Grow Capital First

Damn that counts me out

 

^^^

 

taking advantage of lower rates, perhaps prepaying into offsets, saving more as we cannot spend as much now, many ways to grow equity... adding minor cosmetic renovations.
But knowing and specializing in your niche market is the key!

 

Lower rates do amazing things for investors

What is your niche market?? If you care to share

 

what I specialise in, long term investor with possible renovations, land banking more now, helping family to invest into RE (invest more into land via IPs - many don't realise ROI in land in AUS has been tremendous for the last 50 years).
Our strategy or investing changes as we age wouldn't you agree, as priorities and experiences change.

 

Yes, agree

 

I'm those things. But are you talking fundamental analysis/value investing or trading?

 

Syd and Melb star performers

Perth is only now starting to show signs of recovering....... its been a long time between drinks

 

Yep, Perth booming by all accounts. Check out the last Friday Weekly update of the Spark Your Fire podcast, which spends some time talking about Perth.

 

Its interesting we are the only State which has a budget surplus, billions..... due to iron ore prices soaring

Most of the money will be injected into infrastructure projects. I see housing markets ready to burst

I suspect Perth to fly under the radar. Mind you in saying this I have been told many Eastern States investors are buying up

Easiest way to make money is jump into a rise

Rental stock is at an all time low...... a perfect storm for a boom cycle

 

It wont work for me
I have a small problem... I am not analytical or patient

I just focus on what works for me and something that I can repeat with little risk. So far its been working well and been able to continue growing capital and income

It does actually raise a point, personality, mind set, level of risk all comes into play

Find something you are good at, rinse and repeat

 

No doubt about this, I think we have gone from inventory at 12,000 to now close to 7000. Oversupply to tight

 

But what is that passive income is generated in tax free environment like Super after 60 year sold on $1.6M then 15% tax anything above? Better to look at gross, various entities, other investments can minimize tax in various forms too, even franking credits, etc...

 

I haven't seen too many people discuss the effectiveness of choosing between CG or CF based on their current salary/income. For someone with a salary of lets say $50,000, would it be more effective to work towards CF compared to someone with a salary of $120,000+ where they might prefer CG?

Would the increase in cashflow allow someone with a smaller salary build up their portfolio quicker and therefore outperform a situation where they purchased a property later for CG?

In the current markets, would a CF strategy help reduce risks over the coming years if there is a possibility for rates to increase which therefore increases our repayments?

I'm fairly new to real estate and economics, so this may just be a silly question

 

If your salary is 50k you should look to improve yourself first and get a higher salary.

 

Ok, so let's say that IP will make you what $5K extra income in CF+, what you then need to take into consideration the lenders will not take that 100% as extra income, maybe 70%, income tax will need to be paid yearly too in addition and so on. So how many IPs in CF+ will you need to improve your income?
I agree though that a balanced personal circumstanced portfolio or investment strategy should be chosen, like say in playing Monopoly. Would you buy cheapest places or wait and increase extra income or your savings first, and then buy the median priced places or would you buy the most expensive when you cannot afford?
So I suppose I did that in real life played Monopoly using my strategy as playing the game. Bought average priced few IPs (not cheapest not just for CF) allowing some CG+ then eventually bought a premium property once incomes, rents, portfolio, time and economy permitted that. Hopefully that helps.
Also what I like with property there are other ways to deal with increases in rates or land tax or bills, you can fix parts of loans to buy time, IO, prepay, pay off with some income, do improvements or renovations to increase rents, there are alternative ways rather than just one way. As there are many ways to invest into property too.
You need to start and see if it works for you whether the property you invest into delivers the outcome you expect. Do you expect income or growth, yes I expect both but what do you wish to achieve you need to be specific, $100K per year in rent, have $5M in value, what? I like both but prefer larger growth as I am not taxed on that unless I sell (well land tax can creep up eventually but is claimable if for investment purposes).
So what I am suppose asking you is to evaluate how hard will it be say to earn from income or rents and put aside say $5M worth in your lifetime as opposed to assets on paper in growth?
I think it is very hard to put aside $5M after tax each year being on average incomes yet it was possible to attain that in growth.
Will it still be possible who knows.... but if no one tries then who knows?

 

His got to find a partner, that will do it

 

Silly comment. Better to start somewhere, rather than wait.

@Jason D you make a good point. When I was on a low salary, I bought what I could afford. Got lucky- I really needed somewhere to live and I happened to by just before a boom. 2 years later, my property doubled and I was able to sell and move elsewhere which allowed me to be debt free. This is what allowed me to start investing.
To answer your question, if you are on low income, I think it’s important to go for growth rather than cash flow. Cash flow is nice when you want to build your portfolio (usually when you have a higher salary)

 

@euro73 On the debt pay down strategy, please correct me if I’m wrong but assuming a property becomes neutral on borrowing capacity if the yield on debt is 11-12%. In theory if you have a 400k property 300k loan, rental of 250 a week = your current yield on debt is 4.2% (250*50/300k).
If you need a 12% yield assuming loan and rents don’t change you need your loan to go down to (250*50/0.12) = 104k. Therefore at which point that 100k of debt won’t impact your borrowing capacity.

Was wondering if this logic holds up?

 

Bump

There has never been a more appropriate scenario of growing capital first than what we are seeing today

Imagine jumping on the booming property markets or share market??? Would have easily increased your wealth.