Cash Flow and Growth, Here’s How

by | Dec 21, 2017

Hi everyone,

Sam Saggers here, property investor, market expert and real estate author!

As we’ve established, there are no big citywide surges of growth on the horizon for at least half a decade… so how are we profiting from real estate now?

We have 5 approaches to putting serious wealth into our pockets during this time. The approach I want to talk about today is “Massive Cash flow”. We are not interested in rural centres or mining towns. We’re doing this in inner city, high growth locations. Places you really want to be investing in for long term growth regardless of cash flow.

Right now, short stay accommodation is producing amazing results for us. We’re talking 12% yields and higher…after management costs. We’re not doing all the hard work ourselves, it’s completely hands off, totally passive. We’re seeing these results in areas that would usually only get 5.3% yields or lower because of the inner city locations.

Two interesting observations on what this means for you.

 

Observation #1:

Rental yields like these mean this property can potentially pay itself off in a little over 7 years.

Why do I talk about paying off the debt? Because getting the property to pay itself off effectively buys you another investment property. Follow the logic.

Buy the apartment for $600k. Let’s say you borrow the full amount because you refinance to use equity from your home or another investment property, that’s a $600,000 mortgage. If you get in the right Micro-Pocket (more on that at the event) and the property doubles in 10 years, it’s now worth $1.2 million. Sell it, pay off the debt and you have made a tidy $600,000 profit. This ignores costs etc. obviously; it’s just a simple example to explain the concept.

Now, look at the difference if during that time you also paid down the debt.When you sell at the end, you would have no mortgage to pay out, so your cash in the bank is the full sale amount of $1.2 million. That’s double the money effectively, the same as if you’d bought two investment properties.

 

Observation #2:

These higher rental yields can halve the amount of property you need to hit your wealth goals.

Most people I talk to say that if they were debt free, to live a comfortable life they would want $100,000 of passive income a year. To get this money in rents from property yielding 5%, you would need to own $2 million worth of real estate debt free.

How much real estate do you need if you’re getting a 12% yield to make that $100,000? To reach the same cashflow goal, all you would need is $834,000 of debt free real estate. That’s actually much less than half!

Either way you look at it, a high yielding inner-city property is effectively worth two investment properties. There’s nuance to getting this right though. It’s not a simple case of just buying any old property and throwing it on AirBnB.

Click here to like us on Facebook and see more updates like this.

Hey there, do you enjoy the Positive Real Estate Blog? If you did, why don’t you book into a Property Information Night in your area and get more information from our team. You can do so here.

Also, if you can not wait, click here to access the Property Mini Course and signup for our email newsletter. This FREE 2 hours video series gives you some of the top tips from our team that you can use right now. Thanks.

Do You Have Wealth Creation Habits?

Studies of habits and their close cousin, willpower, have been done, giving us insight into how people form - and keep - habits. Did you realise that science shows our habits are “etched” into our brains? Once a particular action or set of actions have become a habit,...

5 Property Investing Myths that Kill Investors’ Futures

If you’ve been investing in houses you’re probably listening to advice you’ve come across and believe to be true. But is it? Just because something is considered “common wisdom” that doesn’t necessarily mean that it’s entirely true. It may be only partly true or it...

Ways to Protect Your Assets

Beginning property investors are often so absorbed with finding an investment property that will deliver good capital growth and/or positive cash flow that they forget the very important matter of protecting those assets. Protecting your wealth is no less important...

2 Big Fears Property Investors Face

Buying investment property to grow your wealth is a well proven strategy. So why then is it so scary for many would-be investors? A number of reasons, but in my opinion, the two biggest reasons people are afraid to invest in property are: The large amount of money...

How To Negotiate “Like a Boss”

You can find a great investment property, in a growth location, and still miss out on positive cash flow because you weren’t able to negotiate a price and terms that worked for you. If you’re not comfortable negotiating for what you want or if you’d simply like to...

5 Quick Tips For a Stress Free Retirement Plan

The superannuation balance of Australians is dismal. Men have on average $183,000 in their accounts whereas women have barely more than half that - $93,000. In fact, only 10% of Australians have in excess of $100,000 in their super!  Obviously then, lots of...

Is a Structural Renovation Right for Your Investment Property?

At Positive Real Estate, we provide “time proven” property investing information and advice. We work directly with property investors throughout Australia, helping them reach their wealth creation goals. Recently, Bupa Landlord Insurance​ showcased us in a post on the...

3 Simple Retirement Questions People Often Fail To Consider

You didn’t buy your first investment property without a plan, so why should your retirement plans be any different? Retirement planning - in terms of financial concerns - should definitely be a part of building your investment property portfolio, but it takes much...