CF +ve in Perth/WA....Thing of the past?
- Thread starter <KS>
- Start date
quiggles said:I see a problem with the model. I never bothered to raise it with the Investors Club (at least not more than once, the blank looks were quite enough).
Taking property 1, value 100k, 10 years later it's $200k so you draw down 80% of the available equity. Now you have to service that equity, and we'll assume that the 7% is a pretty low guesstimate - and we'll further assume tht you can lock it in for 10 years. Now you can pay cash, or capitalise the loan. If you capitalise the loan, and the property grows at 7% over the decade, you wind up with a property valued at $400k, on which you owe 80%- yes, that's right, your debt compounded too. so no draw down.
Ok, instead of that you decide to pay it off (I/O) so you draw down $80k and spend $74.4K, while the other 5.6K goes to the bank. Next year, you go to IP 2, and draw down around 85k (80k+7%) and spend $73.4K while around 11.6k (5.6k +(5.6k+7%))goes to the bank - any guesses where you're at in year 10?
And anything you've spent on living is not tax deductible, and if this is your only source of income, you have no tax deductions anyway.
Now before you jump all over me, yes, I've ignored the rents but if you go to Somers' work you'll find that the rents where cap growth is good tend to be poor (much lower than interest rates) and equally I've ignored any expenses on the properties. Now honestly, apart from deductions against other income, how much does each property return? - you can add that to the pot of income, but I don't think it does much except delay the inevitable. OTOH, the cash you are drawing down (but not rents) is also vulnerable to inflation.
And if interest rises, capgrowth will slow, at least to begin with and maybe even a whole property cycle won't be enough to save you, especially if the cash runs out.
Happy to hear your thoughts.
Hi Quiggles,
Like I said in my post above " The easiest way to explain what Im meaning by this is to provide a basic example taking into account that all your portfolio cashflow will be ."serviced via Rental income, the Tax man, an LOC and/or Cashond structure
If you havent done Steve Navras "Optimising Investment Structures" Course, Id strongly suggest you do so. Its the best value for money course around, and it will open up a whole new world of investment potential available. It can even make your Non Tax Deductable lifestyle drawings Tax Deductable
Thanks, LikeWow. There are no limits.
Fair enough, Rixter.
I was happy with the figures using the very simplistic model - which neglected the rent. And of course, also the tax advantages of interest on investment loans. I think anyone with ~10 good IPs should be retiring very comfortable.
regards,
Fair enough, Rixter.
I was happy with the figures using the very simplistic model - which neglected the rent. And of course, also the tax advantages of interest on investment loans. I think anyone with ~10 good IPs should be retiring very comfortable.
regards,
27th?
Interesting thread, now i have to go and look around for whats happening on the 27th...
CF + In Perth You'd have to be in the 'top' tax bracket (looking at Mark HAYS newsletter) maybe look where he is also selling (Bridgetown area)
Habving a look uparound the old Sandringham and what the packers have Planned for Burswood residential, units are going to be a big hit. nice and close to the city and the river. Ascot/waters is running out of land..
Interesting thread, now i have to go and look around for whats happening on the 27th...
CF + In Perth
You'd have to be in the 'top' tax bracket (looking at Mark HAYS newsletter) maybe look where he is also selling (Bridgetown area)Habving a look uparound the old Sandringham and what the packers have Planned for Burswood residential, units are going to be a big hit. nice and close to the city and the river. Ascot/waters is running out of land..
Hi,
Im not sure how any of you could go past Clarkson, it's certainly not cashflow +ve but then again, what is?
It's one suburb in from the beach, 3 out of the 4 neighboring suburbs are worth 60% more, it's got a flash new train station with a new small community shopping village next to it, a big expansion to the existing Ocean Keys shopping centre and the list goes on. Also, an extension to Mitchell Freeway up to Clarkson is in the works which makes it even more accessible to those who work in the City. It's already pretty good distance for those who work in ever-growing Joondalup.
The punchline is in today's quickly growing market, how many other suburbs are still under 250K?
Something to explore.
Im not sure how any of you could go past Clarkson, it's certainly not cashflow +ve but then again, what is?
It's one suburb in from the beach, 3 out of the 4 neighboring suburbs are worth 60% more, it's got a flash new train station with a new small community shopping village next to it, a big expansion to the existing Ocean Keys shopping centre and the list goes on. Also, an extension to Mitchell Freeway up to Clarkson is in the works which makes it even more accessible to those who work in the City. It's already pretty good distance for those who work in ever-growing Joondalup.
The punchline is in today's quickly growing market, how many other suburbs are still under 250K?
Something to explore.
dtraeger2k said:Hi,
Im not sure how any of you could go past Clarkson,
QUOTE]
Nice spruiking Dave
I agree that an extension of the freeway will make the place seem more attractive to a lot of people. Not sure it will become CF+ in the near future.
