ve Geared?

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From: Glenn S


Hi,

Yet another Newbie here.

Is there any reference material around that can actually lead me in the right direction towards attaining positively geared properties?

I already have 2 IP's 1 doing OK in capital growth the other not so good, But both are negatively geared, and so costing me, This obviously affects the ability to purchase more IP's.

Negatively geared is easy, The traditional way of waiting for Growth to occur, But what about +vs cashflow AND cap growth?

What to look for in a suburb, street etc, How to attain the 10% rentals etc required to be positively geared (this seems a complete mystery to me) or the heavily discounted pricing.

Are most of these "Off-The-Plan" type scenarios?

All Help greatly appreciated as I am currently getting ready to purchase a 3rd IP, and then woke up and decided I'd like to go positive for a change.

 

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Reply: 1
From: Debra L


Glenn,

One useful thing to look for to help you obtain a property that will have both good capital gain, as well as excellent cashflow to make it positively geared, is to look for a property that will give you 'two incomes for the price of one'.

If you find a house that has a granny flat or bungalow out the back, or has been split for dual occupancy, you can get two rents coming in, which can make all the difference in turning what would have been negative, into positive.

For example, a friend of mine recently purchased a three-bedroom house in Boronia (Melbourne) with a granny flat out the back. He paid $142K for the property, and between both rentals gets $275 pw. Gross rate of return = 10.07%.

Sometimes it is a matter of being in the right place at the right time. Finding an area that has an oversupply of a certain type of dwelling, which are hence selling well below a reasonable market value - and as such have a huge potential to increase in value, once the oversupply has been absorbed.

An example of this was when the SA government first started selling off their ex commission houses. I was able to pick two up in 1998, which returned me a nice 26% GRR and doubled in value within two years. But the main reason was that they were initially sold for well below their true worth.

Hope this helps.

Good luck with your searching.

 

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Reply: 1.1
From: Glenn S


Thanks,

I had not thought of that angle at all.

Glenn