Building a Property Portfolio - Mid 20's

[LoneWolf]

Not true.

Strong capital growth is more important than strong cashflow. Ideally you get both. But if I had to choose one, I'd rather the property that gives me 200% of my equity back in a few years, than the one that makes 8% yield.

The difficulty of course is that cashflow is generally more certain than capital growth. To get capital growth requires skill, research, intelligence, luck, which is what sets rich investors apart.

Well Said. +1

An extra 50 bucks a week ain't going to make you rich, say you now have 10 lots, what is an extra 500 bucks going to do for you in the long run and to your financial freedom?
Yes, CF is nice and helps with the collection of more properties.
But, in order to become an rich investor and play the game properly, you would need to increase equity, and as DB said, this sets apart rich investor

If your main focus is on CF, then you would need to collect a mass amount to make it worthwhile, and realistically, how many can you collect? ask yourself

 

[nhg]

Not true.

Strong capital growth is more important than strong cashflow. Ideally you get both. But if I had to choose one, I'd rather the property that gives me 200% of my equity back in a few years, than the one that makes 8% yield.

The difficulty of course is that cashflow is generally more certain than capital growth. To get capital growth requires skill, research, intelligence, luck, which is what sets rich investors apart.

+2

There's a balance between the two. Cashflow won't make you rich. It does however help you keep your borrowing capacity high enough to keep buying more capital growth properties (they can be one and the same).

Too negative and you will limit how many growth properties you can have.

This is why I don't purchase 'cashflow' properties in the middle of the bush. $10/week extra in my pocket doesn't help me in the big picture. I look for properties with enough cashflow to support themselves before capital gains kicks in in the foreseeable future as I slice it up or manufacture growth.

 

[PDP]

Finding that balance is difficult. Obviously you don't want to be too negative geared otherwise mortgage brokers won't lend you anymore money due to your serviceability. This is why having a mixture of diversity in your portfolio is better than say a portfolio skewered with 'only positive cash flow but with limited capital growth' OR 'only capital growth properties where you have to fork out money to cover the repayments'. Target a strategy that best works for you and your situation.

Ensure you have set clear goals in terms of what financial position you want to be in and in what time-frame. How are you going to reach it? So it will be different for everyone and what age/circumstances their in.

 

[Tonibell]

If you target areas where there is better CG potential then there are a number of ways to get properties where you can manufacture improved cash flows.

That allows you to hang in there for the capitals gains.

It is a lot harder to manufacture CG from areas that you have gone into for the cash flow (although CG might just happen anyway).

 

[Moneyman_85]

Hey Cashflows,

Any updates on the next purchase?

 

[Cash Flows]

Hey Cashflows,

Any updates on the next purchase?

Hi Moneyman

I have purchased another house in Toowoomba (Rockville). 3 bedder for $215k and rents for $265 per week.

Current portfolio with recent valuations consists of;

Gold Coast Unit - $220k rents for $250
Toowoomba House - $220k rents for $260
Toowoomba House - $215k rents for $265

I have my loans split into fixed and variable with maturity dates spreading over the next 2-5 years and average loan rate is now 5.22%.

If all properties are rented at 100% occupancy, the portfolio is running at approx $3-4k negative geared.

I did take into consideration the suggestions to look at higher cash flow properties and even commercial stuff but I went with my gut feeling and happy to have my money invested in Toowoomba.

Cheers

Cash Flows

 

[Moneyman_85]

How negative are they with depreciation?

"the portfolio is running at approx $3-4k negative geared."

Wait the whole portfolio or each?


Also I thought Ipswich was far from Brisbane lol

 

[Cash Flows]

Hi Moneyman,

I have not taken depreciation into consideration, all three are over 30 years old unfortunately.

Would you still recommend I look into it?

 

[Moneyman_85]

hell yea,

mine are 40 years old lol

 

[Richard Feynman]

You're in for a nice bonus, then.

Get the depreciation schedules done.

 

[Moneyman_85]

Go here for a quick quote and use depreciator for the report

http://www.bmtqs.com.au/tax-depreciation-calculator

This seems to be pretty accurate (I got more on my report though)


Too bad you left it this short till cut off...... unless there still time after?

 

[Richard Feynman]

I'm pretty sure (not certain, someone call me if I'm wrong) that you can do up two two years of retrospective depreciation.

 

[Moneyman_85]

I mean to claim in this financial year

the report has to be done prior to June 30?

 

[SOULFLY3]

payment must be made this financial year.. And then wait for the reports to be emailed to you..
May take a few weeks?

Then go to your accountant not prior

 

[blackenator]

Hi All thought I would way in on this thread the op is in a similar position of my own but has 2 more investment properties. I recently just settled on a block of land in Sydney .I originally put the down payment last year September as the market was heating up and I knew their was a delayed settlement but I took the risk and it seemed to pay off.

The new releases of land for similar size block to mine are 50k more expensive and still selling out on the first day. House and land packages in the area seem to be selling for 150k more than what I will end up paying for my block and house combined. I know the bank wont value my property at the same as what the house and land packages sell for or even what the developer sells for but I'm crossing my fingers

 

[Cash Flows]

Hi Blackenator,

Not sure how we are in a similar situation?? but hope it is all going well for you!

Quick update - IP #3 settled and all went well with settlement. Looking to save up a buffer of at least $40k before next purchase ($10k buffer per property)- currently have $25k buffer.

No plans for what type/location for next purchase but any feedback would be great. Bit hard to predict where property prices/cycle will be in 12-18 months time so I am more interested to hear some opinions on what type of property i should go for with my next purchase given my current exposure.

Cheers

Cash Flows

 

[Cash Flows]

Hi Everyone!

Well it's been nearly 12 months since last purchase so I just wanted to update the details of the portfolio;

Chevron Island 2 bed unit - purchase $185k - cmv $240k
Newtown 2 bed house - purchase $207k - cmv $240k
Rockville 3 bed house - purchase $215k - cmv $230k

Given my current exposure to GC and Toowoomba markets, any idea as to what type of property and where I should look to from here? should have around $30k for next purchase which will also leave me with sufficient buffer in place.

An ideas/suggestions would be great!
Cheers

Cash Flows

 

[Encarta]

Something in Logan under 300 if you can find something then add value, I dont think there will be anything for under 400 in 12-18 months IMHO

Not sure what they will go to for this, but potential for 600+ rent possibly and in decent area

https://m.realestate.com.au/property-house-qld-crestmead-119873809

 

[Cash Flows]

Thanks for sharing that encarta. thats not a bad piece of real estate right there! my broker has come back with a $300k pre approval so I do need to stay below this price range.

 

[ZachAnSel]

Nice work Cash Flows, have you investigate about land tax - since you heavily invested in QLD?
Or you tackle that by purchase via Trust?

For me $30k is not a lot, perhaps with your portfolio best to keep as buffer. QLD starting popping hot..