Positively geared properties - do they exist?

Hello!

I have been reading the latest issue of "Your Investment Property" magazine. They have featured a lady who "amassed a $3.5m portfolio in 4 years and retired at 39". She has 12 investment properties, all of them positively geared (which is how she's been able to retire). She has mortgages on all of them.

I am really scratching my head over this. I don't get how you can have a loan on a property AND have it be positively geared?

I have three IPs. We got them all for a good deal, and get good rent. They turn a decent profit - UNTIL you take the bank payments into account. Even paying interest only, these repayments remove any hope of them being positively geared for a looooong time.

Perhaps I just chose the wrong properties? How did this lady do it?

Harriet
 
And a follow-up question (sorry - forgot it earlier)!

The same lady says that when she bought her first IP, "I worked out the rent, capital gain, rates, taxes and interest rates, and I realised I was actually making $160 a week."

OK, I understand the concept of capital gains. But doesn't this only translate into cash-in-your-pocket if you sell the property?

H.
 
...or perhaps you just need to review your definition of the word "good".

Yep - maybe that's the problem.

But I would still like to hear whether others have managed to buy a property using bank funds AND have it positively geared. Is it do-able?

H.
 
Hey Harriet,

They're out there - they're just harder to find for the average punter (like myself) who are generally restricted to properties advertised to a mass audience (like realestate.com.au, etc).

However, if you're a seasoned investor, a buyers agent, or someone who has the ability to snap IPs up before there marketed then you'll have a better chance of picking up some real bargains (positively geared included).


Cheers,

Jamie
 
Traditionally, with most resi, you sacrifice long term average cap gain for the higher rtns.

I know people work around this with various means, including making a normally neg property into a pos etc, like student accom, adding granny flats etc.

Regional can also work to some extent, again though one needs to choose carefully, while some regionals have done well due to local economic factors, some havent done so flash.

The other one youd need to take VERY careful stock of is the "retrired" bit. Not in regards of this story in particular, but peoples needs and wants are very different. Some can make a great life on 25 k a year, others struggle on 500 k

ta
rolf
 
Thanks for replies!

Yes, I hear what you are saying, Rolf. It's all relative.

Also, the lady in question is not really "retired" - she just gave up her day job to manage her portfolio.

H.
 
Harriet it is possible to do this I have a positive cashflow of $1000-$1200 pw.

With the exception of regional properties where you can get 9%-10% returns the most you can get in metro properties is about 5.5%-7%. I buy for both CG and CF. The metro properties I buy are usually cashflow positive winth 2-3 years returning 8-9% and cashflow positive.

The lady in YIP made her money on her earlier purchases, including a large CG on a commercial property. The newer properties are in regional areas like Mildura.

Also, a lot of people only focus on growth and buy in bluechip areas.....trouble with this is one you buy one it maybe a while before you can buy again due to the CF situation.


Hello!

I have been reading the latest issue of "Your Investment Property" magazine. They have featured a lady who "amassed a $3.5m portfolio in 4 years and retired at 39". She has 12 investment properties, all of them positively geared (which is how she's been able to retire). She has mortgages on all of them.

I am really scratching my head over this. I don't get how you can have a loan on a property AND have it be positively geared?

I have three IPs. We got them all for a good deal, and get good rent. They turn a decent profit - UNTIL you take the bank payments into account. Even paying interest only, these repayments remove any hope of them being positively geared for a looooong time.

Perhaps I just chose the wrong properties? How did this lady do it?

Harriet
 
The holy grail of property investment is being able to borrow 100% of the purchase price, pay all the interest and costs and still have money left over from the rent. To have more money at the end of the deal than the start would be endlessly repeatable and a quick way to financial freedom.

The reality is that we are all looking for that, hence there are many more buyers that sellers, so that it just doesn't happen very often. Even Steve McKnight admits that by being creative and renting by the room, or quick rejuvenations can help turn a property CF+ these days.

If you get up into multi million dollar commercial properties I think there would be more of a chance, but most of us here on the forum are still at the single residential stage I think.
 
Plenty of em around. I might have another go at selling mine later this year. $75k, rented for $110pw. Not very positive unfortunately unless you self-manage.
 
The lady may have bought most of her properties when +ve IPs were more common due to the conditions at the time. It all comes down to so many factors - time, timing of the market, lending conditions...

Sometimes in the IP mags they sensationalise things and you don't always get the full story. She might have gotten a windfall along the way which helped her position or she could have worked her a.... off. But, good on her for working out a way to retire at 39!
 
Perhaps I just chose the wrong properties? How did this lady do it?

Harriet

Not taking anything away from her achievements, but if you analyse the figures and ignore the text, it becomes very apparent that the busines they ran was operated from premises they owned. So, when they sold the business, they kept the commercial property and when it was revalued, the reval would have been based on the current, market rate rent.
That one property accounts for a huge % of the growth in their portfolio. Their PPOR is also a big contributor.
Which leaves their actual investment properties (those bought as part of thier strategy *I'm looking at you when I use that word, Tarah*) as not being sigificant contributors in terms of CG.
 
...The reality is that we are all looking for that...

And hence they are harder to find, but thorough searching can yield results.

I have found numerous cf+ properties in the last year, especially with the rates the way they are at the moment. See, the main issue, is that most of these are blocks of units, cheap entry, good returns, but man, absolutely crappy tenants and possible rental chase ups. Return is in the 100s/week positive, but sooo much hassle and maybe SANF issues, so they stay there unsold...if you have the balls, do it, money to be made, but at some "other" cost...

PS. Regional properties, the only places I see cf+ these days...:D
 
You need to find a deal like ours. Cheap fixer-upper ending with 25% potential yield, or ~400% CG and rising rapidly. If you're willing to fix the damn thing up over a year, anyway. Most people aren't that insane. I can't ever see us doing this again, it was very wearing, but will literally set us up for life.

Nathan finds deals on the same spectrum of ridiculous yield on a regular basis, and NOT always in regionals. It can be done.
 
Agreed - they both scream out at you on the table of figures presented.



Agreed - so what lessons can one infer from that Rob ??

Ummm.
They made more more out of their commercial property and PPOR than all of their resi investment put together.
Gee, who let you back in :)
 
Thanks, all.

Rob, I thought the same thing as you about those stats - long-term ownership of their commercial property really helped!

H.
 
Sometimes in the IP mags they sensationalise things and you don't always get the full story. She might have gotten a windfall along the way which helped her position or she could have worked her a.... off. But, good on her for working out a way to retire at 39!

I was impressed with the article too, tarah (or at least the headline) until I read that she had the commercial property which is where most of the cash had come from. That together with the business she owned generated a lot of the equity/cash.

I agree though, the mags tend to sensationalise things alright!

Regards Jason.
 
Ha ha, yes Rob strategy!

Hi Jingo, I didn't actually read the article but I'm just guessing. I'll have to get the latest YIP! I still get a buzz out of reading how other people have become successful - can give some good ideas!
 
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