Past positive cash flow times?

[BuildingBlocks]

I have only been keeping a track of property prices since around the time of the 2000 boom, however am interested in looking back further to gain an understanding of future possibilities.

I know about the high interest rates of the 80's/90's and can see how prices surged at various points along the line, but what was happening with rental returns during these periods?

At present we could very generally say that major city rent returns are between 4-6% with interest rates sitting in the mid 7% range, resulting in negative cash flow for the vast majority of purchases.

Looking back over the last several cycles for say the Sydney metro (or Melbourne would be another good example), was this ever the other way around, with the majority of properties providing positive cash flow?

At present things feel pretty good to me, there are cash flow opportunities out there if you work for them, Nathan is an example of this at present and someone like Steve McKnight showed how it was done in the early 2000's, at a somewhat easier time ...at least it appeared to be . But was it ever the ducks in the barrel just waiting for the trigger to be pulled in major cities?

 

[evand]

Depends where in major cities you are talking about.

In 1998 in outer western Sydney i remember gross yields of circa 10%. Rents had risen slowly through the 90s with prices going nowhere/backwards for much of the decade.

I bought my first property in 1988, a 2br terrace in Leichhardt Sydney for $170k.
I rented it for a while in 1990 for $250 - $275 per week. Which is pretty amazing so close to the CBD (5km away).

Now that place would be worth say $650k-$700k and rent for $600 pw.

 

[VYBerlinaV8]

Cashflow positive properties are out there, but they aren't the norm in inner city locations (at least not where I invest). I've had some success with buying something cheap and renovating to improve rentability.

 

[Dazz]

Cashflow positive properties are out there, but they aren't the norm in inner city locations (at least not where I invest).

I've found CF+ve properties very much to be the norm in the inner city areas....actually far more so than in outer areas.


We must have different goggles on that we view the world through.

 

[Wunderbar]

Depends on what LVR. anything is cashflow positive with a low enough LVR

 

[VYBerlinaV8]

I've found CF+ve properties very much to be the norm in the inner city areas....actually far more so than in outer areas.


We must have different goggles on that we view the world through.

We could easily pick it all apart and figure out why over a few beers I reckon.

I suspect the main difference is that we have different ideas as to what sort of properties we'd be happy to buy as investable cashflow positive. There are definitely cashflow positive properties in cities, but many of them I wouldn't want, as they don't fit what I'm after. This doesn't make them wrong, they just don't suit my strategy.

I'm a big fan of positive cashflow, but I think it's important to recognise that not all cashflow positive properties suit all strategies.

 

[Ed Barton]

all of my properties are cf pos. it's pretty easy when you have no debt.

but the traditional meaning of cf pos is that they provide a return that is in excess of interest and holding costs. not many are.

 

[Wunderbar]

I know several cashflow positive properties in the CBD even with 100% LVR - SERVICED/STUDENT APARTMENTS. Too bad you can only borrow 40% (if at all)

 

[jaycee]

all of my properties are cf pos. it's pretty easy when you have no debt.

but the traditional meaning of cf pos is that they provide a return that is in excess of interest and holding costs. not many are.

That's the definition being used yes. Your's would be considered cashflow positive if the rents would cover the interest should someone else ahve borrowed for them - would they ?

I'd dare suggts Dazz is talking acommercial buildings.

Dazz, for those of use with limited funds, and therefeore investment budgets, which is partly the reaosn for investeing in median/below median price residetnial housing, do you still think that ther are cashflow postive properties in the inner city which make good long term asset accumulation investments ?

Just tyring to udnerstand your prvious post in the right context.

 

[Wunderbar]

Well I can tell you in Melbourne CBD that there aren't commercial buildings that are positively geared with a high LVR - esp. the good ones. Swanston Street shops sell for cap rates of around 3-4%...how is that positively geared?

 

[Aaron Sice]

That's the definition being used yes. Your's would be considered cashflow positive if the rents would cover the interest should someone else ahve borrowed for them - would they ?

I'd dare suggts Dazz is talking acommercial buildings.

Dazz, for those of use with limited funds, and therefeore investment budgets, which is partly the reaosn for investeing in median/below median price residetnial housing, do you still think that ther are cashflow postive properties in the inner city which make good long term asset accumulation investments ?

Just tyring to udnerstand your prvious post in the right context.

you can buy a good commercial site on limited funds. just because Dazz likes his big old sheds doesn't mean that's the only investment in commercial available.

i reckon the best ones to buy are mixed use - shop/cafe below, apartment above. awesome yield and mitigated risk for not much more than your average house.

 

[Dazz]

I'd dare suggts Dazz is talking acommercial buildings.

I was referring to the initial conversation of positive cashflow properties in the inner city. The zoning of the individual land title wasn't mentioned by anyone.

Dazz, for those of use with limited funds, and therefeore investment budgets, which is partly the reaosn for investeing in median/below median price residetnial housing, do you still think that ther are cashflow postive properties in the inner city which make good long term asset accumulation investments ?

I couldn't possibly answer that jaycee as I haven't researched or looked at "median/below median price residential housing" for a very long time. That's Jan Somers country, and I have no inclination to follow her basic fruit cake recipe.

Whether they make good long term assets or not is up to the criteria of the individual making that judgement. Obviously if I don't pursue that line of enquiry, you can sort of gather what my opinion on the subject is.

You must remember everything is comparable in investing. If you are currently getting....on a scale of 1 to 100....say returns putting you at the 60 level, I imagine you'd say an asset returning a 70 level is "good". However, the chap owning an asset returning a 95 level would probably say the same asset returning a 70 level is "not good". Perspective and comparison needs to be used. Absolute figures are meaningless without comparisons.

