Positive/Neutral Geared Deals Everywhere?

[auror]

I agree - I'm not seeing too many high yield properties in Sydney. Granted, I have been looking around the inner west ( the area I'm most familiar with) and I know others on this forum (eg. Witzl's example buy) have been in the west.

Am having trouble getting started with my 1st IP because the yield is so unattractive in the suburbs I know best - definitely negatively geared at current IR - what will it be like when interest rates rise?

 

[Witzl]

also agreeing with Evand here....... it's not rocket surgery.

If you use a large cash deposit, it is costing you money from elsewhere - either in lost opportunity costs, interest on a LOC, interest on a redraw, increased interest from lowered offset acct, etc etc.


P.S. i still consider my property above to be cashflow negative, but only just.

 

[Perth Investor]

I agree - I'm not seeing too many high yield properties in Sydney. Granted, I have been looking around the inner west ( the area I'm most familiar with) and I know others on this forum (eg. Witzl's example buy) have been in the west.

Am having trouble getting started with my 1st IP because the yield is so unattractive in the suburbs I know best - definitely negatively geared at current IR - what will it be like when interest rates rise?

You guys should try looking in Perth...

 

[stumunro]

If Mr & Mrs Jones approach me and say i want to buy a 200k property and I have a 50k deposit, then I will give them calcuations based on their situation and how it affects their cashflow each week.

If Mr Nathan a FHB purchases a property with the grant used as the deposit then he too will be given calculations based on what his cashflow will be each week, not on a 100% lend...

Gearing in simple definition is how someone chooses to leverage their property. If they want to put savings into a property with enough money to make the property positive geared.. then that person has created positive cashflow...THere is no if's and but's about it.

The property will return the capital investment given a certain period of time. A negative geared property WILL NOT pay back the outlayed capital, without external forces such as an increase in rent or capital gain.


WHILE I TOTALLY agree that investors should be calculating on 100%+ lends, for reasons mentioned, this doesn't change what a positive cashflow property is.


Nathan: You keep mentioning using the deposit and getting a return on other investments, but you are not considering that your deposit is saving you interest @ the rate of your mortgage.

While I am 100% knowledgable that cash can be used for better reasons then just a deposit, I don't agree that everyone needs or wants to, and that calculations should be done the same for EVERYONE.

 

[stumunro]

P.S if you are simply wanting to compare postive cashflow deal between peers the simplest way of getting the bottom line is asking them whether it is +ve cf on a 100% lend and expenses.

This will surely lessen any mis-interpratations.

 

[stumunro]

also agreeing with Evand here....... it's not rocket surgery.

If you use a large cash deposit, it is costing you money from elsewhere - either in lost opportunity costs, interest on a LOC, interest on a redraw, increased interest from lowered offset acct, etc etc.


P.S. i still consider my property above to be cashflow negative, but only just.

No-not rocket surgery at all.

We are talking about purely cash here. There is no arguements that interest from a LOC / redraw/ lowered offset is to be included in the calculations.

I agree about lost opportunity, your deposit tied into your property is not liquid. But for some, this is good

BTW, you can't decidedly say that transferring money from a LOC into a bigger deposit is actually costing you money. If the loan has a higher i/r then the LOC, it's actually saving you something Swings and roundabouts !

 

[stumunro]

Sorry about the thread take over - ill shutup now

 

[Aaron Sice]

a trick i learned from Rixter - ask for a cash back after settlement to improve your yield to CF=. then after 2 years or so of rent rises, when the cashback runs out, it will again be CF=.

 

[Belu]

a cashback from what? Can you (or Rixter) please explain?

Cheers

 

[stumunro]

a cashback from what? Can you (or Rixter) please explain?

Cheers

Basically if rent is undermarket, or you just want some cash, you can ask for $x as part of settlement as a payment to you from the vendor.

Which covers you for the 6 months or so until you can increase rent.

 

[devo76]

A property im looking at at the moment. Got them down to $250,000 but want it for $235,000. I will work it out at the upper price.

Property purchase price $250,000
Purchasing cost at 6% $15,000
Small reno already priced $4000

Total = $269,000
Now the costs per year

Interest cost at WBC 3 year fixed @ 5.19 IO $13,962
Insurance $500
Rates and water $1,350
Realestate costs $1700

Total= $17512

RENT at what it is achieving now.

$440 per week by 52 weeks $22,880

CASHFLOW

Rent minus costs equals $5,368 or $103 in your pocket PW

Even at higher rates it still looks good.

They are out there.

This property just sold for $255,000 !!!!!!!

He who hesitiates....... ma#@ibates

 

[murtagh]

This property just sold for $255,000 !!!!!!!

He who hesitiates....... ma#@ibates

yeah, I just lost one as well while waiting around to think it over properly (And giving the agent some time to get desperate).

Not the right move in this climate.

 

[Propertunity]

Not the right move in this climate.

The waiting or the *other thing* devo was on about?

 

[ffc1883_1996]

yeah, I just lost one as well while waiting around to think it over properly (And giving the agent some time to get desperate).

Not the right move in this climate.

G’day murtagh,

Fellow Melbournian, do you mind if I ask roughly where, roughly how much and roughly what type of property?

I’ve been on the look out for evidence of this “up tick” from sources other than real estate agents?


Regards - Ben

 

[chilliaa]

Depending on whether you currently have skin in the game so to speak, this is not a bad outcome.
The longer property stays on the market, the more people procrastinate. If people start to loose out by low balling and waiting for their perfect price, they will become inclined to move faster.

This is the start of how a bull market develops. Instead of fear of over paying and the belief of being able to pick something up cheaper at a later point in time, the market develops a fear of missing out.

Once it starts momentum should continue to build until there is a change in the dynamics.