I think we have finally gone CF Neutral

[vaughan]

A lot of people don't but think about it. You buy a $500k property with an LVR of 80% which means you have to find $100k deposit. If you have these funds locked up in a property you are losing the interest on it.

$100k in a long term deposit could earn about 4% so it is costing you $4k to have that money tied up.

If you managed to start with a 100% mortgage that's a different matter.

... Which is why I believe that all cash-flow calculations should be based on the whole purchase costs -- buy price plus legals and loan fees -- and not just on the loan amount.

And yield figures for units and townhouses should include strata fees!

 

[NedKelly]

... Which is why I believe that all cash-flow calculations should be based on the whole purchase costs -- buy price plus legals and loan fees -- and not just on the loan amount.

And yield figures for units and townhouses should include strata fees!

And don't forget Stamp Duty.

 

[MRO]

Cashflow positive by definition refers to cashflow. If the total cash outgoings are less than cash incoming then you are cashflow positive.

The real cost of the deposit can be used to in other value measures of the property and is probably more relevant.

 

[Dazz]

Good on you Angel.

That's down to hard work, persistence, judicious decision making and risk taking.

Hopefully no-one mentions the "L" word.

 

[vaughan]

Cashflow positive by definition refers to cashflow. If the total cash outgoings are less than cash incoming then you are cashflow positive.

The real cost of the deposit can be used to in other value measures of the property and is probably more relevant.

You are 100% correct. Cash-flow is cash-flow.

So a new description for what I'm ranting about is needed. Something like "total investment return" or TIR?

There probably is a financial term for it already.

 

[NedKelly]

You are 100% correct. Cash-flow is cash-flow.

So a new description for what I'm ranting about is needed. Something like "total investment return" or TIR?

There probably is a financial term for it already.

How about "Total Effective Investment Return" which includes a deduction for the opportunity cost of the money tied up in the property.

 

[Singo]

Yep, cash flow is cash flow. But here it is all about what to do next with the cash flow position. unless there are no loans, we have to consider the interest rates. What happens if the interest rate changes and what to do about it is important to plan for the future cashflow.

Calculating the ROI (return on investment) can include all sorts of calculations.

 

[Piston Broke]

All the calcs and observations are valid, but at least Angel is on the right path.
Most people will just loose money and after 10+yrs wonder what happened.
3.5 yrs to no cost RE holding is better than most out there. And a probably great learning experience.

 

[DaveM]

Hopefully no-one mentions the "L" word.

Liberal?

 

[Richard Feynman]

Congratulations. Great milestone!

Curious, if you're willing to share, what's the total portfolio value?

 

[Angel]

Hi Richard,

About $1,170,ooo for three properties returning $1260 per week rent. That is a total of $1.6m including the PPOR which is mortgaged for the 3 deposits and 2 lots of SD.

I cant remember how to work out yield, can someone do that today please?

There is the possibility that I miscalculated something on Sunday.

Gotta go to work now, Ciao

 

[Angel]

Liberal?

Bad luck that we got three years of Labor in 2010, I'd say.

Moving on...

 

[JacM]

Hi Angel,

It's a bit hard to work out net yield since we do not know all the details (council rates, water rates, insurance, mortgage interest).

Your gross yield is as follows: (1260*52/1170000)*100 = 5.6%

 

[Angel]

Thanks Jacqui