Getting started

For the average joe like me just starting out looking to buy their first investment property should cash flow be the number 1 priority? With the possibility of negative gearing being scrapped it won’t be ideal buying a negative geared property unless my wage increases. I’m looking at buying an I/P with a granny flat and or going interest only on the loan to make sure of cash flow positive. I’m also looking at buying as close to the CBD as I can afford. Anything else I should prioritise or consider?


Thanks in advance

 

Which cbd?

 

Any that I can afford to be honest, living in Tas on 50 k a year my options are limited. Anywhere a long the north west coast. I’m in it for the long term not short term wins. Hobart has had its boom and its not affordable

 

If Labor wins the next election (looking likely ) then they have promised existing deals will be grandfathered. So if you own a neg. geared property (and I'm not advocating that) then you will be unaffected by a change in government.

 

Additional cashflow is always a win - but treat it as a bonus.

Get the fundamental right as a starting point, and look at cash flow after that. No point buying a crap investment with good cashflow - CF can disappear very quickly if it's in a terrible area with crap tenants, or is vacant a lot, or needs repairing consistently.

 

Everyones circumstances, are different.

Rule of thumb:
<$200K cash. Do a chunk (manufactured growth) deal.
>$200k cash. Do a cashflow deal.

I find, if you do cashflow deals first without a large capital base, or high income, you will not be able to build a portfolio large enough for that 'cashflow positive' to provide any flexibility with employment.

As a friend once said to an eager beaver who thought cashflow was all the rage: "sure, if the house was always tenanted, nothing broke, and rents kept going up with inflation, sure I could retire".

 

If you are young, the historic wisdom is to buy high quality growth properties first. And then emphasis yield more and more as you continue buying.

The rules have changes slightly, but I think this sequence still basically works.

Remember, that the growth properties become yield properties eventually as well.

 

I am the later 58 k a year, def not on the big bucks

 

@Bean27 If you have too much positive cash flow, yes you'll definitely need to pay tax on it - that's part and parcel of earning money, unfortunately!

But that's okay - there's various strategies that can help with this. Do you own a home already?

 

I do I bought a house in Devonport for 240 in may, is prob worth 270 now with a new kitchen and flooring. Trying to learn as much as possible before buying an investment property in 3-5 years

 

I reckon your first hurdle will be income if you've got a property already, particularly if you have a family. I'd make increasing income a priority in the interim, as you may find your borrowing capacity is tight for a second property unless it's really cheap. If you're going to keep your home and save a cash deposit for the IP, make sure you get a really savvy broker on board and they'll help you with the right strategies to make the most of your scenario.

 

Yes def looking to increase that income, don’t Any kids yet but may do in the near future. Have been piling money into our home to increase equity so far but will look at saving some sort of deposit too