Stacking up numbers with cash flow positive properties

Dear All Intelligent Property Investors,

I really dont understand and have been trying to work out the maths with cash flow positive property.

you see, a lot of talk about cash flow positive properties generating an annual income of $100K per annual from rent.

But when i work out the numbers after all expenses it hardly worth the risk or the money.

For example.

If the loan for the property is $165K and it generates a weekly rent of $300. You will get a cash flow positive of $892 per week approx.

If you had ten (10x) of these $165K which is worth $1.65 million worth of properties but a cash flow of $8920. these numbers really doesnt make sense.

How can those mentors say you can generate $100K cash flow if it is hard enough for the average price of property and rent to achieve this?


I understand there are mining towns that have excess rent but they will have excess property prices as well.

I just don't understand please help !!!!

Could you please tell me your story of whether this is possible?

There are many mentors in the market promoting this and i dont know if this is true.

thanks

sprightly said:

you see, a lot of talk about cash flow positive properties generating an annual income of $100K per annual from rent.

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Do you have any examples/links?

100k cashflow is your goal?

How about if this was 8 properties paying 20k each in rent per annum. Perhaps (after a few years of good capital growth), 3 could be sold off to clear all debts on the other 5...

It really comes down to what you want to achieve and when you want to achieve it by.

Yes $100K per annual rent is my goal if this is realistic.

1x property generating $20K per year - residual rent of $384 pw (after all expense? )


Is this achievable?

I guess from looking at the other threads there are properties that can generate over a thousands of rents (after expenses) with good cash flow.

looking at averages it seems they range from less than $300 to more than $5000.

Taking a conservative look, just say $1000 is achievable.

then with $100,000 / $1000 = you will need 100 properties to achieve this annual cashflow rent.

this is the assumption of not selling to pay for the other properties and with maximum lending.


It seems in the forum alot of people is talking about Nathan Birch and he has $72 properties.

I guess he is close to getting $100K each year without doing much....luckly guy!!!!!

sprightly said:

Yes $100K per annual rent is my goal if this is realistic.

1x property generating $20K per year - residual rent of $384 pw (after all expense? )


Is this achievable?

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Of course.

You seem pretty fixated on net rents though, which makes me think you've read American authored investment books. In Australia we consider the equity gain of benefit/use too

It takes time

There are ways to add to the yield of a property but it's generally a combination of items. You can improve yield by capital growth, reducing buy costs (i.e. your own developments, buying and reno), NRAS, granny flats etc etc

No one I have ever met has instantly created 100k rental income. It takes time generally. The only exception might be something like NRAS which if done well could generate quite a bit of additional income.

sprightly said:

Yes $100K per annual rent is my goal if this is realistic.

1x property generating $20K per year - residual rent of $384 pw (after all expense? )


Is this achievable?

Click to expand...

Work backwards...

$100k annul rent, let's assume you only get 80% of the actual rent paid (to account for holding costs).

$100k / 80% = $125k - the actual rent you need to get from your properties (assuming you have no loans).

If you assume you can get a 5% rental yield from your properties, you thus need:

$125k / 5% = $2.5M in unencumbered properties.

The real question now becomes how to get $2.5M in properties, without any loans over them.

One solution may be to accumulate a portfolio to the value of $2.5M, then get the properties to double in value and sell off some to pay down debt. You could simply wait for capital growth or find ways to manufacture it yourself.

Other solutions may include finding ways to make the 5% rental yield into 10%, so you can work with $2.5M in properties with the loans attached.

Get higher cashflow properties that don't have the growth, instead use the cashflow to pay off debt.

You could also find ways to take out the 80% consideration at the start. That way you only need $2M to get the same result. Using shares instead of property may do this for you.

So many options

The op wrote: "If the loan for the property is $165K and it generates a weekly rent of $300. You will get a cash flow positive of $892 per week approx. "

HUH? Rent is $300 a week, and you are getting $892 cash flow positive PER WEEK?

That sounds awesome.

It's easy to get cash flow positive properties over time. Over time rents go up.

Or you can be creative and do some reno's or get lucky and get a property that is cash flow positive straight up.

thank you guys for the quick response.

Thanks PT-bear.... is great to see in that perspective.

working it back wards with dollars rather than amount of properties.....

sprightly said:

It seems in the forum alot of people is talking about Nathan Birch and he has $72 properties.

I guess he is close to getting $100K each year without doing much....luckly guy!!!!!

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I've never met Nathan but I'd bet that there was no luck involved: it was all hard work.

Having 100k income per year from rent isn't hard.

