Positive Cash Flow

W

WebBoard

Guest
From: Neil Smith


Having read Jan Somers book "More wealth from residential property", I am now reading Margaret Lomas's book "How to create an income for life" in which she writes a lot about "positive cash flow properties", (ie nothing to come out of your pocket, actually make money each week).
It all seemed a bit "pie in the sky" to me, I'm sure they exist but I would'nt think there are too many around, Jan Somers figures seemed a bit more "real" to me.
Does anyone have any thoughts or experiences, as I'm very new to investing.

Thanks for any help,
Neil.
 
Last edited by a moderator:
Reply: 1
From: Rixter ®


Hi Neil,

Positive cashflow Property sure is real....Im living proof as all my portfolio properties are Cashflow Positive...You just have to know what to look for and where to look. Whats you investing strategy Neil and why do you like property as a vehicle to invest with?

©

Happy Investing,
Rixter® :)
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 1.1
From: Anonymous


Margaret Lomas is about to run a series of seminars. She says hers won't be one of those really expensive ones, hers will be just under the four thousand dollar mark. Three days including dinner and a cocktail party and you will learn about positive cashflow investing.

;-)
 
Last edited by a moderator:
Reply: 2
From: Manny B


Hi Neil,

as per Rixter's comments, there are still positive cashflow properties out there... you just need to know how to find one...

I recall seeing tips in earlier posts, so it may be worth doing a quick search, but some of the ones I do include:

Look beyond what you see when you inspect a property, look at:

1. Can I improve the place to get an instant equity gain (which equates to more rent & possibly a good depreciation schedule through a QS), which can quickly change the IP from a negative cashflow to a cashflow neutral OR positive cashflow. Ways to improve include:
* Renovation (cosmetic in most occasions, ie. paint, polish floor boards, touch up bath & kitchen via painting tiles, etc.)
* Possibility to subdivide where the IP is on a decent block & can whack a unit in the rear of the property
* Possibly knock the place down if it isn't worth renovating, especially if you could subdivide
* Going out of major cities could find cashflow positive properties (many forum members have achieved this)

Above are just a few examples, but if you do your research & look beyond the pealing paint you may see at an Open for Inspection, you can reap the rewards...

Cheers,

MannyB.
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 3
From: Anonymous


RE Margaret Lomas's idea of positive cashflow
is NOT positive at all !!!!

Its only positive AFTER tax deductions, so you are very limited as to how many properties you can buy before you run out of tax able income to offset against.

Regards
Richie Rich
 
Last edited by a moderator:
Reply: 3.1
From: Ian Parham


G'day Neil & All

Anonymous please,...with the myriad of resource avaiable to newer and experienced investors today, $4000 IS EXPENSIVE in anyone's language!!!

No need to go out buying books either...go back through the archives on this forum (Having said that, I have many property related books as I like to read).

Spend some time on here researching...it's free and comprehensive!

The seminar circus should be avoided until such time as one knows what it is one really wants to do insofar as setting about investing is concerned. Similarly, be particularly selective about coughing up hard earned cash until being very sure of your direction. These people will not make you wealthy....but you will if you take your time researching first...don't be in a hurry!!!

If this sounds too hard, buy a lotto ticket....because you are not yet ready to take the 'Growth Stone' from my hand Grasshopper.

It (property) is fun, it is extremely interesting, and very rewarding....just take your time initially doing the hard yards first....read & learn :>)

Cheers Ian
 
Last edited by a moderator:
Reply: 3.2
From: Ian Parham


G'day Neil & All

Anonymous please,...with the myriad of resource available to newer and experienced investors today, $4000 IS EXPENSIVE in anyone's language!!!

No need to go out buying books either...go back through the archives on this forum (Having said that, I have many property related books as I like to read).

Spend some time on here researching...it's free and comprehensive!

The seminar circus should be avoided until such time as one knows what it is one really wants to do insofar as setting about investing is concerned. Similarly, be particularly selective about coughing up hard earned cash until being very sure of your direction. These people will not make you wealthy....but you will if you take your time researching first...don't be in a hurry!!!

If this sounds too hard, buy a lotto ticket....because you are not yet ready to take the 'Growth Stone' from my hand Grasshopper.

It (property) is fun, it is extremely interesting, and very rewarding....just take your time initially doing the hard yards first....read & learn :>)

Cheers Ian
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 3.2.1
From: Anonymous


Ian ,
I didn't say $4000 was cheap, I just mentioned that she didn't class her seminar at $4000, as expensive like others. Personally I would have to put her in the expensive class and I can think of a lot better ways to use the money to improve my outcome. I just found it interesting that is how much she would charge for what she says is not an expensive workshop.
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 3.2.1.1
From: Ethan Smith


Hello,

I'm also midway through margaret Lomas' book. I can't wait to get out there and see for myself whether positive cash flow properties exist. I think I'll probably end up having a mixed bag of positive cash flow and negatively geared properties (with hopefully high capital gains)

Can anyone explain to me though what is so wrong with acquiring negatively geared properties that grow in capital value whilst one has an income to offset against. And then when you retire, you sell a few to re-organise your IP portfolio so you generate a positive income from them? This sounds just as legitimate to me as positive cash flow properties.

