Cashflow property???? Also thoughts about ipswich

Hi,

I am a first time property investor and looking for some help from fellow somersofters. A property has been suggested to me by National Hotspots company in Redbank Plains , QLD. The property is for 380,000$ and rental is around 350/week. Could you plz comment on :
1) How is the area for investment in terms of 5+ years for property growth and cashflow positive.

2) Most importantly, I am not aware of the cashflow property concept. As per the guy from National Hotspot, the property is a cashflow positive after taking into account all the deductions including depreciations, rental costs etc etc.
While I was talking to a friend and he suggested that after deducting water, council, insurance, agent fees and bank interest, if property is giving you anything, then ony it is positive cashflow. Tax Deductions and all should not be considered to call a propert positive cash flow. They are anyhow going to be deducted as the buildings will be depriciated.

Can someone please clarify this doubt and let me know which point of view is right.

Thanks
 
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Hi,

I am a first time property investor and looking for some help from fellow somersofters. A property has been suggested to me by National Hotspots company in Redbank Plains , QLD. The property is for 380,000$ and rental is around 350/week. Could you plz comment on :
1) How is the area for investment in terms of 5+ years for property growth and cashflow positive.

2) Most importantly, I am not aware of the cashflow property concept. As per the guy from National Hotspot, the property is a cashflow positive after taking into account all the deductions including depreciations, rental costs etc etc.
While I was talking to a friend and he suggested that after deducting water, council, insurance, agent fees and bank interest, if property is giving you anything, then ony it is positive cashflow. Tax Deductions and all should not be considered to call a propert positive cash flow. They are anyhow going to be deducted as the buildings will be depriciated.

Can someone please clarify this doubt and let me know who is correct, my friend or hotspot agent.

Thanks

Your talking about 2 different concepts, it is possible to have a negatively geared positive cash flow property which puts money in your pocket after tax or a positively geared property which makes money before tax is considered. In this case you will pay tax on this 'extra' income.
Regarding Redbank Plains, be careful there are a lot of NRAS properties in this suburb which have limited rental growth, there is also many new developments there limiting growth presently. Rents in this suburb have risen but only slowly.
Regarding spending $380000 for a house there you need to have a close look at the competition, I have a 3 bedroom place there 15 years old worth considerably less so I would study the local market fairly closely.
Regarding the property suggested I know nothing about it but it looks like it would be negatively geared but positive cashflow once depreciation and tax is considered depending on your marginal rate.
 
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Is National Hotspots company trying to sell you a property? It's the only question which needs to be answered.
 
Be very very careful of buying new houses from any of these companies.

In general (and others may have their own definiitions but this is what I have observed for most) - POSITIVE GEARED property is the term for when rent exceeds all costs (without considering tax). POSITIVE CASH FLOW is the term for when rent doesnt quite exceed all costs but when tax depreciation is added back the propertys income THEN exceeds all costs.

If you go the the information resources section and checkout the spreadsheets collection you will find a range of cash flow modelling excel sheets to see what the cashflow of a property is.

Redbank plains has a lot of available land. How will it grow above average if they can just build more houses cheaply next door? Also be aware of flood in that area and mining because some houses sunk due to mining shafts underneath.

If targeting that area I believe the best value homes are project homes around 7-10 yrs old and priced well under current construction value. They can actually be positive geared if you get them cheaply enough. Then get a depreciation schedule done as they still have plenty of tax savings in them too. Much better than paying a premium for new.
 
Thanks!!

Your talking about 2 different concepts, it is possible to have a negatively geared positive cash flow property which puts money in your pocket after tax or a positively geared property which makes money before tax is considered. In this case you will pay tax on this 'extra' income.
Regarding Redbank Plains, be careful there are a lot of NRAS properties in this suburb which have limited rental growth, there is also many new developments there limiting growth presently. Rents in this suburb have risen but only slowly.
Regarding spending $380000 for a house there you need to have a close look at the competition, I have a 3 bedroom place there 15 years old worth considerably less so I would study the local market fairly closely.
Regarding the property suggested I know nothing about it but it looks like it would be negatively geared but positive cashflow once depreciation and tax is considered depending on your marginal rate.

Hi Hugh, thanks for your reply. Could you please help me in suggesting:
1) Do you think negatively geared properties are worth looking at or only positive geared properties should be considered. I am pretty naive so might be asking silly questions.
2) What is a NRAS property?
3) I have studied the prices in same area and for a 4 bedroom 2 bath new house, the price seems to be comparative with others. As you have a property there, have you faced issues in getting the property rented there? What about the situation of floods? Any other issues with the area.

I was told it is going to be the next Parramatta of QLD.