One way (not the only way) is to pay P & I until the property is paid off.It just takes time. Sit back and when it is retirement time, assuming you are willing to work until close to retirment age, you are there with a nice income.

cashflow positive properties

It is easily doable over time. It took me personally 8 years to get over 100,000 in income as well as having an average job. Having a clear strategy is important. Just start with one property and leverage yourself forward.
Cheers
Charlotte30

PT_Bear said:

Work backwards...

$100k annul rent, let's assume you only get 80% of the actual rent paid (to account for holding costs).

$100k / 80% = $125k - the actual rent you need to get from your properties (assuming you have no loans).

If you assume you can get a 5% rental yield from your properties, you thus need:

$125k / 5% = $2.5M in unencumbered properties.

The real question now becomes how to get $2.5M in properties, without any loans over them.

One solution may be to accumulate a portfolio to the value of $2.5M, then get the properties to double in value and sell off some to pay down debt. You could simply wait for capital growth or find ways to manufacture it yourself.

Other solutions may include finding ways to make the 5% rental yield into 10%, so you can work with $2.5M in properties with the loans attached.

Get higher cashflow properties that don't have the growth, instead use the cashflow to pay off debt.

You could also find ways to take out the 80% consideration at the start. That way you only need $2M to get the same result. Using shares instead of property may do this for you.

So many options

Click to expand...

Exactly. Or you could do a combination of both.

Get $2.5m of properties at 10% yield. Then one day you can sell some off and have say $1.5m of properties giving you $150k.

Also over time rent presumably goes up (depending where you bought).

Deltaberry said:

Exactly. Or you could do a combination of both.

Get $2.5m of properties at 10% yield. Then one day you can sell some off and have say $1.5m of properties giving you $150k.

Also over time rent presumably goes up (depending where you bought).

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It's a wonderful thing that there are so many ways to go about this. If it were a simple step by step formula then lots of people would follow it and investing wouldn't work as well.

The really great thing is a good strategy can be developed over time. The plan you end up with will likely be revised and amended as opportunities present themselves.

Charlotte30 said:

It is easily doable over time. It took me personally 8 years to get over 100,000 in income as well as having an average job. Having a clear strategy is important. Just start with one property and leverage yourself forward.
Cheers
Charlotte30

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Charlotte I think we need to hear more of your story...were your ip's in nz or aus or elsewhere and how did you get to 100k in 8 yrs - pretty short time really. Do tell???

vaughan said:

I've never met Nathan but I'd bet that there was no luck involved: it was all hard work.

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I have and can confirm hard work is at the centre of the method.

PT_Bear said:

It's a wonderful thing that there are so many ways to go about this. If it were a simple step by step formula then lots of people would follow it and investing wouldn't work as well.

The really great thing is a good strategy can be developed over time. The plan you end up with will likely be revised and amended as opportunities present themselves.

Click to expand...

That's right. It's not a hard task, but it's by no means an "straight forward", otherwise there wouldn't be so many people in average income jobs.

Complications include:
- Can the area be rented out easily
- Risk of rent default, unforeseen circumstances (eg termite infestation, floods etc)
- Will the area you buy actually grow in value (some investments have on paper good yield but maybe the real yield is ordinary and the actual value of the place might go down in value, like what our friend is looking for in the other thread)
- In relation to first point, a whole host a questions are involved including location, position, infrastructure, proximity, demographics, future trend of all the latter three
- Even if you find a good area and a good asset, are you paying the right price (how well do you know your market; can you name the street, do you know who's building what/developing what, do you know what price that random house in the laneway behind you sold 4 months ago? If you don't, you probably don't know your market that well)
- Marcoeconomic and microeconomic factors of the world, your currency, your country, your state, your city, your suburb, your street, your exact position
- Are you lucky?
- Increasing value or rent through additional work (renovations, subdivision, simple development) - but what's the return on additional capital invested really? Do you have the skills to not have cost blow-out? Do you have the people behind you?

For many people, it's all too hard, and they might not be lucky. They also specialise in finding flaws in strategies (which is good), but that hinders them and holds them back because they can never see the grass for what it is. They think too much and spout out too much theoratical rubbish. People who work in jobs are really good at that so they'll stay there for a long time. Sometimes you just have to take a leap of faith.

knightm said:

I have and can confirm hard work is at the centre of the method.

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I get very annoyed when people attribute the success of others to "luck".

sprightly said:

For example.

If the loan for the property is $165K and it generates a weekly rent of $300. You will get a cash flow positive of $892 per week approx.

these numbers really doesnt make sense.

Click to expand...

I agree, they make no sense at all! I'm not sure where on earth you got those figures from...

vaughan said:

I get very annoyed when people attribute the success of others to "luck".

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While I agree with you, I also get annoyed when people attribute NONE of their success to luck.

Regardless of how much hard work is involved, there is always an element of luck as well (IMO).