I recently bought the book 0-130 Properties in 5 Years—it’s an amazing read with excellent content.
The book suggests focusing on positive cash flow properties. Given today’s high property prices and interest rates, is it still possible to find positive cash flow properties?
I understand that some people find them in mining towns, but I’m not sure if that’s a viable option. What are your thought?
Hi Lin,
That’s a good question. I lived through those years, and have seen a few booms in my time. I recall Steve saying that his “way” was what worked at that time, in that market. Markets change, and Steve changed with them. After Ballarat, Steve moved to another area (was it Latrobe Valley?) then on to New Zealand, then USA, and later on to Commercial properties. I recall other investors too “riding a wave” of cheaper properties from Brisbane on up the Queensland coast back in the early 2000’s.
What works this way today? I have no idea. With house values so high right around Australia, perhaps another country is where this method might work today. Or wait 5 to 10 years, and these times might come again.
I’ve found house values seem to rise like a staircase – a long flat period, then boom and a huge rise in a very short time. Then a flattening out (and even a drop?) and a long period of little movement until the next boom.
Will this work into our futures with values being as high as they are? Again, I don’t know. Major world changes could have an effect. e.g. what if immigrants stopped coming to Australia? Another COVID-type issue may shut down world travel again. What if it lasted years? Would prices fall? I suspect so, but how far?
Meanwhile, perhaps other ways can help. With housing so dear today, some renters have turned to sharing accommodation, and investors have added granny flats (cheap as they don’t need to buy the land again – they already own it). Some investors create houses that cater for multiple renters (a 3bdrm house also has 3 bathrooms, but they share cooking areas, etc). That brings in multiple rents from one property.
i.e. Are there now other ways to invest? Back in Ballarat, Steve did the wraps that helped people end up buying their own homes without paying much more than rental rates. Worked beautifully for a lot of folks. But today, what works now? Investors will find a way I’m sure – keep your ear to the ground and see what can work for you. Good luck,
Benny
Unless you are going rural you don’t find cash flow positive properties. You have to Make them. Typically this is done by strageties suchs as subdivision, and selling off the land, a retain and build or my favourite a HMO (rent by the room). Even better is to get a property where you can layer in these strategies into a single purchase.
Here is an example that I purchased 3 weeks ago that has yet to settle. Off market purchase at $670,000, house had been trashed by poor quality tenants. Owner was self managing to save $. House is filthy dirty, has fleas and a badly water damaged ceiling thanks to a faulty evaporative air conditioner. Owner wasn’t interested in spending the 30k to sort the house out and undersold to get rid of it, leaving 70k on the table. You buy problems and turn them into solutions.
We have yet to settle, but have already started the subdivision process. Post subdivision we will have a lot of 260-270m2 that we are going to build a good sized street front 3 x 2 on. This is worth Mid 7’s will cost high 3’s to build and the subdivision will be about 45k. This process will take 21-24 months.
This will leave us with the original 4 x 2 which we will convert into a 5 bed 3 bath home which we will rent out by the room with an anticipated gross rent of $1500 a week. After costs (water, power, rates internet PM etc) we will have an income of cicia $1,100-$1,150 a week. Conversion costs 90k DIY. Take the profit from the build, pay some tax and we will be nicely cashflow positive principal and interest in around 2 years time.
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This reply was modified 2 months ago by
David Hall.
Hi David,
Thanks for such an insightful yet succinct post. I have just the place for such good comment, and have added a link to here in the “Big Picture” topic for those who follow. Well done, and I like your style.
Benny
Yes, it’s still possible to find positive cash flow properties despite high prices and interest rates. Look for affordable areas with growth potential, consider multi-unit properties for higher rental income and think about properties needing renovations to boost their value. Also, shop around for better mortgage rates and consider alternative financing options to improve your cash flow.
Ariana Mortenson
https://australiatopbusinesses.wordpress.com
Email MeProfessional Writer & Blogger in Australia
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This reply was modified 2 months ago by
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