Positively geared properties - do they exist?

[Neophyte]

The reason that cheap(ish) positive cashflow properties make me nervous is the potential maintenance issues.

e.g. replacing a switchboard costs roughly the same is a 150K and 500K place.

My basic assumption is that most of the cashflow positive places tend to be towards the cheap end of things and be older/dodgier properties. Being cheap the percentage of total value that a big essential maintenance job can costs is much higher than a more expensive property.

 

[sash]

Depends on the property but if you buy a brick veneer place maintenance it is not too much of an issue.

If you are positively geared by say $20-$40 pw, you should have 1k-2k for maintenance.

Also remember that most property in the 400-500k is negatively geared to the tune of at less $150pw. Unless you are really unlucky....you are unlikely to hit $1000-2000 maintenance bills in a year.

The reason that cheap(ish) positive cashflow properties make me nervous is the potential maintenance issues.

e.g. replacing a switchboard costs roughly the same is a 150K and 500K place.

My basic assumption is that most of the cashflow positive places tend to be towards the cheap end of things and be older/dodgier properties. Being cheap the percentage of total value that a big essential maintenance job can costs is much higher than a more expensive property.

 

[RumpledElf]

If you build a brand new house in a regional it is considerably positively geared from day 1 even before depreciation. Who says they are all old houses?

 

[devo76]

Not trying to push my own story but my last purchase goes like this

House with attached granny flat $300,000
Purchase cost and small reno $30,000

Total $330,000 x 6.2% = $20,406 per year
Rates $1,350 per year
Agent fees at 6.48% of rent $1,530 per year
Insurance $580 Per year

Total costs = $23,866 or $458 per week

Income

House rent $16,380 per year
Granny flat $7,280 per year
Tax return $1,600 per year

Total income = $25,260 or $485 per week

Cashflow = $27 per week positive right from purchase.

I did not buy below market. I wasnt lucky. i just spotted a dual income property come on the market. This is a regional coastal city too not a one horse town.Plus its subdividable.They still pop up like this you just have to be looking.

 

[shahabr]

definately possible to find a positive cash flow property, takes patience and hard work. last property i bought in orange had been renovated but the landord had been charging the same rent for 3 years, it was advertised for $189k and after some negotiation i got it down to $163k and took the rent from $155 to $210 pw, this turned it positive and with depreciation i will be up around $50 pw not a lot but its positive

 

[MTR]

Not trying to push my own story but my last purchase goes like this

House with attached granny flat $300,000
Purchase cost and small reno $30,000

Total $330,000 x 6.2% = $20,406 per year
Rates $1,350 per year
Agent fees at 6.48% of rent $1,530 per year
Insurance $580 Per year

Total costs = $23,866 or $458 per week

Income

House rent $16,380 per year
Granny flat $7,280 per year
Tax return $1,600 per year

Total income = $25,260 or $485 per week

Cashflow = $27 per week positive right from purchase.

I did not buy below market. I wasnt lucky. i just spotted a dual income property come on the market. This is a regional coastal city too not a one horse town.Plus its subdividable.They still pop up like this you just have to be looking.

Have to agree with this, I am finding lots of opportunities but you have to put the time and effort to find these deals. I could be on the computer for 5 hours per day, bound to find something eventually that fits the criteria.

Infact I found 2 positive cashflow properties this morning, regional NSW, just researching an area, they are out there. I am not necessarily chasing regional areas so I either need dual occupancy, small reno/makeover or something that can be carved up and sold off to make it stack up.

Cheers, MTR

 

[HandyAndy888]

Also, listed price often does not return cf+. A bit of bargaining may yield good results...

 

[our obsession]

If you build a brand new house in a regional it is considerably positively geared from day 1 even before depreciation. Who says they are all old houses?

Yes, what Relfy said, another here.

Mixture of constructions and already built.

I don't spend time in cyberspace looking for them, I know my regional cities....and create them, plus chance upon them on the ground so to speak.

"Being There."

I am happy with their returns, I am happy with their averaged out growth, and I buy well. It is my foundation for further wealth creation down the Obsession Road of Enlightenment...

 

[james_w]

if you can't find positive cashflow properties atm then your not looking hard enough plenty in the cq mining areas rockhampton also has a few around atm

 

[MTR]

Just purchased 35km from Syd cashflow+ - Purchase price $315,000
House $350 pw, granny flat $180-200 pw.
Also, this area is now on the rise so I should be able to achieve reasonable capital growth.

They are out there but expect to fight for these types of properties, multiple offers. Secret has been to make RE agent my friend, the only way for me as I am not located in my target area of Syd.

Cheers, MTR

 

[virgo]

Granny flat inquiries

Hi MTR and Devo 76

Would like to inquire about your purchases; they sound very good; are the houses brick /fibro ? Do they need high maintenance?

Reason i am asking is i am thinking of buying the same setup; only thing holding me back is the house is an older (more than 50years old) fibro house and i'll like to do some comparisons with you.

p/S: Devo 76 in your calculations you have a tax return of 1600 per year...what's that? is that depreciation?

thanks!

