I've also done it for residential - in fact my last residential was as prime as you get for a location for a metropolitan area, with decent cashflow. But yes they tend to be more easily found in commercial.
The CASHFLOW+ debate...Generally, most CF+ IPs are usually found in "crap" locations
- Thread starter beachy
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I've also done it for residential - in fact my last residential was as prime as you get for a location for a metropolitan area, with decent cashflow. But yes they tend to be more easily found in commercial.
I don't know if that's correct.
Even if you have 0 leverage, you could have a very low yield (eg 1.5%) which would be considered poor cashflow.
Not so Jeremy.
I've known many many investors and others who wouldn't classify themselves as investors who have worked hard and simply paid cash for a vacant block of land and held it for many years, making substantial capital gains over the decades. Some have seen prices multiply by tens and one investor I chatted to have seen hundreds of multiplications. He bought a block for 16,000 pounds in 1965 and it is now worth $ 9.5 million. He couldn't care less about some little dribble of rent.
Others have used leverage after buying a vacant block as a very successful strategy. There is nothing stopping you, or anyone else, from parking your cash into a vacant block (avoids all of the Tenant headaches) and then using the title deed as leverage for further investment, perhaps with some income component to it. The Banks tend to prefer these title deeds over cash deposits I've found.
Anyway, there are two proven, very widely used strategies that investors have used in the community over the decades that discount your statement as pure folly.
I've known many many investors and others who wouldn't classify themselves as investors who have worked hard and simply paid cash for a vacant block of land and held it for many years, making substantial capital gains over the decades. Some have seen prices multiply by tens and one investor I chatted to have seen hundreds of multiplications. He bought a block for 16,000 pounds in 1965 and it is now worth $ 9.5 million. He couldn't care less about some little dribble of rent.
Others have used leverage after buying a vacant block as a very successful strategy. There is nothing stopping you, or anyone else, from parking your cash into a vacant block (avoids all of the Tenant headaches) and then using the title deed as leverage for further investment, perhaps with some income component to it. The Banks tend to prefer these title deeds over cash deposits I've found.
Anyway, there are two proven, very widely used strategies that investors have used in the community over the decades that discount your statement as pure folly.
+1
Yep!
Absolutely!
At the end of the day, you can buy your neg geared place & pay down the mortgage all you want. In the meantime all the investors that invest for cash flow will have bought several more and will be enjoying their additional cash flow.
Think of it this way.........How many properties can you afford that cost you, say $50pw to hold? Now, how many can you afford to hold that put money in your pocket, even if its only $20pw?
Agree.
Just look at Mt Druitt...properties have gone up $150k a piece in a relatively short period of time.....if you had 10 or more of them you'd be laughing all the way to the porsche dealer by now
That would be an overstatement. The majority of the cf neutral / slightly plus deals are im the outer metro. Most inner metro deals are similar to other states.
Nathan birch is called mount druid's donald trump
There are several posters on this thread who have made very nice capital gains on so called cash flow properties in lesser areas .Skater and handyandy in outer west sydney . We did the same in the last cycle in several locations including Logan , rocky , Townsville and Hobart .
You make the money thought capital growth . Cash flow just helps you hold more .
Last cycle we were late starters so all the " nice " areas had moved , where as this cycle we chose to buy in nicer areas when the market was dead . Doing very well and in the near future our portfolio of nice properties will become cash flow positive . We've found More expensive properties ( though " cheap " for their area ) have less management problems and because there are less of them again , less work .
If I was buying now I'd probably be looking at cheaper areas and we still may buy more in the next year or so .
Cliff
You make the money thought capital growth . Cash flow just helps you hold more .
Last cycle we were late starters so all the " nice " areas had moved , where as this cycle we chose to buy in nicer areas when the market was dead . Doing very well and in the near future our portfolio of nice properties will become cash flow positive . We've found More expensive properties ( though " cheap " for their area ) have less management problems and because there are less of them again , less work .
If I was buying now I'd probably be looking at cheaper areas and we still may buy more in the next year or so .
