Eliminating the shortall
- Thread starter rj
- Start date
kissfan said:
Hi Kissfan,
At the end of the day it comes down to ones own individual risk profile and how well any strategy for that matter fits within it.
With all strategies and aset classes used for investing one should ALWAYS work towards maximising Cashflows & minimising risks.
As long as you have safety buffers in place for minimising any perceived risks this helps in providing you a comfortable SANF.
ramone_johnny said:Ok I will. Infact Im going to print this out and take it home, so can everyone stop posting so i dont miss anything?
Also 2 more questions Rixter.
1. Is it really still a matter of "who" you know, more than "what" you know when it comes to becoming wealthy in property investing.
AND
2. What are your thoughts on shares as a means to offsetting this shortfall?
Ok 3 - I lied.
What about borrowed money towards cashbonds initially?
RJ
RJ,
1/ I dont know where you get the Who you know Not what you know adage in relation to property investing but I can asure you theres nothing further from the truth.
Continual Applied knowledge creates experience and experience diminishes the fear factor.
2/ If shares work for you and you are comfortable with them then why not use them. There is no right or wrong way for increasing cashflow as long as it does actaully increase your cashflow - thats all that matters.
3/ Sorry i dont understand you question - what about it?
Rixter said:
Sorry Rixter,
I was going to ask if beginning out initially via borrowed money towards cashbonds would be an option. Im a fish out of water asking these questions I know - however I was told just recently that I could borrow up to 180,000 towards an investment.
Ill be back on tomorrow. Looking forward to reading some more replies on this topic.
RJ
If you're really hungry you'll be there in under 7 years.
RJ,
As well as some making it in 7 years and some taking 20 years, remember the ones who are faster, and all the ones in between, the ones who are slower and even more, many many more, who never make it.
It is nothing to do with "who" you know & never has been. You're off track with that idea.
It is up to you.
RJ,
As well as some making it in 7 years and some taking 20 years, remember the ones who are faster, and all the ones in between, the ones who are slower and even more, many many more, who never make it.
It is nothing to do with "who" you know & never has been. You're off track with that idea.
It is up to you.
I can remember the ones who tried to make it in x yrs in the late 80's, most never made it and some went bankrupt, some are still paying for it.Pete said:
They say history repeats so don't forget that theres at least 2 sides of the cycle.
In saying that theres different risk profiles and mine has been a slow one, but i know i can outride most senario's history thows at me and become financially independant in due time.
In regard to the above questions.ramone_johnny said:
Not wishing to disregard all the great info offered to you thus far.
In a nutshell the shortfall is subsidised through growth. I know because I use this strategy year in year out. Sounds simple and is when you have the asset base to make the machine turn. Like Cheeks refers to as "crytical mass".
you live off some of the rent and subsidise the shortfall by refinancing,growing the portfolio and keeping the loan to value ratio heading south whenever possible.
Simon
G'day ramone_johnny
I had a look at our holdings and thou they are neutral, I thought what can I do to get more income to buy more houses?
So I bought a franchise business that was run under management. Good move. Later I bought another business that isn't going as well as the first, so under the pump a bit but it's got potential. So even though we can't jump back in and buy more, (could have if I'd stayed with the 9-5 job but that was driving me insane), so I work for me now and we have multiple streams of income and are working on more.
Don't just think about share trading or options, start thinking about streams of income that way you cover more options.
Cheers
quoll
I had a look at our holdings and thou they are neutral, I thought what can I do to get more income to buy more houses?
So I bought a franchise business that was run under management. Good move. Later I bought another business that isn't going as well as the first, so under the pump a bit but it's got potential. So even though we can't jump back in and buy more, (could have if I'd stayed with the 9-5 job but that was driving me insane), so I work for me now and we have multiple streams of income and are working on more.
Don't just think about share trading or options, start thinking about streams of income that way you cover more options.
Cheers
quoll
The Y-man said:
Now, I haven't read the entire thread, so if this has been touched on, my apologies.
Funding the short fall through commercial property trusts. Has anyone here done that, and how have you fared? Do you have a particular strategy on this side of things?
Thanks.
Merovingian said:Now, I haven't read the entire thread, so if this has been touched on, my apologies.
