Positive Cashflow Strategy

Thanks, brokers will know. Not sure which is easier and depends on the person, but yeah in the long term servicing could be a wall. For me I haven't hit the wall yet and was able to make some small improvements to my servicing.

But to prevent hitting the wall in future I've been buying the non-regional cashflow properties. There seems a huge variance in opinions though as to what's more important, with many above thinking CG is more important than cashflow. I think they are correct for those who are starting out, as equity is what held me back the first 10 years, and I think in future it will be cashflow.

Yeah thats pretty common - it generally takes a while to hit the serviceability wall.

Agree that capital is generally the constraint earlier on. Have been doing the same - purchasing non regional cash flow properties too.
 
Yeah thats pretty common - it generally takes a while to hit the serviceability wall.

Agree that capital is generally the constraint earlier on. Have been doing the same - purchasing non regional cash flow properties too.

Yes agree at the start getting capital is hard.

I would not purchase in a regional area that I'm not familiar with as a start.

The best place to start is in your own backyard. If you can't afford there then find the nearest suburb that matches your criteria. Don't buy in bad areas where it is undesirable to live just because of yield. Like others above have said what appears positive maybe end up negative cashflow.

Your goal would be to accumulate as large an asset base as you can without compromising your lifestyle eg. Don't have such a large negative cashflow that you have to eat instant noodles every meal. I would aim for neutral cashflow or better but that's my preference because i like to eat out, drive a new car, send my kids to a good school etc having cashflow properties help me maintain my lifestyle whilst investing.

Your first property will enable to learn the process and get a feel for what it's like to be a landlord. You WILL run into problems and its a great chance to learn and adjust your strategy as you go. So don't think too hard buy a standard 3 bedder in an area you yourself would live in.
 
The best place to start is in your own backyard. If you can't afford there then find the nearest suburb that matches your criteria. Don't buy in bad areas where it is undesirable to live just because of yield. Like others above have said what appears positive maybe end up negative cashflow.

I think this is a common mistake by investors. Going for 'what you know' rather than 'what you dont know'. I think its best to learn more about what you dont know and then make the choice based on value.
 
I think this is a common mistake by investors. Going for 'what you know' rather than 'what you dont know'. I think its best to learn more about what you dont know and then make the choice based on value.

Agreed.

The information to make an investment grade decision will take just as long for an area you are unfamiliar with as it would for a place you grew up in.

It's very different information you're after. 'Knowing' an area can be quite deceptive.
 
The best place to start is in your own backyard. If you can't afford there then find the nearest suburb that matches your criteria. Don't buy in bad areas where it is undesirable to live just because of yield. Like others above have said what appears positive maybe end up negative cashflow.

disagree,
a lot of people will say "I grew up in XXX, so Iknow the area"

you know the area from a residents perspective, not as an investor

also being local you are more likely to get emotional

but I know where you are coming from, it makes you feel more comfortable buying in your backyard
 
Yep exactly otherwise most people would never get started. I know people including myself who talk about to investing Qld or Vic but never really get started. It's too hard. I even drove to Dubbo a long time ago to check out properties but was too scared to purchase because I really didnt know the area and it took me 6 yrs to finally purchase my first IP.
 
Hi guys, while i understand that aiming for CG is better for the long term, it is very hard for me as a strategy as i am low income ($70k gross combined income and 2 dependants).

i have been able to amass a grand total of....3 properties by buying positive property and adding value/renos. they are at least $150pw each. yes its very risky but i am unable to buy in areas of high CG due to finance/service.

am i missing something or is there a better way?

lucky for me the properties i have have had good CG but that was not a priority when i was purchasing.
 
Hi guys, while i understand that aiming for CG is better for the long term, it is very hard for me as a strategy as i am low income ($70k gross combined income and 2 dependants).

i have been able to amass a grand total of....3 properties by buying positive property and adding value/renos. they are at least $150pw each. yes its very risky but i am unable to buy in areas of high CG due to finance/service.

am i missing something or is there a better way?

lucky for me the properties i have have had good CG but that was not a priority when i was purchasing.

For 70k combined income and with 2 kids, you sound like you're flying mate. Ideally over the years as your position improves you may be able to aim for areas with lower yield and higher CG potential, but right now I think anything that's negative is going to have a big impact on your lifestyle and potentially present you with big risks if things turn sour.
 
"For 70k combined income and with 2 kids, you sound like you're flying mate"


thanks, but its like walking on thin ice. Everytime RBA reviews interest rates i can literally hear my heart beat.
 
"For 70k combined income and with 2 kids, you sound like you're flying mate"


thanks, but its like walking on thin ice. Everytime RBA reviews interest rates i can literally hear my heart beat.

Paul your a champion. Love your amazing effort and great results.
 
"For 70k combined income and with 2 kids, you sound like you're flying mate"


thanks, but its like walking on thin ice. Everytime RBA reviews interest rates i can literally hear my heart beat.

It may be worth considering fixing a portion of your debt then to provide some security against future potential rate rises.
 
Hi guys, while i understand that aiming for CG is better for the long term, it is very hard for me as a strategy as i am low income ($70k gross combined income and 2 dependants).

i have been able to amass a grand total of....3 properties by buying positive property and adding value/renos. they are at least $150pw each. yes its very risky but i am unable to buy in areas of high CG due to finance/service.

am i missing something or is there a better way?

lucky for me the properties i have have had good CG but that was not a priority when i was purchasing.

Depends on the limiting factor also.
Deposits or income.

