Hey guys, What facts and figures should i focus on when choosing a suburb/area for my IP that i aim to have cash-flow generated? Strictly looking for Cash flow as opposed to CG.
Rental Yield, Vacancy rates, Demographics Whilst you aren't looking for capital growth, CG is what builds wealth. Consider what spending is going on in the area - Government spending on infrastructure, and private spending.....is there new shops/stores going in e.g. Ikea, Costco, Woolies or new shopping centre.
That's correct, i'm in the position where i can purchase 1-2 CF properties to begin with that produce an income then purchase a counteracting CG property or 2 so those 3-4 are set and forget then rinse and repeat
Are you just starting out? Have you spoken to a broker to help you understand your borrowing capacity etc? Suggest as a starting point find someone who looks at the bigger picture, rather than one transaction at a time.
Kind of, I purchased my first in 2002, renovated it, sold it, purchased another in 2013 which is sitting pretty. Have inherited some funding so i'm trying to work out the best path for me. Obviously there is no one way to do what we all want to do. I require little stress as I have a casual job where i work full-time hours and don't do too bad coin wise but still i would prefer less risk. I'm in the process of trying to get myself a broker/somebody who will work closely with me and open my eyes to things i may be blinded by (i'm open to anything really) but maybe some creative thinking. I want to map it all out so i know what my next goal is
When I was looking for my first few cash flow positive properties I looked at vacancy rates. If you are starting out looking at CF I assume you will also be looking at low demographic. Ensure you are comfortable with (generally) less than perfect tenants and research good property managers in the area. Some agents will not manage low demographic properties so if you can't get an agent id recommend you not buy in that location.
Sounds good in theory, but in reality its not that simple. The cf+ amount will need to be significant enough to cover NG costs of 'CG properties', if that's what your aim is. Also don't forget all properties have maintenance and and other costs along the way to further reduce the cash flow, so make sure that's taken into account when running the numbers. Any reason why your not buying 'CG' properties first and then CF? Also as you say 'strictly' looking for cash flow properties...implies you already have a large asset base and CG is really not important now. If you don't buy cf+ properties in areas that have good CG potential then that's problematic to build wealth, imo.
Of course, I work in a job that i could work 8 hrs or 70 hrs in a week (although on average i still do $80,000 plus a year) so i do not want to have a short fall. I have in the past and nearly lost everything with 2 mortgages and work dried up which I've only experienced once in 12 years in the industry. So yep i am a bit worried living that lifestyle. Also my fiancé is Swedish and we will be backwards and forwards between OZ and Sweden so again i would prefer to not be out of pocket unless something aka CF+ is covering the shortfall. Everyone has their own path, I enjoy what i do and enjoy its fruits and don't know anything else, hence why i aim to learn property inside out so i can make the crossover from building it to managing it!
Sounds good. I would still try to get cf+ properties in suburbs with good fundamentals, Otherwise if you don't get much growth or it takes very long, it will halt you expanding your portfolio. But it sounds like you have a good plan for yourself mate. Well done.
Yes of course, obviously i would research them til i have the best that suits me. I guess i'm just seeing how others research, you always justify your own methods, its human nature. I know not everyone is the same but it's nice to have that other 2-3 people give you some tips and give you a bit of a nudge, that's what this place is all about right? we gota start somewhere!
How much are you looking to put in, and how much net cash flow are you aiming for? Like Leo said, the CF+ would have to be significant enough to make it worthwhile. For an ave resi property I'd guess that might be approx $200-$300/week net to make it worthwhile. Personally, I'd prefer to pick the best CG potential areas with an acceptable rental yield, rather than look for yield before other considerations. Would you rather a property yielding 8% return with zero capital growth, or property yielding 5% with capital growth likely to be from 5-10% annually ?
This is a great point and fine distinction in strategy. If you can find that balance of acceptable yield with the best chance for CG, it will likely yield an overall better result, whilst still not cutting much into your cash flow or increasing the risk much. imo this is great advice to listen to.
My agent in DB has done a great job of screening applications. Had 5 applications over last weekend and only one of them was good enough for them to put forward. It took weeks to locate and secure a tenant but that is primarily because of the blip in sales to investors in May. One thing to be mindful of when an area becomes a hotpsot ( increasing vacancy rates ). I think Logan will eventually see this effect because of the popularity of CF+ there.
These are things i still don't know how to structure in order to keep going. The biggest problem i will always have is serviceability due to moving around, this is why i aim to replace my income slowly but surely. I was thinking that I could at least have the first CG property serviced by 1 possibly 2 CF+ properties so for peace of mind i have 1-3 ticking away. Build some equity in the CG property then launch into the next property. Just to have that initial property ticking away and being able to use my time looking for the next one and not working my time away. I could put some $ in an offset account on a loan for a property i already have in Brisbane to clear that debt whilst deciding my next move. So that would be at least $200+ with spare cash for 2-3 more. I wouldn't want zero capital growth, I would expect a little, maybe try find a happy medium with a bit of both. End goal is $150,000 passive