Restrictions apply of course. When starting out, it doesn't matter really, just grab whatever is in your budget. Just don't expect it to be stellar.

Just tyring to udnerstand your prvious post in the right context.

It was totally within the context of what was written previously. "Property" and "property market" are extremely wide and varying beasts that cover just about everything, from a little bedsit thru to an office tower. 'Most people' think of it as a 3x1 house....but there is so much more to 'property' than just that.

 

[jaycee]

I was referring to the initial conversation of positive cashflow properties in the inner city. The zoning of the individual land title wasn't mentioned by anyone.




I couldn't possibly answer that jaycee as I haven't researched or looked at "median/below median price residential housing" for a very long time. That's Jan Somers country, and I have no inclination to follow her basic fruit cake recipe.

Whether they make good long term assets or not is up to the criteria of the individual making that judgement. Obviously if I don't pursue that line of enquiry, you can sort of gather what my opinion on the subject is.

You must remember everything is comparable in investing. If you are currently getting....on a scale of 1 to 100....say returns putting you at the 60 level, I imagine you'd say an asset returning a 70 level is "good". However, the chap owning an asset returning a 95 level would probably say the same asset returning a 70 level is "not good". Perspective and comparison needs to be used. Absolute figures are meaningless without comparisons.

Restrictions apply of course. When starting out, it doesn't matter really, just grab whatever is in your budget. Just don't expect it to be stellar.



It was totally within the context of what was written previously. "Property" and "property market" are extremely wide and varying beasts that cover just about everything, from a little bedsit thru to an office tower. 'Most people' think of it as a 3x1 house....but there is so much more to 'property' than just that.

I wasn't tring to have any sort of a go, but I was trying to udnerstand if there was anything I could learn from your post or what it was trying to say (which I didn't obvioulsy see clearly) that wzs useful for me to learn.

I guess the answer I got from your reply, is look into it for yourself and you might find out...

 

[BuildingBlocks]

So ...does anyone have average historical rental return % data for the last couple of decades for resi?

For any Australian major cities as an average would be good.

 

[plusnq]

http://www.reia.com.au/reia-ebooks-details.php?id=38

Data will cost you though.

Cheers

Shane

 

[Ed Barton]

That's the definition being used yes. Your's would be considered cashflow positive if the rents would cover the interest should someone else ahve borrowed for them - would they ?

I'd dare suggts Dazz is talking acommercial buildings.

Dazz, for those of use with limited funds, and therefeore investment budgets, which is partly the reaosn for investeing in median/below median price residetnial housing, do you still think that ther are cashflow postive properties in the inner city which make good long term asset accumulation investments ?

Just tyring to udnerstand your prvious post in the right context.

well thanks for you patience J.

my cns properties would be pos by the common definition, my Brisbane ones with granny flats would be too, just. none my others would be.

do you just look at the ir when considering if it's positive or all other holding costs?

my point was for the average investor there are not many positive properties around. the average investor has one property. i don't count SSers as average investors.

one has to look very hard to find pos properties. when i say that i mean, as is where is. adding value to get it to pos, in my mind makes you a renovator, developer etc. i guess the differences could be termed active or passive investor.

 

[jaycee]

you can buy a good commercial site on limited funds. just because Dazz likes his big old sheds doesn't mean that's the only investment in commercial available.

i reckon the best ones to buy are mixed use - shop/cafe below, apartment above. awesome yield and mitigated risk for not much more than your average house.

Interesting.... I did see about 2 yrs ago I guess or more, a building offering 10% + return. It was rented to a pathology mob (blood tests and the like). Out around Cannington I think.. I drove past it and saw it was a new complex and the same agent was selling leasing a lot of them. I think some were still empty. By the time I rang on monday, cause I thought I'm not going to learn any more unless I actually do a bit more, the agent said it was under offer sorry, so not much I cn do on that one unfortunately. Since then, I loaded up on another 2 negative resi properties so sort of stopped looking except for "fantasy" high priced properties for fun on the net. So still haven't really learned much

But I have run numbers and "guessed" (I hesitate to even say guesstimate really) what I might look forward to in 10 yrs if I did nothing else. Worked out $25k before tax/after property expenses.. That will be in 10 yrs time's money though, so i guess that would be worth about $13k before tax in today's terms.... Hmmm Another negative resi like I already have would see a bit more income, but in extended years.... So I started to believe I may just have to get smarter than just doing that if I wanted a better result... which I do. I would also like to upgrade my ppor somehow, it's ok but I would like more than 55 sqm one day, that's fair isn't it ?

Different property types or developing or subdividing seem like the sort of things I should look into more... though I guess maybe I should pick one and start looking into it otherwise I may jsut keep skimming and glossing over things forever


Ed, Thanks for your reply also. In metro Perth I see development opportunities, like you described, for those who know more than me, but not straight resi which will pay 100% mtge and outgoings by a long shot..

 

[mrmonopoly]

I have to admit I was a little cynical as to whether CF+ was still achievable in our major capitals, at least until last week when I bought one 3km's from Sydney CBD.

I think if you know exactly what you're looking for, understand both the sales and lettings market and how depreciation can really work in your favour then there absolutely is CF+ out there, you just need to know what you're looking for and be ready to move quickly.

I wont go into detail as I have already discussed this in another thread somewhere, but this was not a niche market property, just your everyday 70sqm inner city 1 bed.

I cant stress strongly enough this is CF+ NOT positively geared.