If growth properties you can always sell a few down the track, pay off non deductible debt and this will help serviceability and generate deposits.

If low growth high rents this may help qualify for more, but without the deposits it will be a long time between properties.
 
This is why I like NRAS - it generates incredible cash flow that can then be redeployed towards aggressive debt reduction, so you are creating accelerated equity AND the necessary cash flow to take advantage of the equity.

I used it to go from 2 properties to 10 properties within 3 years, and pay off my PPOR within 2 years.

No right or wrong answer to any of this. There are many paths to financial freedom. Each investor finds their own particular way. Some enjoy more success than others, but in most cases all investors enjoy more success than those who do nothing.
 
This is why I like NRAS - it generates incredible cash flow that can then be redeployed towards aggressive debt reduction, so you are creating accelerated equity AND the necessary cash flow to take advantage of the equity.

I used it to go from 2 properties to 10 properties within 3 years, and pay off my PPOR within 2 years.

No right or wrong answer to any of this. There are many paths to financial freedom. Each investor finds their own particular way. Some enjoy more success than others, but in most cases all investors enjoy more success than those who do nothing.

That sounds great.
 
Depends on the limiting factor also.
Deposits or income.

If growth properties you can always sell a few down the track, pay off non deductible debt and this will help serviceability and generate deposits.

If low growth high rents this may help qualify for more, but without the deposits it will be a long time between properties.

Yes Terry a very good point with which I agree, having CG allows to further build wealth quicker, whether via the new deposit. I think lots of people miss that point and perhaps that's why most never invest past 2 IPs as they find the whole process so difficult.
It took few years for me to understand that too.....
 
I do strongly agree that CG is the way to go for true wealth creation but timing is very important.
Its no secret the key is to hold the property for a long period, (unless you time the market perfect then any short term gain is likely to be small and lost in closing costs and negative Cashflow)

But when I say timing I am more focusing on your timing in your life to be holding a NG property. I have seen 3 examples from close friends in the past 3 years who purchased NG properties for growth right when they were starting families. Now what happened is the wife stopped working, down to single income and that extra $150 a week really started to hurt. Another issue is the growing family and the small PPOR that they want to upsize.

Like everything in life a plan is important so you must consider your plans for the next 5+ years and ensure any NG property can be serviced without a negative impact on your life. You do not want to be selling soon after a purchase because of changed circumstances.
 
I do strongly agree that CG is the way to go for true wealth creation but timing is very important.
Its no secret the key is to hold the property for a long period, (unless you time the market perfect then any short term gain is likely to be small and lost in closing costs and negative Cashflow)

But when I say timing I am more focusing on your timing in your life to be holding a NG property. I have seen 3 examples from close friends in the past 3 years who purchased NG properties for growth right when they were starting families. Now what happened is the wife stopped working, down to single income and that extra $150 a week really started to hurt. Another issue is the growing family and the small PPOR that they want to upsize.

Like everything in life a plan is important so you must consider your plans for the next 5+ years and ensure any NG property can be serviced without a negative impact on your life. You do not want to be selling soon after a purchase because of changed circumstances.
Totally agree with you, so it is not just the timing but what plans you have set out for the future.
We lived in an average suburb further from CBD, south west, yet acquired 8 IPs before moving to dream home.
AND in our circumstances we only started investing once the kids were born, but only after repaying PPOR after 5 years (these were years of dedication that I like to call - or years of delayed gratification).
People are much more knowledgeable nowadays, but I suppose if you are starting a family, one should ask a question, do I want to live where I live? If not move first before investing, then when time and finances permit invest.
We chose to stay put where we lived and build the asset base first...
So yes, the plans play vital role as decisions and life circumstances will always change, right?
 
I'm going to swim against the stream here. I think that you should focus more on cash flow than capital gains.
You can very much calculate how much your property will be positively geared by and make some fair assumptions that on average your rent will go up by over 2% (should go up with at least CPI).
You can't however use past capital gains to predict future capital gains. You can't even guarantee that there will be any capital gains in any area in the short and medium term.

Ensuring that the properties you purchase are cash flow positive also helps you with borrowing for subsequent investment properties.

Obviously you should still look that the fundamentals are correct, you want population growth, jobs and infrastructure spending to go into the area where you're buying.
And I do agree with other people on here that capital gains definitely supercharges your purchasing, but purely focusing on something that might not happen for the next five years or so isn't be best thing to do, in my opinion.
 
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Hi Spludgey,

Im going to have to disagree with you on a few things mate.


[QUTE=spludey;1243935] . I think that you should focus more on cash flow than capital gains.


You can very much calculate how much your property will be positively geared by and make some fair assumptions that on average your rent will go up by over 2% (should go up with at least CPI). there are many factors that can destroy your projected rental income for the year.


You can't however use past capital gains to predict future capital gains. You can't even guarantee that there will be any capital gains in any area in the short and medium term. What you can do (and IMHO should do) is manufacture CG, and not have to wait for market movement.

And I do agree with other people on here that capital gains definitely supercharges your purchasing, but purely focusing on something that might not happen for the next five years or so isn't be best thing to do, in my opinion.[/QUOTE] I agree with you, ppl SHOULD NOT bank on CG for short term, that's why its important to be able to manufacture growth, and there are many ways to do this.


Cheers
Leo
 
Is there any good NRAS still in Melbourne was getting some emails from a place that specialised in them but have forgotten, I think they were in Epping / Thomastown.

I'd be worried about the tenants not paying and doing a runner / damage the property, guess that is what insurance is for.
 
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