Where are your positively geared IPs??

I'm new to property investing and I think I must be doing something wrong. I'm looking for a positively geared property but all the ones I look at online and do rough calculations on only seem to just cover the IO loan and the extras leaving nothing extra. I know you can add extra income by putting a granny flat and renting rooms seperately. But for my own curiosity I would like to know where are your positively geared IPs?
Thanks for answering in advance.
 
I'm new to property investing and I think I must be doing something wrong. I'm looking for a positively geared property but all the ones I look at online and do rough calculations on only seem to just cover the IO loan and the extras leaving nothing extra.

A couple of things:

Leaving aside granny flats, for additional income and rent-by-the-room,
1. Almost any property you buy will be positively geared if you put down a large enough deposit.
2. Most negatively geared properties now, will become positively geared if you hold onto them long enough. (rents go up and mortgage repayments stay pretty much the same)

Other than that, you can buy cheaply, do a low cost cosmetic reno, or add extra bedrooms / bathrooms and increase the rent.
Or buy at the very low socio-economic end of the price range, these properties usually have higher rental yields.
 
A couple of things:

Leaving aside granny flats, for additional income and rent-by-the-room,
1. Almost any property you buy will be positively geared if you put down a large enough deposit.
2. Most negatively geared properties now, will become positively geared if you hold onto them long enough. (rents go up and mortgage repayments stay pretty much the same)

Other than that, you can buy cheaply, do a low cost cosmetic reno, or add extra bedrooms / bathrooms and increase the rent.
Or buy at the very low socio-economic end of the price range, these properties usually have higher rental yields.

Very true. Most investors that I work with that are serious about purchasing CF+ properties, calculate their interest costs at 105% purchase price - as they are generally using equity to purchase than cash.
 
A couple of things:

Leaving aside granny flats, for additional income and rent-by-the-room,
1. Almost any property you buy will be positively geared if you put down a large enough deposit.
2. Most negatively geared properties now, will become positively geared if you hold onto them long enough. (rents go up and mortgage repayments stay pretty much the same)

Other than that, you can buy cheaply, do a low cost cosmetic reno, or add extra bedrooms / bathrooms and increase the rent.
Or buy at the very low socio-economic end of the price range, these properties usually have higher rental yields.

But that's not truly cashflow positive.... 105% is the correct way to look at it.

This is the way I look at it. Once you have an IP, you will (most likely) also have an offset account. Your rate of interest on your mortgage now becomes the risk free rate for you.

Say you put a $50K deposit on a $500K property and lets say that it is CF+ by $1K each year.

That $50K that you've now taken out of your offset account means you are paying $2.5K more interest there. So really, the property is CF- by $1.5K.

105% is the only way to work out if a property is truly CF+.
 
They would have to be pretty cheap with high rent for 105% repayment..

Where are these? Lol

Why would you buy at 105%? You have to go quite a few steps backwards before you even get back to 0.

I have a few positive ones in Melb CBD (3000). They are either:
- fully furnished, or
- short term rentals

All were positive from the start with 80% finance.
 
But that's not truly cashflow positive.... 105% is the correct way to look at it.

This is the way I look at it. Once you have an IP, you will (most likely) also have an offset account. Your rate of interest on your mortgage now becomes the risk free rate for you.

Say you put a $50K deposit on a $500K property and lets say that it is CF+ by $1K each year.

That $50K that you've now taken out of your offset account means you are paying $2.5K more interest there. So really, the property is CF- by $1.5K.

105% is the only way to work out if a property is truly CF+.

Yep, opportunity cost of capital should be calculated.
 
Mount Druitt 2770
Gosford 2250
House + granny flat near Wyong 2259

Note, all of these properties were actually $1k-$3k pa cashflow negative in the first year. Even Mount Druitt which was bought around $170k and renting for around $270 pw. Strata fees, insurance costs, water bills can really add up. But they were positively geared after that as rental increases kicked in.
 
On a buying spree? :D
I wish I am that comfortable buying interstate!
Btw, what about writing a thread on your purchases etc?

This ones different to the others in that ive actually been inside this one :p

No thread until ive done something worth writing about. Any numpty can pull equity from ppor and spend it on house deposits.
 
They would have to be pretty cheap with high rent for 105% repayment..

Where are these? Lol

You betcha. I think I've posted about these a fair bit on the forum. :)

There are a few on the forum walking the same path, DT being an example.

Why would you buy at 105%? You have to go quite a few steps backwards before you even get back to 0.

I have a few positive ones in Melb CBD (3000). They are either:
- fully furnished, or
- short term rentals

All were positive from the start with 80% finance.

Calculate at 105% because this includes all funds placed into the deal. Otherwise you're not factoring in the equity loan used, or cash injected into the deal.

Anyone can buy a 3% yield with a 80% deposit and make it CF+. Buying at 105% CF+ at purchase, that's the sweet spot.
 
I use 105% in my calcs. It's cheating if you don't!

haha. mine are 8%+ ROI at 105%. Postcode 2760.

CJay is on the money. I've seen a few 8%+ now.
 
I calculate my returns based on the full cost of the property, so that includes the deposit and stamp duty. Within the first year i was getting 11% gross return on my ips. 4107
 
I use 105% in my calcs. It's cheating if you don't!

haha. mine are 8%+ ROI at 105%. Postcode 2760.

CJay is on the money. I've seen a few 8%+ now.

Ok. I'll put my hand up. What is this 105% calculation? Can somebody point me to a resource which explains this?

Isn't the best measure annual return on deposit paid?
 
Ok. I'll put my hand up. What is this 105% calculation? Can somebody point me to a resource which explains this?

Isn't the best measure annual return on deposit paid?

BLTN's response in this thread is probably the best one.
Since the deposit paid comes from equity then there's interest payable on it which needs to be accounted for. Or if your deposit is from cash, it still needs to be weighed up against other options, such as sticking it in your offset account.

Since majority of people will borrow full purchase price plus costs/fees on top, calculating at 105% borrowings gives them a level playing field. As we're comparing cashflow +ve areas, any numpty can pour enough cash into just about any suburb to manipulate that status.
 
BLTN's response in this thread is probably the best one.
Since the deposit paid comes from equity then there's interest payable on it which needs to be accounted for. Or if your deposit is from cash, it still needs to be weighed up against other options, such as sticking it in your offset account.

Since majority of people will borrow full purchase price plus costs/fees on top, calculating at 105% borrowings gives them a level playing field. As we're comparing cashflow +ve areas, any numpty can pour enough cash into just about any suburb to manipulate that status.

Thanks. So what we are saying is that whatever the purchase price, add 5% and then calculate the interest repayments on that figure? Then use this figure as the loan expense when calculating the return?
 
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