Capital Gains vs Cashflow

and my guess is they were not on a very high income either hence the CG property in north morton bay and not somewhere near the CBD in Brisbane/Mel and they chose to lose some cash.

on top of that they were very thankful to some senior members... that is why I am so critical of CG talk here because it gives a very wrong impression

 

I am using 2 ways to manufacture growth. First is renovations. Second is building out the back of underutilised back yards. These are to retain and rent out. I haven't finished the first build yet but my numbers say that this approach will increase both capital growth and cashflow. Watch this space I guess

Both makes sense to me.

 

My investment partner is a low income earner. We went in on our latest deal 50/50. After renoes it will be cashflow positive and a significant increase in value. He's happy about the increase in value but not happy about cashflow positive. He hasn't paid tax in more than 15 years and doesn't want to start now. Too bad.

 

I think it just depends on their capabilities in that point in time. But to go interstate on the first IP and be negative in my opinion is not the way to go for the first initial purchase. is more or less like paying a car loan and getting tied down by it without room for movement. Again brisbane qld could boom according to some but having i think that would be highly unlikely.

 

I am the opposite. I would love to pay $1M+ in tax every year .

 

There is something wrong with this approach surely?? Wouldn't it be best to have grow income/cashflow so you improve lifestyle/financial freedom and utilise structures to reduce tax??
I am only now learning from other investors how I can significantly reduce my tax and I wont sharing on PC.

 

Yes, exactly! But he is from the old school of Australians who will do anything to avoid paying tax, even it means having a low income. I would rather have the income and deal with the tax. Better than having no income.

Yeah, keep that one quiet Maybe catch up at the next Perth meet?

 

I am not feeling the love here, @MTR spill out the knowledge

 

Does it involve Panama?

 

LOL.... I get in enough trouble as it is, keeping this one to myself

 

Some people are so weird that they are bordering on stupid.

I have a nephew (age < 40) who has a HECS Debt. His big claim to fame (in his eyes) is that he hasn't paid a cent of it back. He has never worked since he got his Teaching degree. I tell him to get a job, pay back the debt, live a better lifestyle, be a better role model for you two young kids, ... but to no avail.

He married one of my wife's nieces - so he is NOT really related to me is he?

 

I'm seriously looking for CF since retired.
$400,000 give or take .
Naturally looking for a good return with low maintenance .
Low vacancy is an absolute must .
Not keen on bodycorp.
Not interested in risky fickle areas.
I'm ok with a structural Reno to
Increase rent as in adding an extra bedroom. If it's nothing too complex .
Any ideas on better locations . I'm in nth NSW for the time being .
Cheers

 

I know someone in similar scenario, bizarre behaviour, actually gets up my nose, seeing we are funding his Debt.

No he is not related to you... LOL

 

The secret to keeping a secret, is to say nothing about it anywhere to anyone.

 

I am the same.

By the time I was his age (37), I had worked for 16 years, bought two PPORs, and sold one, bought my first IP, bought my first business and sold it, started up two other businesses, ... Nope, I am NOT related.

I have two kids in their early 30's. Both have well-paid full time jobs (always have), with their partners both are running their home-based businesses, both have bought their first PPOR, one has an IP and the other is close to buying one, ...

I am so glad they are like their parents and NOT their cousin!!!

 

I know a family in Brisbane, wife is on a pension. 27 year old daughter on a pension. She still finds money for the latest iPhone, $200 hairdos and $150 cases for the said iPhone.

Son landed a job! Not a fancy job (he's only on commission though after he lost his previous job) but anyway, its a job nonetheless. Dad works only very casually, 2 or 3 days a week I suspect.

I suggested some things so the family can earn some more money, but perhaps they need more than my suggestion to get them out of their comfort zone....

 

Hello all,

I'm new on this forum. Hope someone is watching this thread!

I am ready to re-enter the IP market but never been a true investor like some on this forum.

I have two IP using the buy and hold strategy and increase the equity through renovations. These are now CF+ and my families financial situation is improving so i'm primed for my next IP.

The question is buy for CF or CG? so, i have spent a lot of time reading all the replies to this thread.

My heart says to go for CG and improve equity through improvements, with me doing most of the work. This would result in a purchase that is NG.

My head says to go for CF+. This would mean that I need to grow as an investor and let the numbers decide.

Despite one thread that said rents could go down and interest rate will rise, what i have not read here is how the CF can be depleted by repairs, damage caused by tenants and defaults, vacancies etc, surely its not all roses with CF+ IPs?

Also what about the initial investment cost to prepare the property for rent after the initial purchase and subsequent repairs after any bad tenant vacates?

If you spend $30K on reno's on a IP with $100 CF+ per week that's a 5.7 year pay back period. In this period, a CG IP may have at least appreciated?

Please go easy on me, i am truly interested and currently sitting on the fence on this issue.

 

Are you getting close to that the number yet ?

 

You need to consider both CG and Cashflow to be an astute investor.

At the end of the day the thing that makes you the most money is CG. Cashflow however allows you to build a portfolio and continue to build that portfolio to X number of houses.

Rule of thumb for me is buy investments where you see "potential" in CG or steady CG but also provides decent Cashflow. When I say decent I would say > 5% at the minimum and if you are buying a place in a more riskier area such as a country town I would say > 8%.

For me personally as many know I am focused on Logan for now. I see huge potential for capital growth there and yield is always close to 6% for me. Probably the lowest I get is 5.5%.

This gives me benefits of both worlds really, it provides me constant and expected CG but if it booms it will be multiple times of that. At the same time yield is high so I basically use none of my own money to hold this house.

Thirdly, alot of these houses can be value add by simply upgrading cosmetic things like paint, carpet, new kitchen, new bath, etc.....all these value adds are simple and can be done cheap if you can do some of the work and adding to the value.

Fourth, because of the cashflow and its non impact to my other incomes my serviceability continues to be ok, hence I can borrow more money from the lenders allowing me to build my portfolio even more.

DYOR.

 

That is not fair the rule is "share and share alike " on this forum