 

[josko]

Congratualtions MTR, that's fantastic.

I have a client at the moment who will hopefully purchase a property north of Sydney.

It will cost her approx. $7/week for the first year. In one year, she should be cashflow positive.

With a few folding doors, she could turn the extra lounge room into another bedroom and perhaps collect another $50/week. Options, options....

Keep your mind as well as your eyes wide open. A bad investment for some is a good one for another.

Regards JO

 

[oc1]

In this environment one great way to achieve cashflow positive is to:

*buy a block/knock down house
*build 3 units
*Sell 2, keep 1
*repeat

After 5 developments, you would be close to 5 fully paid/or almost paid units throwing you rent each and every month which you can live off. Or you can tweak the strategy to suit your needs. Easy!

 

[Lynchy]

Actually found this 1 on realestate.com.au yesterday.

800sqm block in Queens Park, Perth. 2 houses on the 1 block, one 3 bed house at the front and one 3 bed house at the back. The 3 bed house at the back needs a little bit of work done to satisfy council requirements, the 1 at the front is a nice partially renovated cottage. They would rent for around $700 a week total I would think.

Asking price is $420,000.

 

[devo76]

Hi MTR and Devo 76

Would like to inquire about your purchases; they sound very good; are the houses brick /fibro ? Do they need high maintenance?

Reason i am asking is i am thinking of buying the same setup; only thing holding me back is the house is an older (more than 50years old) fibro house and i'll like to do some comparisons with you.

p/S: Devo 76 in your calculations you have a tax return of 1600 per year...what's that? is that depreciation?

thanks!

hi. The $1600 is how much cash I get back thanks to a depretiation schedule I got done. My property is a 1000 sqm corner block. 50+yo fibro house to the front with recent Reno. Solid brick granny flat attached on the back considerably less aged.maintenance in general is low as it is built to last. Very solid. It was a 3 bedder but floor plan allowed for the massive hallway to be marketed as a dining room . So instant 4 bedder. Plus it looks like rent will go up $15 on the flat and $25 on the house so happy days. If another pops up like this I'm jumping in asap. Plus it looks like I will be ok to build on the back and subdivide also. Even better.
Cheers.

 

[Simon]

Cashflow = $27 per week positive right from purchase.

I did not buy below market. I wasnt lucky. i just spotted a dual income property come on the market. This is a regional coastal city too not a one horse town.Plus its subdividable.They still pop up like this you just have to be looking.

Need an awful lot of these to retire I imagine?

Generally one sacrifices growth for yield and vice versa. Of course the recent boom made even the most regional of towns look great as they showed prices doubling in three years - what the spruikers didn't show was the flat growth in the 20 years prior.

I know that a well located middle class home will rent easily and well. After a few years rents are rising and the loan repayments are shrinking in relation to median incomes. The moral here is that if you can afford the negative outflow for the first 5-10 years it will all be gravy later on in life when you are sitting on a cash cow.

Maybe an illustration might help:

My folks bought wterfront in Sydney in the 70's for $48K. Was a huge loan back then when median incomes were $4K ish pa, a new Falcon was $2700 and wives generally didn't work.

But had they kept it, even if they stayed IO the whole time, they'd have a great income from it and Huuuuge capital growth.

Instead of chasing regional properties I am suggesting that the young investor needs to "just do it" then hold it.

How I wish I had never sold anything I bought....... shares included.....

If only young folks would listen to me they'd have it made

 

[virgo]

Granny Flat

Thanks Devo 76

Sounds like a great buy! I will know tomorrow about the condition of the fibro house + granny flat.....doesn't the age of the fibro house worry you?
Any asbestos?

cheers

 

[Simon]

In this environment one great way to achieve cashflow positive is to:

*buy a block/knock down house
*build 3 units
*Sell 2, keep 1
*repeat

After 5 developments, you would be close to 5 fully paid/or almost paid units throwing you rent each and every month which you can live off. Or you can tweak the strategy to suit your needs. Easy!

Wow - sounds easy when scribbled on the back of a coaster like that.

 

[oc1]

Wow - sounds easy when scribbled on the back of a coaster like that.

Not talking theory here Simon. It's the current strategy I employ. Not for everyone though as it's a more hands-on approach.

 

[LisaP]

In this environment one great way to achieve cashflow positive is to:

*buy a block/knock down house
*build 3 units
*Sell 2, keep 1
*repeat

After 5 developments, you would be close to 5 fully paid/or almost paid units throwing you rent each and every month which you can live off. Or you can tweak the strategy to suit your needs. Easy!

Hi Oscar - sounds like an interesting alternative to achieve a positively geared portfolio.

Have you (or has anyone else in this forum) achieved a portfolio of 5+ fully paid off units via this type of development activity, or perhaps in the process of achieving this goal? If you have, how long has this taken you, and with what sort of starting capital?

Agree with Simon - sounds so easy when it's described like that!