Cliff
Thats very interesting, if you look at historical blue chip areas vs not so blue chip (excluding mining towns and whoop whoop), on average the blue chips outperform the non blue chips. Lets say for VIC Sth yarra/carlton/brighton vs Box Hill/Ringwood/Footscray/Sunshine for arguments sake
but not everyone can afford to buy anything decent in the blue chip suburbs, so they have either the choice of buying the absolute dumps in these blue chips or a decent one in the outer
However the way I see it, the negative geared amounts for the bluechips are far higher and a killer for most, that is unless you rent out per room, student accom, develop, value add etc. etc.
There are heaps of $1.6m properties in innner city whose rent is is $900-$1100 per week,
I cannot afford to buy $1m+ properties, so I go for sub $300k, which the yield is at least 6%, as if I was getting 3.5% yield on a 1m IP, id be $15k out of pocket not including rates, insurance, PM fees, vacancies, maintenance, etc. If I included these it would be $20k+, which is $400 per week, which is well over 50% of what I earn,
so personally, I would rather control $300x3 IPs with higher yield , instead of $1mx1,
So yes its the same as many peoples "buy the bread butter properties"
if I could afford $1m+ properties, I would most likely be actively pursuing commercial, that is undervalued with good yield and I would sit back and let the $$$ roll in through Rental increases and CG
as for whoop whoop, I do have own a few, but they arent moree or ones where the population is 5k or less, even though I do own some in the dumps!!!! the lowest population town in my portfolio is about 11,000
It's interesting reading the above comments because most of the posters who have CF+ IPs are in less desirable areas (and yes, they're happy with buying there). Just confirms my thinking which is that it's very hard to buy CF+ IPs in your typical "blue-chip" or A or B-grade suburb. When I say CF+ I mean you've bought an IP and it's become CF+ within 1-2 years or straight from purchase.
What's your point exactly?
Beachy
There's a time for everything .
If at the peak of the GFC I can pick up two units in Mosman for 900 that rent for 1000 verses a " cash flow " positive property in Mt Druitt, I'd go for mosman any day . If the alternative was 1.5 for a 1100 rent verses a cash flow property in Mt Druitt , i might make a different decision , but again it would depend on what had happened with Capital Growth .
If we were in a situation like we are at the moment where you might pay 300 k for a house that rents for 300 in Mt druitt , but it's already gone up 50 % in the current cycle , I'd be looking else where .
The fact that we could pay 900 k for two units in Mosman at the peak of the GCF when no one could get finance , was partially as a result of buying multiple cashflow properties in the previous cycle for 65 - 85 k and selling them for considerably more.
We've made money for developments , cash flow cheapies , blue chip investment properties and blue chip PPOR's . At the right time they all work , hence my nick " apprentice timing lord " .
My aim is to have a portfolio of paid off blue chips . Less hassle , but we may well buy a few more " cash flow cheapies " to pay off the mortgages on the blue chips we already own . Not sure if we'll buy any more blue chip keepers.
When we pay off the one's we have we'll have a nice retirement income.
Cliff
There's a time for everything .
If at the peak of the GFC I can pick up two units in Mosman for 900 that rent for 1000 verses a " cash flow " positive property in Mt Druitt, I'd go for mosman any day . If the alternative was 1.5 for a 1100 rent verses a cash flow property in Mt Druitt , i might make a different decision , but again it would depend on what had happened with Capital Growth .
If we were in a situation like we are at the moment where you might pay 300 k for a house that rents for 300 in Mt druitt , but it's already gone up 50 % in the current cycle , I'd be looking else where .
The fact that we could pay 900 k for two units in Mosman at the peak of the GCF when no one could get finance , was partially as a result of buying multiple cashflow properties in the previous cycle for 65 - 85 k and selling them for considerably more.
We've made money for developments , cash flow cheapies , blue chip investment properties and blue chip PPOR's . At the right time they all work , hence my nick " apprentice timing lord " .
My aim is to have a portfolio of paid off blue chips . Less hassle , but we may well buy a few more " cash flow cheapies " to pay off the mortgages on the blue chips we already own . Not sure if we'll buy any more blue chip keepers.
When we pay off the one's we have we'll have a nice retirement income.
Cliff
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