Positive Cash Flow

farmilor

farmilor

This is my first real post on this forum, so sorry to be asking for advice before actually contributing .......... just means I don;t know enough yet :confused:

After buying, holding and selling a few properties around Sydney and the Central Coast over the past few years with little direction, I realise it is time to approach this investing this properly.

My wife and I have recently given birth to our first baby boy (6 months this week). And to prevent my wife from having to go back to work anytime soon, I'd like to try and substitute part of her missing income through a positively geared property.

Problem is though, I haven't really looked into these sorts of properties before, so I'm asking for some advice on where to start looking for a properties that will provide a decent income over the next 3 - 5 years. Not really too concerned with capital growth from this property, really just want it to hold its value until we plan to sell it in 3 - 5 years time.

Any advice on where to start looking for these properties? I've started looking around Moranbah, Clermont, Dysart in QLD area, but am open to suggestions???

Thanks in advance.

Richard
 
How much positive cash flow are you looking from it per week?

If its to replace you wife's income you will need multiple properties.

ie $500 p/w gross = 10 properties @ $50p/w (if you can find positive geared IP's providing this)
 
Hi Rick

Not looking to fully substitute her income, just enough to convince her that she doesn't need to go back to work for a while. Don't have any firm figures on how much I'm after yet, because I know that +ve cf properties are rare.

Something around the $200 - $300 a week mark should suffice. I realise this is almost impossible to find in one property. Although I've heard of properties being auctioned off for rent in QLD and fetching $1100 a week.

Should just get my hands on one of them :)
 
After childcare costs, transport, work related clothes etc how much extra would her working bring in? Do you need her income to live as a family?

Could you look at alternatives like reducing expenses - sell one car (assuming you have two), grow vegies, eat more cheaply by shopping at markets etc.

I am assuming she actually wants to stay home at this stage?

In regards to cashflow positive it would require real creativity plus work I think to get real cashflow. No much passive cashflow stuff out there (well in Australia anyway) How's the US research going Ozperp?
 
It is probably possible to find properties which are CF+ on no money down.

I have one, which on current values, is probably CF+. And I sold one 18 months ago which would have also been CF+ on the sell value- and probably even more on todays values.

I suspect it would be extremely difficult to find now.

If they are there, look for multiple occupancies. Like two plus occupancies on one block.

The one I sold was a block of flats (AKA "the flock of bats"). I didn't want to sell. I wanted to refinance. But a block can be extremely hard to refinance, so the only way I could use the equity was to sell.

The one I kept was a dual occ. Two cottages (three originally, that's another story) on one block, Canberra. Last valuation, $550K. Purchase price $280K 5 years ago. Current rent around $550 pw.

Just from those brief figures- it's not the $pw which have given me the value.

My cap gain has been $55,000 pa (straight line). While the property has been cf+. (Obviously in very good times- and many ahve had hugely better gains than this. But I'm OK.)

I didn't ever look to CF+ or cap gain as the primary objective. I looked for a property with growth potential (inner Canberra) with good income (multiple incomes)- and the worst house on the best street- good redevlopment potential. I struck lucky.
 
Commercial property - although not sure of state economy in 3-5 years time when you plan to sell out....

Cheers,

The Y-man
 
Thanks for all your comments ...... I realise it is difficult to find cf +ve in OZ at the moment, but surely it must be possible somewhere.

Don't wife's income to live as a family, and I am happy for her to stay at home for as long as she likes. It's just that she believes she needs to contribute financially, and try as I might, I can't convince her otherwise.

Surely mining towns should provide some properties like this. For example, If I could get a place with a $200k loan (which is possible as I have enough cash for a large deposit to bring the loan down to this), on my current interest rate of 8.48%, would only need rent of $326.15/week to be neutral (very rough figures of course). I know I need to add stamp duty, PM fees, rates etc ......... but very rough.

Or would it be better to just keep this cash in our ppor loan and minimise our expenses by making our interest payments almost negligible??? Specially seeing as we are not chasing capital growth with this sort of property?
 
QUOTE Surely mining towns should provide some properties like this. For example, If I could get a place with a $200k loan (which is possible as I have enough cash for a large deposit to bring the loan down to this), on my current interest rate of 8.48%, would only need rent of $326.15/week to be neutral (very rough figures of course). I know I need to add stamp duty, PM fees, rates etc ......... but very rough.

Or would it be better to just keep this cash in our ppor loan and minimise our expenses by making our interest payments almost negligible??? Specially seeing as we are not chasing capital growth with this sort of property? END QUOTE


I would be looking 3-5 years ahead. Cap growth in mining town? Easy to sell?

It would be sad to be stuck with cap growth dog just when other areas started to boom!

All your 3-5 years income would be accounted for pretty quickly.:mad:

Just my opinion!
 
farmilor said:
....Or would it be better to just keep this cash in our ppor loan and minimise our expenses by making our interest payments almost negligible??? Specially seeing as we are not chasing capital growth with this sort of property?
Click to expand...

Much better idea me thinks.
Assuming your paying 8.48% interest on your ppor mortgage, if your gross that up at a 30% marginal tax rate its the same as an investment yielding 12.11%. Good luck finding an resi IP yielding 12.11% from day 1. Commercial maybe, but the entry costs would be quite high.
 
She can contrinute by learning about investing when bubs gives her a chance :) Maybe SHE can track down those elusive cashflow properties!

She may of course want to work to maintain her skills, social contacts etc. In this scenario she will want to return to work regardless of the financial need.
 
He doesn't give her much time to do anything .......... her is the most active 6 month old I've seen. Anyway, she gets frustrated easily when searching for properties, and I love it.

Looks like we may need to take the boring option for a while and just cash up while keeping an eye open for that next Sydney bargain.
 
If your pporloan has an offset account, sticking it in there for now would reduce your monthly outlay by a decent amount. It'd also make it readily available for when you are ready to invest.

win-win no?
 
Thanks Anna ......... I only have my wife to thank for that. She already had an IP on the central coast when I met her, and bought her second in hornsby shortly after we met. Gone on from there.
 
mate there are some fantastic +ve cashflow deals in other countries.

even though the market is soft at the moment, i think the places to invest are places where there is till serious demand for housing. while that is vague, i made it so on purpose to avoid dishing out investment advice.

if you want it, keep looking.
 
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