How to get Positive Geared properties

Hi all,

After growing my portfolio to include 3 capital growth heavy hitters (using a lot of information from the forum… big thank you to you all) I am now looking to add a bit of positive cashflow assets to balance out the portfolio and provide some diversification.

I have around 500k (purchase price) for this.

From what I read, the main ways of getting a neutral/positive geared property is one of the following:

• Regional
• Low socio-economic areas (i.e. Logan)
• NRAS
• Renovate - Irrelevant as I am very time poor

And now for the questions:

• Are there are other approaches that I should consider?
• What do you recommend/what worked for you in the past?
• Where is today a good area to buy positive geared property (both regional and low socioeconomic)?
• NRAS - In general I like the idea however all NRAS properties I looked at were very overpriced and the numbers just didn't stack up. Is this the case with all NRAS? How do I go about finding NRAS properties that are not criminally overpriced?
• Would it make more sense to go for 2 X250k or 1x500k?

Any other comments/suggestions/observations/questions are appreciated.
Thanks,
M

 

For NRAS properties that stack up, I would suggest reaching out to @euro73, he will be able to point you in the right direction.

 

You forgot about just adding a granny flat - which can be done metro or regional.

 

Even with renovations, you can use various tradespeople/builder or some property managers that can project manage for you.

 

Great question about balancing CG and CF properties. In thinking about the options you put forward above, how do these sit with you risk wise (eg thinking about vacancy levels, damage, relying on other schemes, potential re-sale)??

I would agree with manufactured means (reno, adding GF) to do the CF improvements. What type of CF +ve figures are you looking for?

 

Yes, @euro73 definitely knows his stuff re NRAS, learned a lot from his very detailed and professional posts.

Thanks, that's a very solid way for positive cashflow. Although there are restrictions around this no? i.e. some places only allow to rent it out to family members. For the 500k I have, where would be a good place to implement such a thing?
Is there solid demand for GF?

 

All investments come with a risk component and you have to mitigate these as best as you can based on your strengths. As a sane person, I would prefer less risk then more but accept the realities of investment and try to balance it out so that the impact is minimized.

As for CF, the more the merrier But seriously, I don't have a specific figure in mind. Basically the less CG potential and the more risk the asset carries, the more I'd require the reward to be.

 

Agreed. I just settled on a property interstate and will be leaving the renovations to tradies. Property manager just keeps an eye on it. It runs smoothly every time.

 

I've bought one currently splitting it into two leases/ dual occupancy without building. Expecting 10% yield. However due two insurance and council rates it only comes out slightly positive cashflow, but should look good in the banks eyes when i do a reval and pull equity.

 

... just search re.com.au invest section and look for high yields that will narrow it down. easier than the other mumbo jumbo

 

What @bob shovel said

 

I would go for another capital growth heavy hitter

 

What @Tranquilo said... needs to be balance, if the rent doesn't keep increasing, at some point, the costs will overtake and it will become -ve geared, and you may be left with something that can't be easily sold (at worst case scenario....).

Absolutely agree about the risks. Not meaning to be negative, just putting comments out there for thought

 

In time your heavy hitters will become positive.
Anything you can do to these now to increase your rents?

I like the mumbo jumbo idea

 

That's an option, but I first want to investigate the option for a +ve geared one. Reason are a) balance the portfolio b) make the bank happy before going for another CG play.

Great comment, I guess it's another risk factor to consider that a +ve geared can turn to a -ve geared and you're stuck with rubbish in your hand.

Yes, at least two can be renovated pretty nicely which will result in 30%-50% reduction in outflows (assuming I stay in budget). Bit this will only happen in 2018/2019.

 

The brokers might (will) know better, but I'm not sure this makes a huge difference does it? I was recently told that a 6% yield wasn't really that relevant in trying to get a new loan 'serviceability-freebie' (I think it needed to be 10 or 12% yield or something)

 

You heard right. Doesn't have much of an impact post-APRA, unless we're talking about yields across an entire multimillion dollar portfolio, then a few % can make a big difference.

@Mancha, from the finance side of things, chat to your broker so you know the impact of x% rent return and how it will affect your borrowing capacity (now and into the future). And from a personal cashflow and risk management aspect, work out what's comfortable in terms of holding costs.

And...

Who says you can't get CG and Cashflow?

 

Is there anything you can do to your current properties to maximise the rent on these? I assume you've recently reviewed the rents and you're asking the market/maximum rent for these (without pushing the tenants out which creates a vacancy and therefore CF issue)?

Slightly off topic but good to have the current portfolio at maximum power while looking for the next IP!

 

Can be done as a complying development in NSW state-wide if your block allows.

No such restriction in NSW

Any good CG area.

Yes

 

are you using the agency tradies or your own?