy of the book from the store. From memory it is less than $20.

    – Steve

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of OllieOllie
    Participant
    @ollie77
    Join Date: 2014
    Post Count: 30

    Thanks Steve
    The book sounds like a good deal. Looks like I have some reading to do

    Ollie

    Profile photo of DwightDwight
    Participant
    @bigvman
    Join Date: 2002
    Post Count: 42

    Steve is the man. Follow his advice!

    You have to find your own path though. I have had some success with shares (doing it the old fashioned way – Buy, it went up, I Sell!) and am now looking for cashflow positive property deals.

    I have bought in Gold Coast and NZ in the past 24 months and the most expensive home I purchased was less than $140k.

    The houses I’ve bought are all standalone or in a small block for the QLD case. I’ve avoided high rise with their OC fees that really eat into your income.

    Also consider getting some coaching or training. You have a real opportunity to put your nest egg to use.

    I was in a similar situation 10 years ago and made a few big stuff-ups that cost me. Buy Steve’s book, go to his seminar. Don’t be afraid to invest in yourself a little before you try to find a “vehicle” to make your money.

    Good luck,

    Dwight

    Dwight

    Cashflow Positive Investor

    Profile photo of JpcashflowJpcashflow
    Participant
    @jpcashflow
    Join Date: 2007
    Post Count: 575

    Hi Ollie
    Firstly well done in being in the position you are in :), also it’s good to see you are looking out for your own future. Before rushing just sit down and look at what is your overall goal.

    There are so many ways to kick a soccer and au many ways to create wealth

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

    Profile photo of OllieOllie
    Participant
    @ollie77
    Join Date: 2014
    Post Count: 30

    Thank you all for the knowledge and advice. I have decided to purchase my first IP instead of the managed fund option. I have placed an offer on a unit in a small complex which I believe has good capital growth. The rental yield after body corporate fees is in the low 4 % which I’m ok with as it is the capital and the chance to borrow against for IP 2. But have to start reading on how to do it correctly before anymore purchases.

    Profile photo of demkeldemkel
    Participant
    @demkel
    Join Date: 2006
    Post Count: 49

    Congratulations on your purchase Ollie!
    All the best to you.

    Profile photo of OllieOllie
    Participant
    @ollie77
    Join Date: 2014
    Post Count: 30

    Thanks demkel

    Profile photo of JpcashflowJpcashflow
    Participant
    @jpcashflow
    Join Date: 2007
    Post Count: 575

    Well done

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Sorry Ollie don’t want to appear negative but did you say the yield post body corporate, insurance and Council Rates was in the low 4% and you were happy with that !!!!

    I will assume your kidding as you get a similar amount in a Term deposit.

    What happens when interest rates increase and the Body Corporate fees go up which of course they will.

    I have to say we would never buy a unit for a client ( there are the odd exceptions of course ) and would focus on freehold property that generates 5.5% +.

    You are never going to be able to retire on a rental income that starts that low and going forward financing number 2 will get harder.

    Seriously if it is not too late review your investment decision and buy something else as you cannot live off capital growth alone.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of OllieOllie
    Participant
    @ollie77
    Join Date: 2014
    Post Count: 30

    Thanks for the rethink Richard. Went back over my calculations to get my net yield and had made a small error but only increased the outcome slightly to 5.1%. But your comments have me wondering if the other property in a less then desirable street with a yield of 7.3% would be better? I’m yet to sign anything so not too late to re-evaluate. Will give me something to do on Sunday.
    Thanks once again and value the feedback.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Yes that is better but even at 5.1% I wouldn’t touch it.

    Just make sure whichever property you go for you don’t have a single loan over the 2 properties which is something your Bank will encourage.

    Loan structure is paramount especially if you are trying to build a long term income and most Bankers have no idea.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of JpcashflowJpcashflow
    Participant
    @jpcashflow
    Join Date: 2007
    Post Count: 575

    Hey Ollie

    If you are not sure about this investment maybe just hold back.

    There is no rush at all and maybe it’s a good time to sit back and review your goals.

    Feel free to contact us if you need anything….

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

Viewing 20 posts - 1 through 20 (of 24 total)

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