A game of cash flow

Ok guys - I've finally got together $30k deposit and one of my grandparents has just offered to lend me a further 70k @ 3%. So now I've got a 100k deposit but will pay 3% interest on the 70k.

I'm looking for a cash flow positive or neutral property. I have a few ideas but would love to hear everyone's thoughts. Location and property type suggestions? GO

Cheers

 

Where have you looked so far Kurt?

 

How much money do you earn?

 

Mostly regional NSW towns so far. having a fixed 3% rate for some of it really helps with the cash flow.

 

At the moment i'm putting away $400/week after tax and bills into my savings but that wont last. I'm potentially looking at going back to study soon so I'll just have part-time and casual work which is why i'm after the neutral/positive cash flow option. I also have $25k in shares so if I got desperate on repayments the shares could be drawn upon for any one-off issues.

 

I did put an offer on a commercial property but they had a new lease come in at the same time and they wanted more for it.

 

What yield did they want to sell it for?

 

9% Gross originally but then they asked for $25K above their asking. The agent was pretty annoyed.

 

What was the net yield ?

 

Cashflow Nuetral at what interest rate? IO or P&I?

Has your broker given you a price limit?

How are you going to manage a vacancy period when you're studying?

I'm all for getting in while you can but leveraging up on a low income needs some careful back up plans.

 

@Kurt Well done on saving 30k and it is your call on what you want to do but I would be hesitant to jump in right now.

You have limited income which looks like it is reducing further with study and unsure on how much buffer you will have to manage repairs, vacancy etc.

If your heart is set on buying a property I would be hesitant to go above 300k as that is a 60k deposit (bank LVR 80% but actual LVR is 90% as you are borrowing 270k) + buying costs so lets call it 15k (10k is stamp duty) leaving you with 15k.

Even though you are aiming for CF+ if the place is vacant or needs repairs it can quickly turn from CF+ to CF- all of which you have little control over but you will need money for this.

Personally myself I would continue to read the forums and learn more about property whilst I save a larger deposit and complete my study as I would hate to lose my grandparents 70k and prefer to stand back and look at my achievements and said I didn't get any help and look what I've achieved - I am proud of my achievements and I wasn't given/loaned any money to invest with from family.

 

This is how people get in trouble and start their investing on the wrong foot. Many things can go down from there.

Make sure you have your income sorted and you understand abit better what your doing before you risk your grandparents nest egg. They probably spent a lifetime saving it,

 

THIS

 

I get the feeling you are around early 20's from what you have said? You have saved 30k- awesome and still saving cash each week which is great. You are very lucky to have your grandparents lend you 70k but they obviously know you well and wouldnt do it ifthey thought you would blow it. Definitely take the opportunity you have been given, just make sure you do your research before you buy. I would suggest somewhere like Hobart. A market with low entry point and high yields which is also rising and also has low vacancy. Do your own research and go for it mate. Fortune favours the brave

 

Thanks - $70k is pocket change for them and they certainly do know me well which is why they're not worried and neither am I. I have briefly looked at Hobart but the net population growth is an ugly figure down there which is the only thing that worries me. I'll take another look though.

My day job is financial planning so I know my way around my budget but the majority of my knowledge is in the share market which is why I'm putting some feelers out here for good cash flow. I can easily look at numbers and say yes or no you can afford that property today but its another thing to know if it's a good investment.

 

Hi, lucky you to have good family and good advice from this forum. but I guess we make our own luck. in my twenties I knew #$%@ all about finance and budget. Everything I have was made of blood, sweat and tears. Now that I don't really need it, I'm getting some family inheritance. Such is the fabric of life!

KY