Funding the short fall through commercial property trusts. Has anyone here done that, and how have you fared? Do you have a particular strategy on this side of things?
Thanks.
CPT's have outperformed home loan interest rates for the past few years - so we have put money into these rather than paying off debt etc.
i.e. $100k in a CPT returning 9%pa, can fund $112.5k of home loan.
Strategy? Not really - just diversify into several CPT's
Cheers,
The Y-man
Glebe said:
Exactly right.
Say you buy your first property that costs $50 per week, (nice even figures follow). That is, you start of with a cash flow deficit of $50 per week. You now own 1 IP.
Then, in 24 months, it is making you $50 per week in rent. You are now $100 per week better off than 24 months ago. You then go out and buy two more properties, which each cost you $50 per week. Now you are again $50 per week out of pocket, but you now own 3 properties.
Then, in 24 months, say the rent increases at the same pace for each property, so you now are getting $350 per week, (add $100 to the rent of each property).
Now, you buy more property, which each initially cost you $50 per week, so to get back to your initial cash flow position, you would buy an extra 8 properties, each costing you the same $50 per week.
You now own 11 investment properties, which cost you $50 for the lot. Think of the capital gains you would have accrued over this period of time, (minus what was used for purchasing the other IPs).
So in this theoretical 48 month period, you have bought 11 IPs.
Nice, easy, fake, round numbers, but I hope I illustrated the point: it works — if you select good real estate, and of course, you have the equity to pull out of each property, when a new purchase is required.
The Y-man said:
Well, the amount interest is being paid on would be constant, (assuming of course, an IO loan).
Talking about cashbonds again.
I remember reaching that debt serviceability limit when my bank manager informed me that I had a great LVR, but I could only borrow $50K for investment. And only $150K for a house.
When I mentioned cashbonds as an option to help me out of my DSR problem, she said the bank would not consider the bond as income because it wouldn't have been paid for long enough. (two years or something at the ANZ).
I came to a bit of a dead end there. And I could see their point.
One thing I never understood was how would you get the loan for the cashbond in the first place if your DSR was holding you back from borrowing for property?
I remember reaching that debt serviceability limit when my bank manager informed me that I had a great LVR, but I could only borrow $50K
for investment. And only $150K for a house.When I mentioned cashbonds as an option to help me out of my DSR problem, she said the bank would not consider the bond as income because it wouldn't have been paid for long enough. (two years or something at the ANZ).
I came to a bit of a dead end there. And I could see their point.
One thing I never understood was how would you get the loan for the cashbond in the first place if your DSR was holding you back from borrowing for property?
ramone_johnny said:Hi guys,
Obviously if the properties were cashflow positive then buying properties one after the other is no concern,
You still hit a wall eventually as not 100% of rent is taken into account for servicing- Interesting many people use +CF to build income then look at - Geared IP's for CG (The figure I heard from one person was 4 +CF then 1 for CG) Rural Properties seem to have been in a catch upphase of late and had great CG as well (just ask Steve McKNIGHT- again he is looking at new strategies to meet the current market)
but when theres a definite shortfall, obviously maintaining serviceability - whether it be on the loan itself or maintenance on the property or perhaps something else - how is this acheivable?
Peter SPANN also "Leapfrogs" on Reno's, Martin AYLES Keeps 1 IP out of 5 built- everyone seems to use different options to suit..maybe you can buy and hold untill your LVR Drops, DSR Increases and your situation allows you to purchase again?
Also, it seems that many highly successful investors began off by selling their properties - as in - quick renovations and selling outright. Surely there must be some truth to this being a consideration.
Peter also talked about how much his IP's would've ben worth if he still had them (or a good %)
I guess in summary Im concerned that after having purchased X number of properties that Ill be sitting at home on the weekends eating home brand tuna and dry toast because of this shortfall in cashflow.
Refer to the reduction thread...all that fibre, Omega 3's and 6's will make you feel greatas well as look good- PLUS Fish is a brain food..you may work out how to bridge that gap
How is it possible to continually buy renovate, rent or sell like the big boys?
continually buy renovate, rent and sell like the big boys
RJ
PS - Great Post Rixter
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