Reply: 2
From: Michael G
Hi,
Before I answer, let's have a think about what we mean by "positively geared properties".
I guess the simple definition is where a property without any outside aid (income) produces enough income to meet all its expenses.
So simply we need to work out how much expenses are generated by a property and this will tell us how much income we need to generate to make it positive.
The biggest cost is interest on debt. There are two ways to adjust this cost;
- find a low interest rate
- use a small mortgage
For this example lets assume 100% borrowing (this could be achieved by draw downs from another property to pay for deposit)
Let's assume current interest is 8%
Say 2% for maintenance?
Sat 2% for land tax
Say 1% for miscelaneous (rates/insurance)
This doesnt factor legals/stamp duty or purchase costs.
This gives us a total of 13% of the property price, To break-even.
So on a $150,000 property, 13% = $19,500 or $375/wk
If we divided $375 by 2 we get $187.5 per week.
Previously someone posted an idea of divided a house into 2 units. Imagine a 4 bedroom house divided into two units each renting out for $190/wk?
Or a large edge of metro house with 6 rooms split into 3 units renting for $150/wk?
or imagine, buying a "messy" house cheap cleaning it up and then relocating another house into the back yard as another source of income?
Or a terrace with a top and bottom unit?
Basically, you are more likely to "make" a positively geared property than you are to find one.
At the moment, I wrap, that's how I'm making my positively geared properties, the stuff I've mentioned above I have yet to do, but I am looking into it. But there are those here that have done it and may be able to eloborate on this.
They may be able to provide better figures, or even a case study or two.
Work out the numbers (ie your investment model) then go find properties that match or with a little tinkering can match that model.
1) Create a model/system
2) Implement model
3) Goto step 1
This requires a bit of sit down thinking and creativity, asking questions, reading books for great ideas, or emulating others.
Look, the idea basically is to work out ways of 1) reducing or limiting your costs 2) and creating more income.
Reducing costs is about smart buying and renovating while boosting income is about how to fit more paying renters into the same amount of space.
1 person pays 1 weeks rent, 2 people pay 2 weeks worth of rent. As soon as you can get 2 people paying the same rent on one block of land you've increased your rent by 100%
Just a thought
Michael G