Positively geared properties - do they exist?

[Simon]

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

I am not making fun of you. Just pointing out that it is a huge undertaking compared to buying a normal IP.

Can you tell us some more about what you have done? Maybe go through a deal in detail - best in a new thread I think.

I am sure it would be very well received - I know I'd love to read it.

 

[oc1]

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!

I'll be over half way achieving this by this time next year.

Forcing growth in this manner makes it easier to achieve positive cashflow from day one. Again, it's more hands-on but i can't justify buying a property for a $20-$50 p/w cashflow gain - it would get eaten very fast.

Building mutiple dwellings on a site allows you to sell some (good thing when active - you're trading stock), pay down your debt, pay your tax and keep some. LVR would be very low so you can access the equity and you would be getting a handsome cashflow return.

Start with one and roll the funds into the next one (or two).

Most may argue, never sell and just keep them all. I prefer the above. You reduce your risk by reducing your LVR, you have money in your pocket each month and there are always sites which you can replicate the process.

 

[oc1]

I am not making fun of you. Just pointing out that it is a huge undertaking compared to buying a normal IP.

Can you tell us some more about what you have done? Maybe go through a deal in detail - best in a new thread I think.

I am sure it would be very well received - I know I'd love to read it.

I know you weren't making fun of me. Been here long enough to figure that out

Can do a new thread, though, everything is under construction at the moment.

I agree it's a huge undertaking compared to buying an IP. The benefits to building are rewarding though. You can always piggy back with an experienced developer or builder. I know a couple of realestate agents who do this with success.

 

[our obsession]

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!

Oscar, you are truly a sweetheart, there is another serious consideration for me with my next to nothing bought land blocks...I had been planning units, but you have just put another twist into the whole unit thing.

Thankyou.

 

[MTR]

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!

I too really like this plan.

Cheers, MTR

 

[yadreamin]

I do know of a couple of people who have implemented this stratergy very very successfully. With some of these developments in country towns with population under 5,000 others in the cities.
However 1 bloke has his own bricklaying company and the other has is own plumbing company.
Those 2 trades would sort of help the plan considerably l would think.

Now l also took note that in the country town there was only money in the inital sale of the units any one who has sold one of those units since then has only got their money back , which is not a bad thing if you are an owner occupier.

Have not seen any figures as far as yeild etc
I would imagine you would have to be pretty much on site to get a project like this over the line on time, on budget.
It could easily take 2 years to complete l reckon.
I too would be real interested for a thread to be started on this stratergy.

Then again maybe the Monavale build of MW is just that

cheers
yadreamin

 

[yadreamin]

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

I would really love to sit and talk with you awhile as l think you would have some very wise words to share indeed.

It is the holding of neg geared ips that is hard to bear, usually thats what pushes the sell button. I know its tempting for me now.

Simon , l thought you bought heavily into Managed funds ?
Did nt that work out for you?

cheers
yareamin

 

[oc1]

Oscar, you are truly a sweetheart, there is another serious consideration for me with my next to nothing bought land blocks...I had been planning units, but you have just put another twist into the whole unit thing.

Thankyou.

Glad to get the mind ticking

From memory you also deal in regional towns like myself. Which area/s are you focusing on?

 

[devo76]

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

Yes it has asbestos but it's in good condition and painted so there is zero health hazards. It will outlast 90% of homes built these days . My 8 yo ppor is showing signs of aging faster than this rental.

 

[Simon]

I would really love to sit and talk with you awhile as l think you would have some very wise words to share indeed.

It is the holding of neg geared ips that is hard to bear, usually thats what pushes the sell button. I know its tempting for me now.

Simon , l thought you bought heavily into Managed funds ?
Did nt that work out for you?

cheers
yareamin

I have some managed funds, maybe a third of my portfolio. Were doing amazingly well prior to the GFC. Some are still up and some are down - similar to my shares I held.

I still have so much to learn but I do know a lot more than I did when I was 20. I would love to pass it onto a 20 year old but they are just not interested or have different priorities.

 

[devo76]

Yes you are right but it's a good yield property so if you buy and hold then sell down to live off rents. This would be a keeper. Also it is in an area that will see good capital gain. Let's be honest the whole of Australia had property booms not just the cities. Also after I build on the back the new property will have about $100,000 equity. That's not too bad in my book.

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

 

[fjficm]

i now have 45+ properties with no mortgage on them with cash flow of 310K+/year and im 36. still working fulltime and managing props via agents etc. my port is 6.5 mill and grows 9%/year on average.

however, i don't see that i have achieved my full potential yet, probably only 30-35% of my journey with more to come

it can be done, keep lvr<50%, positive cashflow and gear all props and sometimes if you do make a mistake, its no big deal, move on. props are not like shares when you can lose the whole thing (if not more, see BrisCon disaster trail). Keep it simple, negotiate hard but not stupid.

 

[yorkiefish]

I know you weren't making fun of me. Been here long enough to figure that out

Can do a new thread, though, everything is under construction at the moment.

I agree it's a huge undertaking compared to buying an IP. The benefits to building are rewarding though. You can always piggy back with an experienced developer or builder. I know a couple of realestate agents who do this with success.

hi oc1, would you be able to pm me some of the agents info or builders/developers etc in regards to your tactic.

thanks in advance.
yorkie

 

[MTR]

I would really love to sit and talk with you awhile as l think you would have some very wise words to share indeed.

It is the holding of neg geared ips that is hard to bear, usually thats what pushes the sell button. I know its tempting for me now.

Simon , l thought you bought heavily into Managed funds ?
Did nt that work out for you?

cheers
yareamin

Hi yadreamin
What worked for me was changing the way I did things, which meant I had to stop buying -ve properties and educate myself on ways to bring cashflow in the door.

Look at properties or whatever asset class of your choice to bring cashflow in the door to balance your situation. This will require more work but once you move from the buy and hold -ve properties it can also bring many more opportunities.

McKnight pretty much sums it up "success comes from doing things differently".

 

[jaycee]

bloody hell, took me all this time to understood what "buy & hold" means and now ther's a whole other world to explore !

 

[oc1]

hi oc1, would you be able to pm me some of the agents info or builders/developers etc in regards to your tactic.

thanks in advance.
yorkie

Not sure what you mean here. The point was there are ways to do this if you lack the experience.

 

[Ausprop]

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!

after tax you only get to keep 63% net at best. if the margin is say 20% AND the dev goes well, you will clear how much? not likely to be enough to own 1 unit. And if the market drops on you whilst building you may do your dough completely.

 

[james_w]

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!

good advice have done similar

 

[Dazz]

after tax you only get to keep 63% net at best. if the margin is say 20% AND the dev goes well, you will clear how much? not likely to be enough to own 1 unit. And if the market drops on you whilst building you may do your dough completely.

That was my reaction as well...seems you and I are in the minority again. Excellent.

 

[Dazz]

i now have 45+ properties with no mortgage on them with cash flow of 310K+/year and im 36. still working fulltime and managing props via agents etc. my port is 6.5 mill and grows 9%/year on average.

Thanks for posting fjficm.


Everyone else seems to have ignored your contribution, but I'm happy to comment.


I gather at an average of 144K per prop, you are talking about multi-property properties, if you know what I mean. That is, you buy a block of 8 flats on one title for say 1.2m, and then call that 8 properties, not one, and that's how you get so many properties for so little money ??


To the original poster, of course positively geared properties exist. Whether you are able to locate them, secure them or afford them are entirely different matters.