Well, I bought my first 2 IP in February of 2007, and 18 months later, when the reserve lowers interest rates again by a minimum of 0.5%, both properties will comes to cashflow positive. I cant believe it, I estimated 5 years, not 1 and a half. Now I am in the position where I must purchase more property to offset my tax. This year I got a large cheque which will help me put down a deposit for another place...I dont know, it just seems so easy. There has to be a catch somewhere. Where is it?
Cash flow positive already...I cant believe it!
- Thread starter DanielG
- Start date
Wherever it is Daniel - don't go looking for it mate.
Sounds like you've established a sound and safe approach. Good to hear of your success. Have you read Jan Somers' books?Cheers, Ian
You do realise that cash flow positive means you're making money, right? No point shooting for a refund if you have to throw money at it, particularly since negative gearing is predicated on capital gains. At the end of the day a loss is still a loss. I don't see capital gains happening at the moment.
What spurred you to action and why buy your first and second IP in the same month?
Curious?
Regards
Graeme
What spurred you to action and why buy your first and second IP in the same month?
Curious?
Regards
Graeme
I was spurred into action after attending a investors club meeting and hearing the success stories of ordinary Australias that attended. I have around 80K in the bank and had no idea what to do with it, and hearing these people talk about how they could live life a lot easier now and enjoy themselves more really resonated with me, so I took the plunge. I had enough of a deposit for an inner city apartment or houses in sydneys west, and the returns were abysimal in inner city where as in sydneys west i saw 6% return from day one.
Daniel,
Nice to hear you are having success. The catch is greed and cockiness, when people start to believe there is no danger thats when they become unstuck.
Have your yields gone up or are you cashflow positive purely because your costs (interest rates) have gone down?
Cheers Pablo.
Have you had a revaluation lately?
If our properties have grown in value over and above the costs of holding them, and we get a tax cheque, then I don't see this as tax avoidance, I see it as a profit.
We don't actually see our property investing as a "business" but rather a method of slowly ensuring we won't ever have to ask the government to support us in our old age.
Have a look at what you posted again and I think that catch will become clearer...
Remember that if you're benefiting from the interest rate reductions the RBA is passing on at the moment, then you're obvioulsy on a flexible loan with your borrower. The catch is that rates move both ways. If you lever up too much now where you require an RBA rate setting at 4.5% or thereabouts to be neutral, then there's a big risk your cash flows will be significantly compromised when the RBA ramps rates up again by 3% or more in 2010 and onwards. I'd suggest you take some insurance against that risk by locking in some rates while the RBA is positioning the headline rate in the expansionary range.
Other than that, you're on the right track. The simple method is to accumulate property and keep an eye on your cash flow. Once you're neutral or better then you're obviously ready to take on more debt as your cash flow permits it. But lock that cash flow down if you can.
Cheers,
Michael
^^^^^
Great advice Michael
Great advice Michael
yup - lock it away in the new year.
but still, clearly this is a good example of someone buying a property that isn't too neg geared (prob neutral after depreciation...?) and suddenly finding themselves in a positive position because of their DD in yields.
kudos i say! many many opportunities will be presenting themselves now. however, we may find that the "distressed sales" may start to dry up as mortgages become cheaper. i alone have $700pcm more to play with...
but still, clearly this is a good example of someone buying a property that isn't too neg geared (prob neutral after depreciation...?) and suddenly finding themselves in a positive position because of their DD in yields.
kudos i say! many many opportunities will be presenting themselves now. however, we may find that the "distressed sales" may start to dry up as mortgages become cheaper. i alone have $700pcm more to play with...
I agree!
Great result, and good due diligence. I also agree distressed sales will start to diminish with the ever easing rates. Oh, and FWIW, my personal cash flow has improved $1700pcm thanks to Mr Stevens.
Lock it in Eddy!
Cheers,
Michael
and potentially still get a big tax cheque due to depreciation!
cashflow positive/paper negative - gotta love it.
yep - the taxman still scratches his head at how someone can not have any income to declare but has 15 properties...
The reason the reserve bank will be lowering rates again by a minimum of 0.5% is to stave off deflation, possibly affecting both house prices and rents.
Hi Michael and thank you for the advice. Yes I am aware I need the RBA to lower interests in order to get to a profitable level, and yes, I will be locking away for five years when i feel that the rates have bottomed out. Add that to ever-increasing rents...and the picture begins to look a little rosy.
As for the others who have accused me of cockiness or greed, i tell you that that is not the case. I was just a little stunned by my situation which i didnt expect and wanted to share it with like-minded people, as i cant tell my friends because i know they would be jealous and i dont like to gloat.