Thanks

Ethan
 
Last edited by a moderator:
Reply: 3.2.1.1.1
From: Jerry Maguire


hi all,
$4K is not an expensive seminar if it can teach you one thing that could save you say $10K just in one property the seminar just pay for itself already.
what you learn in 3 days through the seminar might take you to learn through trial and error over the years and before you know it you are hitting the big 50...
seminar is a way of speeding up the process of wealth by teaching you the education you need to get there fast and you can implement what you learn straight away
 
Last edited by a moderator:
Reply: 3.2.1.1.2
From: Paul Zagoridis


Hi Ethan

On 9/2/02 12:29:00 PM, Ethan Smith wrote:
>I'm also midway through
>margaret Lomas' book. I can't
>wait to get out there and see
>for myself whether positive
>cash flow properties exist. I

Positive cashflow and positive geared properties exist. There is no such thing as a free lunch, so they generally are not obvious or have some "negative" elements.

>think I'll probably end up
>having a mixed bag of positive
>cash flow and negatively
>geared properties (with
>hopefully high capital gains)
>
>Can anyone explain to me
>though what is so wrong with
>acquiring negatively geared
>properties that grow in
>capital value whilst one has
>an income to offset against.

You answer this question yourself when you said "hopefully". Negative gearing is a certain loss for a hopeful gain. If you get the formula wrong it hurts. The main trouble is marketers and Real Estate agents peddle the line that it is easy, certain and fool-proof.

Gearing is a two edged sword. It amplifies your gains and your losses.

Also what happens if you lose your ability to work (or your job) temporarily or permanently? You can eat non-cash tax deductions.

I'm not saying don't negatively gear. Rather I'm in the "proceed with caution" camp.

>And then when you retire, you
>sell a few to re-organise your
>IP portfolio so you generate a
>positive income from them?

Do you have a strategy so it does not cost you too much? You need an effective ownership structure, tax planning (PAYG and CGT) and finance.

>This sounds just as legitimate
>to me as positive cash flow
>properties.

Legitimate yes. Pick your horse and ride it to the finish line.

PaulZag
Dreamspinner
WealthEsteem :: Psychology of the Deal
http://www.wealthesteem.org/
 
Last edited by a moderator:
Reply: 3.2.1.1.1.1
From: Rixter ®


Hi Anon,

I do believe Neil was asking a question in relation to "Cashflow Positive" property. I think you are confusing yourself with "Positively Geared" property which is totally different! If I was you I'd research the differences for your own benefit. Please don't take this the wrong way but give yourself a name so that others can identify who you are, but more importantly, also adds credibility if you expect others to listen to your advice.

©

Happy Investing,
Rixter® :)
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 3.2.1.1.2.1
From: Anonymous


Jerry - lomas proudly talks about her 6 properties as if she is some Godsend to the property investment world ! Would you pay $4k to hear someone tell you why cashflow positive properties in country suburbia makes a good investment proposition...... particularly if their expertise is limited to a grand 6 properties? I suspect the only cashflow she picks up is the $4k a pop from unsuspecting wannabes.
 
Last edited by a moderator:
Reply: 3.2.1.1.2.1.1
From: Ross Sneddon


Hi Neill and Others

There is a remarkable amount of hype being peddled lately regarding "positive cash flow" verses "negative gearing".

Regardless of the sale price, if borrowing costs (real CASH) exceed rental income (also real CASH), then the property by definition is negatively geared. It is also negatively cash flowed and the shortfall thus created may be claimed as a taxable deduction. Now add NON CASH depreciation to the equation as a tax deduction. This may leave it negative or positive cash flowed.

If negative, why pay dollars for someone to live in your investment property? Capital Gain.

Margaret Lomas says "capital gain is not a given" (p16 API June/July) Jan Somers says "This (Capital Gain growth) is demonstrated by the fact that in Australia for the past 100 years, the combined returns from capital growth and rental yields have averaged more than 15% per year compound" (p10 More Wealth from Investment Property). I agree with Jan. The evidence is there for all to see.

Now you have the option of new verses old. If you choose a new property, you may depreciate the fixtures and fittings and claim the building allowance (NON CASH items), all to reduce the shortfall against taxable income from other sources. This can then make the negatively geared property positively cash flowed or close to it. But it is still from a negatively geared property.

If you choose an established property, the above depreciation is less or non existent. Canny buyers may find these "hidden gems" give them a coat of paint etc., and rent them out at higher levels. But this is smart value adding and has little to do with negative gearing.

Margaret Lomas in API (June/July) gives several examples of positive cash flow.

Firstly the investor rents the property out at a rental yield of 9%pa. Be realistic. Sydney and Melbourne are averaging less than 4% and Brisbane at around 6% is the strongest. Normally calculate at say 5%.