I hope all is well with all of you in Perth.
Hello from Dongara
TheBacon
dtraeger2k said:
hehe
2 suburbs
Rockingham + Mandurah
My Anchorage land has not been touched and since I put my deposit on it in November it has been revalued at $17,000 more than I paid for it (settles today!)
Tru Dave ....its still not a CF+ve property but I am looking at a CG of around $60,000 when I put the key in the door
/me gets of the soap box now.
<KS>
Keen said:
This was posted in the meeting place thread about the Perth meeting.
The meeting is in Mandurah (1hr south of perth).
The venue is Nino's fish & chip café, at the marina. (Not Cicerrelo's.)
Nino's is located in the newish shopping area at the marina. If you drive into the marina - Dolphin Drive - and go to a roundabout where there is a car park on the left, the water & boats ~50m directly in front of you, shops in front on the LHS and apartments in front on the RHS; then Nino's is at the far corner of the shops on the LHS. The main route from that roundabout actually does a right turn and heads towards the boat/fishing club.
Hope that helps you and your brother find us.
The meeting is at 12pm (Midday).
It lunch/drinks/chat.
<KS>
quiggles said:I see a problem with the model. I never bothered to raise it with the Investors Club (at least not more than once, the blank looks were quite enough).
Taking property 1, value 100k, 10 years later it's $200k so you draw down 80% of the available equity. Now you have to service that equity, and we'll assume that the 7% is a pretty low guesstimate - and we'll further assume tht you can lock it in for 10 years. Now you can pay cash, or capitalise the loan. If you capitalise the loan, and the property grows at 7% over the decade, you wind up with a property valued at $400k, on which you owe 80%
Ok, instead of that you decide to pay it off (I/O) so you draw down $80k and spend $74.4K, while the other 5.6K goes to the bank. Next year, you go to IP 2, and draw down around 85k (80k+7%) and spend $73.4K while around 11.6k (5.6k +(5.6k+7%))goes to the bank - any guesses where you're at in year 10?
And anything you've spent on living is not tax deductible, and if this is your only source of income, you have no tax deductions anyway.
Now before you jump all over me, yes, I've ignored the rents but if you go to Somers' work you'll find that the rents where cap growth is good tend to be poor (much lower than interest rates) and equally I've ignored any expenses on the properties. Now honestly, apart from deductions against other income, how much does each property return? - you can add that to the pot of income, but I don't think it does much except delay the inevitable. OTOH, the cash you are drawing down (but not rents) is also vulnerable to inflation.
And if interest rises, capgrowth will slow, at least to begin with and maybe even a whole property cycle won't be enough to save you, especially if the cash runs out.
Happy to hear your thoughts.
I agree Quiggles people seem to forget they are borrowing more money in drawing equity, it is not free money.
This is a great strategy but it`s like picking the winners at flemington the day after the race is run.
And so, to the investors using this strategy, time is the big factor, who says that R/E is going to grow by 10% a year?, in fact what happens if it goes down 5% over a few years? or 30%!, happens in USA all the time!, just because it has shown some kind of predictable growth in Aussie before does not mean it will continue to do so, and so what would happen if it did not move for 9 years do we still draw the money each year in the hope that all of a sudden we will get a huge CG?.
It definately could and should work but the reality could be very different.
cash flow positive in Perth..metro...
doable...
1)big deposit...
or2) buy build retain blocks...keep front house... build back.. sell front... rent out rear... would put you pretty close i'd say...
250k... 135k... 230k... leave loan of 155k rent rear 250pw... ta dah... cash flow positive...
or 3) buy in.. Tom price... Newman... port headland....etc..
or a riskier leonora.. mount magnet...
I havent any experience with any but have an opp too try 2) some time...
doable...
1)big deposit...
or2) buy build retain blocks...keep front house... build back.. sell front... rent out rear... would put you pretty close i'd say...
250k... 135k... 230k... leave loan of 155k rent rear 250pw... ta dah... cash flow positive...
or 3) buy in.. Tom price... Newman... port headland....etc..
or a riskier leonora.. mount magnet...
I havent any experience with any but have an opp too try 2) some time...
cf+ in Perth
Sounds like discussions here are concentrating on residential cf+.
I've found a commercial cf+, but don't have the funds to buy it!!! I'm currently advertising for investors to take part with me so we can all make money out of it.
*I'm not advertising here*, but check out Sunday times....
Sounds like discussions here are concentrating on residential cf+.
I've found a commercial cf+, but don't have the funds to buy it!!!
I'm currently advertising for investors to take part with me so we can all make money out of it. *I'm not advertising here*, but check out Sunday times....