Thanks
Nish
 
Hi Hugh, thanks for your reply. Could you please help me in suggesting:
1) Do you think negatively geared properties are worth looking at or only positive geared properties should be considered. I am pretty naive so might be asking silly questions.
2) What is a NRAS property?
3) I have studied the prices in same area and for a 4 bedroom 2 bath new house, the price seems to be comparative with others. As you have a property there, have you faced issues in getting the property rented there? What about the situation of floods? Any other issues with the area.

I was told it is going to be the next Parramatta of QLD.

Thanks
Nish

1 - Only if they have very good prospects for future capital gains
2 - National Rental Affordability Scheme, basically the Gov offers incentives to the owner to keep the rent low.
3 - This one is not for me.

Be careful who you listen to, ask yourself what is in it for them.
 
Hi Hugh, thanks for your reply. Could you please help me in suggesting:
1) Do you think negatively geared properties are worth looking at or only positive geared properties should be considered. I am pretty naive so might be asking silly questions.
2) What is a NRAS property?
3) I have studied the prices in same area and for a 4 bedroom 2 bath new house, the price seems to be comparative with others. As you have a property there, have you faced issues in getting the property rented there? What about the situation of floods? Any other issues with the area.

I was told it is going to be the next Parramatta of QLD.

Thanks
Nish

1. Negative or positively geared properties? Well this depends upon your strategy, if everyone could buy a property which makes money immediately this would be preferable. Unfortunately rents tend to follow wage growth and CPI more closely and most properties will cost you money at least initially. There is a never ending argument about what is better, positively geared properties which MAY have lower growth or negatively geared properties which MAY grow in value more quickly. If you purchase too many loss making houses it can affect your personal cashflow and budget greatly, its one of the main reasons most people only ever purchase one or two ips.
If you can buy well in the right market at the right time you may be able to achieve both positive cashflow and capital growth quickly.
There is no right or wrong answer it depends on your strategy IMO.
Back to Redbank Plains rental growth has been slow but I have never had much of a problem getting a decent tenant, I think the longest vacant period over the years was 2 weeks. There are better areas to invest presently IMO.
One day the area may be like Parramatta but I most likely won't be around to see it, there is still way too much land available
 
thanks

1. Negative or positively geared properties? Well this depends upon your strategy, if everyone could buy a property which makes money immediately this would be preferable. Unfortunately rents tend to follow wage growth and CPI more closely and most properties will cost you money at least initially. There is a never ending argument about what is better, positively geared properties which MAY have lower growth or negatively geared properties which MAY grow in value more quickly. If you purchase too many loss making houses it can affect your personal cashflow and budget greatly, its one of the main reasons most people only ever purchase one or two ips.
If you can buy well in the right market at the right time you may be able to achieve both positive cashflow and capital growth quickly.
There is no right or wrong answer it depends on your strategy IMO.
Back to Redbank Plains rental growth has been slow but I have never had much of a problem getting a decent tenant, I think the longest vacant period over the years was 2 weeks. There are better areas to invest presently IMO.
One day the area may be like Parramatta but I most likely won't be around to see it, there is still way too much land available

Thanks mate.
I have decided not to go for it. As it seems CG would be less because of the available land and it is not positive geared even. Thanks
 
Hi,

I am a first time property investor and looking for some help from fellow somersofters. A property has been suggested to me by National Hotspots company in Redbank Plains , QLD. The property is for 380,000$ and rental is around 350/week. Could you plz comment on :
1) How is the area for investment in terms of 5+ years for property growth and cashflow positive.

2) Most importantly, I am not aware of the cashflow property concept. As per the guy from National Hotspot, the property is a cashflow positive after taking into account all the deductions including depreciations, rental costs etc etc.
While I was talking to a friend and he suggested that after deducting water, council, insurance, agent fees and bank interest, if property is giving you anything, then ony it is positive cashflow. Tax Deductions and all should not be considered to call a propert positive cash flow. They are anyhow going to be deducted as the buildings will be depriciated.

Can someone please clarify this doubt and let me know which point of view is right.

Thanks

i'd buy second hand redbank plains is a good area (3 bed 1 bath 1 car 700m2 around 235-260k rent 300 etc springfield which is 2 suburbs away has massive infrastructure worth googling it. i'm currently working there on stage 1 marter private hospital (theres 7 stages for the health area) the hole springfield master development is only 13% done apparently and brookwaters 1 suburb away have brand new houses from 500-1m the
 
It's the deal that's the problem . You could get a good property for much less , with much better cash flow and potential for capital growth ( which is were you make your money )

Cliff
 
If you can avoid dealing with marketeers then you will also save money. Buy land directly from the developer and engage a builder.

Marketeers usually get paid around $30 to $40k in commissions by builders. Just about every major builder will have a number of marketeers that provide them with regular work as they cannot rely on owner occupiers only to keep a stable business.
 
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