Simple-ish developments certainly exist and are a great way to make $$ during particular points in the cycle imo
Newbie Investor - CG or CF?
- Thread starter Tuula
- Start date
Simple-ish developments certainly exist and are a great way to make $$ during particular points in the cycle imo
What is an example of a simple-ish development?
The OP needs cashflow in his current situation so the loss of rent of a property while developing is not possible for him .
The only thing I can think of is a corner cut off where the original house is kept?
Unless you have a 20% deposit (roughly) for the buying of the site and construction, forget about development.
Leo
Did you even read my comment?
He only has a wage of 54k I doubt he can afford to buy a property and develop it without receiving rent to cover the repayments
Did you even read the part where there is nearly 300k in equity?
I did my first IP/development on around that income, and as a duplex pair on one title.
It worked out pretty well, as the rent from the duplex pair was effectively cashflow positive from day 1.
Why so pessimistic?
One option I have had clients do is buy in outer Sydney, large enough block with existing house ($240k) orientated so they could put a granny flat (GF) on it. It did 2 things, once the GF was finished (they had to pay cash from equity to do it ($70k)), got it revalued and refinanced but more importantly the rent went from around $300 a week for the house to $520 a week for both.
Revalued for $380k so they achieved both manufactured growth but more importantly it increased their borrowing capacity due to the additional rental income being greater than the holding costs. This was purchased last year, GF added almost immediately, revalued 8 months after that.
You first need to ensure you have your equity lines in place and that the first IP purchase ticks the boxes (price and rent yield) you need to be able to get finance to settle the purchase.
CF positive properties are a mechanism to enable you to build your property portfolio and balance it with negatively geared IP's that are purchased for CG prospects. It certainly assists with cashflow to fund any rent shortfall on negatived geared IP's but the main purpose is to enable you to qualify to borrow and purchase again. There is absolutely no point in having negative geared properties and not being able to service the rental shortfall, you go broke quickly or be forced to sell in what may not be ideal selling conditions, why take the risk?
Revalued for $380k so they achieved both manufactured growth but more importantly it increased their borrowing capacity due to the additional rental income being greater than the holding costs. This was purchased last year, GF added almost immediately, revalued 8 months after that.
You first need to ensure you have your equity lines in place and that the first IP purchase ticks the boxes (price and rent yield) you need to be able to get finance to settle the purchase.
CF positive properties are a mechanism to enable you to build your property portfolio and balance it with negatively geared IP's that are purchased for CG prospects. It certainly assists with cashflow to fund any rent shortfall on negatived geared IP's but the main purpose is to enable you to qualify to borrow and purchase again. There is absolutely no point in having negative geared properties and not being able to service the rental shortfall, you go broke quickly or be forced to sell in what may not be ideal selling conditions, why take the risk?
I would guess that the growth your client has seen in the property is not due to the GF. Those same $240k properties are now selling for $360-380k. If it had a reval, maybe six months ago, it might have come in around $320k without a GF, but the prices are rising steadily out here.
Did you post the details at the time?
I'd be interested in seeing the details as I hope to do the same in a few years time. Duplex seems to be a good intro to development compared to townhouses or units.
Doing a duplex is a great introduction to development.
Did my first a few years ago, then progressed to townhouses after that.
Did my first a few years ago, then progressed to townhouses after that.
