Hi everybody,
I needed your opinion about our ‘first deal’. We have found a really nice one bedroom apartement for sale for a very very good price.Its in an old warehouse apartment complex in the cbd area and currently rented out for students and with potential capital groth in 5 years time.
I have read Steves book about financial freedom and this opportunity would generate positive cashflow but very little and if we did go for it probably all our funds would sit in the investment for 5 years.Steve teaches that if we want financial freedom we have to go for cash-flow not capital gains and I also believe that we should buy a business first which generates profit and use that profit to invest.
We are not sure what would be the best strategy to go for and thats why I wanted some professional help and also what to specifically look for if it came to purchase.We also think that the best structuring would be through a family trust and a company trustee similar to Steve’s idea.Is it stil the best way to do it?Please see below my wife and business partners view and strategy on this:
My idea behind this process was to wait for the 5 year period when the value of the property is properous enough to sell. During the 5 years I invisage the growth due to its locality and demand in proximity for student accommodation being close to Universitys. The statistics show that this property is continuously leased due to the high turn over, around number of students residing in close proximity to the universitys and CBD and Transport options. It currently sits on a 10% profit record.
Thank you for your time and reply
Regards
Frances and Attila
I am no professional in fact I have yet to purchase an IP. However, it occurred to me….
I was under the impression that CBD apartments were high in yield but low in capital growth and hard to resell??? But 10% historic growth sounds pretty good, if that is what you mean by profit record.
Also I know that apartments under, I think 50 sqm, are hard to get finance for, and most banks require 50% deposit.
Possible this info I have is out of date/no longer relevant but perhaps worth researching?
I did look into city apartments some years ago and that is what the bank wanted. (Honestly I wish I bought it anyhow because I still don’t have any investments, but that will change within the next 3 months.)
This rings a few alarm bells to me:
students
CBD
warehouse
apartment.What does it return after all expenses, including 105% borrowings, and how much do you expect it to grow in 5 years?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Attila,
I am also questioning it – students usually do not look after the property as well as professionals. Hence usually there is more wear & tear + maintenance costs.
To answer your question: yes it is best to focus on the cash flow and not capital gain. And hence careful / conservative cashflow calculation is really important, factoring in safety cushion for potential cashflow ’emergencies’ during the 5 years holding period. Only go with your 5 year hold then sell strategy if cashflow is robust.
Hope this helps.
Catts,
Here to learn the ropes of property investing, not trying to sell anything at all.Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Hi Frances and Attila,
I would encourage you to look at what you need the most. That is, if you already have an income but not a lot of capital behind you, then you should really look at improving your capital position as a first point of call. A more active strategy such as renovating, revaluing and accessing the manufactured equity for further purchases is a good example of a strategy many investors have employed successfully. Cashflow is obviously important, but it isn’t the only thing you need to concentrate on. Not knowing your personal position I couldn’t really comment on your current plans, they might be very suitable, this is just some food for thought.
Regards
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