Grasp the basics !!??

[Positive+]

Hello enlightened ones )

As way of introduction, I'm an IP'ing newb', not particularly old (37) and am just embarking on our (My families) journey to fanancial freedom.. (Pack the rucksack.. we leave at dawn)

I done a bit of leg work already (Reading loads of books, Open Homing, putting in a few low offers - Well you never know ) - Joined my local PIA, setup my trust etc) - I also have a fair wad of cash (About $120,000) sitting ther just waiting for some nice +ive cashflow investment property or two (and more hopefully)

However, as a Posiive newbie, I'm have trouble grasping one of the basic concepts of this property investment game, and have yet to find the answer in any of the books I've read!

How to get and keep a +ive c/flow, AND get my money out within 6mth to a year?

I know the standard response of 'Buy well below market value', which is all very well, but even WHEN I'm lucky enough to buy a property like this, so that I can get it c/flow +ive at the outset, I still need to get my 20% (Or bigger) deposit out within the 6mths to 1yr timeframe, as suggested by all the top investors - This being the maximum time before getting your money out and moving on to the next purchase.

I understand that 6 months after purchase I could reach for the 'Blue Sky', do some work and get a new valuation / Realise some equity in my property (Providing values haven't dipped - But hey.. That's not very Positive is it !!).....Herin lies my sticking point...

I would still need to keep the IP c/flow +ive after the revalue and subsequent re-mortgage, BUT I would now have a sizably bigger repayment(s). Hence, if the property was only just +ive before (With my 20%+ chunck), I can't see how any likely rent increase within a 6mth timeframe (I don't belive any tennants would really appreciate a rent hike after only 6months), could give me enough to cover the additional.

Please could someone shed some light, on how they actually make it work.

Kind Regards,

Rich

PS... This forum, it's people and their abbundant knowlage generosity, has to be one of the greatest finds ever made since ... Uhhh.. Since.. the Wheel (Well you know what I mean)


Thank you all

Rich

[fudosan]

Hi Rich,

A warm welcome to PT.

Say you buy a property for 80,000 or 20% below market value.
1. Bank give you a loan at 80% of your purchase price, or 64,000
2. You provide the remaining, or 16,000.
3. After revaluation, your property is now valued at 100,000.
4. Go bank to bank and get your loan topped up to 80% of 100,000, or 16,000.
5. Put 16,000 back to your pocket and you can use it again.

The cashflow concept is based on the purchase price, so your deposit is not involved.

That's how I understand how to recycle your deposit. Hopefully other can share their ideas with you.

[RentMaster]

I understand what you mean Positive+

Based on the previous example by Fudosan, you would put in a 16k deposit initially, and then increase the mortgage size by 16k later on.

In order for the property to still be positive cash flow, you would need to calculate your cashflow based on the revalued mortgage, not the initial smaller mortgage you took out. So you would need to make it positive cashflow on a 80K mortgage (or 100% mortgage).

Not normally easy to achieve, but there may be a few deals out there which can do that.

Good luck.

[Julian]

Positive +,

Admire your positive attitude. $120k is a good start. These will place you in better stead than many, however times are indeed a lot tougher than they were a few years ago, so different strategies may have to be looked at.

As fudosan pointed out in order to pull 100% of your cash out within six months your rent will either have to cover 100% of your loan, or at least be able to when you re-finance.

Other options for building wealth with property might include wraps, flips, do-ups, renting out by the room, development, sub dividing etc, adding bedrooms, addding a subsidiary unit. Also you can up the rent by adding a carport, renting whiteware/furniture or filling a need your tenant might have (sell your body?). These skill sets might have to be added to your arsenal of tools.

Julian

[leapy]

I've seen two deals in the last year that would meet this criteria without any value-add work from me, and I consider on average 50 properties a month. Of course, that's entirely subjective - because of the parameters of my effort, belief systems, criteria and methods. I would probably consider myself conservative.

It's a strategy that certainly requires less legwork earlier in a property boom, especially if you can beat the herd.

Sometimes you will come across a desperate, ignorant, lazy or limited vendor (or an agent not putting in his/her best work). And then you need to be both quick off the mark and sure of your market knowledge.

Some people have more of a knack for finding this sort of thing, because of the networks, knowledge, confidence and buying parameters they have built up.

Keep up the self-education and factual research, and quietly assess your goals and belief systems too, to make sure they are conducive to progress.

[kolzee]

Hi Positive+,

Great post and good to see someone who is reading lots and challenging the theories of the many property 'mentors'!!

I don't have the answer to your question other than ensuring that the property is positive on the valuation amount as Julian suggested....

My advice though is to find ways which increase the value AND the rent of the property (similar to Julians advice also)......adding a bedroom for example is a great way to raise the value OR adding a second abode on a large section....

I'm sure Keiran will be keen to help you with this!!!

[Kay]

Dear Positive+

Read Ron Hoy Fong's thread, where he explains how to take out your deposit each time. The secret is to have the deposit amount on revolving credit so you can withdraw the money without drawing the bank's attention to it, and you can then use the money as a deposit with another bank for your next IP.

[Positive+]

Thanks guys & galls,

It's great to get such Positive feedback from such great people, and there some really good ideas there.. (I especially like the renting of whiteware etc - I could be Mr Rentals mk II.)

I guess the real trick is to always keep thinking outside the square, and always look for the Blue Sky in every deal.. If it ain't there - Don't go there!!

OK.. I'm off to track down 'Ron Hoy Fong's thread'