Property for CG, other assets for cashflow - stories wanted

Hi all,

I'm in my mid thirties and currently in the property acquisition phase to build a portfolio that gives me CG in a rising market.

Once I buy 1-2 more properties over the next few months, I'm looking to transition into other asset classes over time, to give me better cashflow.

Am very interested to hear stories from other people regarding what other asset classes (non resi property) you've chosen, to feed/complement your growth-based property portfolio and give you cashflow. And why you've chosen that asset class.

 

Last year went for another commercial property.
Yield 7.4% on $940k purchase in April.
January 2022 the yield is now 10%
On the next review (4 of 4 tenants) I hope the yield will be 11%+
So net profit is currently 68% of rental ( 10% less 3.2% interest)
That is $60k pa less tax.

There is no need to find a cash feeder to support CG properties , commercial property profits supply adequate profit to pay wages while reducing a lot of debt.

Commercial properties purchased in the 1990's are now yielding over 40% now on historic cost.

 

What asset classes are you considering? There is not many options imho.

1) Shares/ETFs
2) Commercial Property
3) Businesses

Thats pretty much it if you rule out Resi properties. Not sure how you view items like paintings/crypto/watches or other luxury items like Hermes bags - are they are also used these days to store wealth but they don't generate cashflow unless you actively trade them.

I've been looking at options for commercial properties as well but I have some friends already into that and when you have tenants and their business is good its fine - everything is hunky dory.

When you have no tenants and finding one can be a real pain in the ass and be a lengthy lengthy process which means potentially no income for 6+ months. I think during peak covid lockdowns I heard a business associate's warehouse was not rented for close to 9+ months.

That is a long long time without cash coming in. His holding costs would have been significant throughout this time.

 

My experiences in residential property have taught me broadly:
- Great for capital gains.
- Not so good for cash flow.
- Half decent 'cash flow' properties still earn most of their return via capital growth. If income is constrained, these type of assets are decent part of strategy.

Cash flow investing is possible, but you're generally buying low quality assets that utilise very valuable borrowing capacities that could be diverted powerfully to growth assets.

Summing up for different investor profiles:

• If you have a bit of capital, I'd probably steer it elsewhere (like CIP) to earn a passive income.
• If your capital and income constrained (generally younger groups), cash flow & capital gain assets are great. Many of the buyers agents focus here. E.g. landed older properties in regionals, Logans, different cities, dual occs, etc.
• If you are solely focussed on income, cash flow assets can work with low interest rates, depreciation, etc.

As a vehicle for long term wealth creation, good property is very powerful in a country like Australia.

Given low quality debt backed properties negative impacts on borrowing capacities (and the fact we don't need income support from properties anytime soon), we've generally been offloading all of these type of assets that we bought earlier in our accumulation in favour of capital growth assets (e.g. large allotments near stations, large land parcels that'll likely be rezoned, etc).