Second. The investor receives a benefit from a will which she uses to assist with her investment. That's great but remember that taxation has been paid on the bequest from the will and should be considered in the calculations. She is borrowing less for the investment and therefore the potential for a positive cash flow is greater but it was a bequest that helped.

Third. The couple buy a property and then depreciate allowable components and make it a positive cash flow. That's standard negative gearing practice. Nothing new.

There is nothing wrong with negative gearing. Jan has written several books on the subject and they make sense. Don't be led astray by fancy language about positive cash flow. If you can achieve it, that's great, but don't lose sleep over it.

Regards

Ross
 
Last edited by a moderator:
Reply: 4
From: Terry O


hi all,
i think just reading this thread should be enough to convince MOST people not to part with 4 grand,,8 gross,to attend a seminar that will NOT teach you ANYTHING that you will not find on this forum. Well done to the posters who are willing to share the truth!

TerryO
 
Last edited by a moderator:
Reply: 4.1
From: Mark Laszczuk


Terry,
Excellent point! Couldn't agree more. I believe that Margaret's strategy has a lot of holes in it, but I've mentioned that before. Look, if you are worried about having negative geared property, and are worried about servicing the loans, give Steve Navra a buzz, or an email. You can find his website at: navrainvest.com.au

Mark
'no hat, some cattle'
 
Last edited by a moderator:
Reply: 3.2.1.1.2.1.2
From: Ian Parham


Hello again all.

Thanks Anon. & Jerry. I must improve my communication skills.

Essentially I was trying to convey to Neil that $4k is a lot of money to spend on a course if the subject matter is something that you have no real grasp / understanding of.

Sure, someone may have a modicum of understanding of the term "Positive Cashflow Property", but is this enough information for that person to say..."Yes, I will invest my $4K to go along and MAYBE learn a lot more"?

What I intended to convey was that I, IMHO, believe in researching as much as possible the subject matter before making the decision to pay a lot of money to go along and learn at a more advanced level, confident in knowing that I will be competent in listening to, absorbing and comprehending the presentation / content.

From my own personal experience I can say that I was slightly interested in the concept of wraps a couple of years back....and considered a seminar. As usual I looked for, and found, a lot more information on the topic and determined that "No, I don't wish to pursue this type of concept". Now this didn't take a lot of time, or effort and nor did I 'miss out' on an opportunity. I simply felt that I didn't wish to go down that particular path of investing. To me, I was happy in making that decision PRIOR to paying out any sum of money.

This is all I wished to convey to Neil.....and to do some considerable research first!

As for the value of some seminars...no question there! I would love to do one on Trusts or Renovations...Doidge springs to mind. I have read and researched both of these fields and know that I would benefit greatly from a quality seminar/workshop.

Kind regards
Ian

Cheers Ian
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 4.2
From: Lewis O'Brien


I find the continued fascination with positive cash flow quite amazing. If you think about it, it is a bit like being fascinated with the half time score at the football - rather pointless.

Positive cash flow in itself is often not clearly defined. Some believe that positive cash flow means the rent is higher than the interest bill. Others will say that after tax benefits, you have money left over. Either way, it misses the point.

While positive cash flow investing has its merits, it will also lead you to invest in specific types of properties - typically property in small country centres where capital growth prospects are limited.

Some 'experts' seem to think that just because some (most?) estate agents promise unachievable capital gains to sell over priced property that capital gains should be discounted. But this is throwing the baby out with the bathwater.

Careful and thoughtful investors will always look at total returns. They will estimate expected long term capital gains based on their research. Personally, if after five years I have made 25% pa, I really don't care whether it is income or capital gain - a profit is a profit.

If you are interested there is an in depth look at this question at FreeLawyer.com.au. Just look under the investor section for the articles.

Lewis
FreeLawyer.com.au
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 4.2.1
From: Ayesha Todd


I have to disagree with the comment made

'While positive cash flow investing has its merits, it will also lead you to invest in specific types of properties - typically property in small country centres where capital growth prospects are limited.'

We already have one and in the process of a second 'cashflow positive' (ie mortgage is fully covered by rent)properties. One is about 30 minutes from the Perth CBD, the one we are buying now is in the heart of the Perth CBD. Yes we have just spent a very busy week looking at properties but we went into each property knowing we wanted it cashflow positive and it came down to two at the end of the week, and it was the one that made the best business sense that won out.
They are out there but it takes research, on the net, in the papers and then on the pavement.

Ayesha
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 4.2.1.1
From: Dave UK


A cashflow positive property today may subsequently become cashflow negative ie if the tenants leave and it remains untenanted for a number of weeks, or perhaps due to an increase in interest or other costs ie repairs & maintenance.

Similarly, what is a cashflow negative property today may eventually become a cashflow positive property due to the ability to increase rent, lower interest costs etc.

I'm a firm believer in acquiring properties
that will help me achieve my overall long term property investment strategy rather than focus on whether individual purchases stack up or not on a stand alone basis.

Cheers
Dave-uk
 
Last edited by a moderator:
Top