Is Investing In Positive Cashflow Still Possible With The Current APRA Guidelines?
With the new lending guidelines making it harder for investors to borrow money can you still successfully invest in positive cash flow properties?
Speaker 1: They’re also saying they’re looking at buying whole strategy with passive income, is that possible with our current situation? Also, is this strategy still even possible, with the current restrictions set by APRA.
Let’s just make it less specific, let’s just talk about a buy and hold the cash flow situation. Is that even possible at the moment with the current acro restrictions?
Ben: Again, as you said, talk to a mortgage broker, because some people that could have been able to borrow 500 k four months ago, can now only borrow 250 grand. Some people that could borrow 250, might not be able to borrow anything now. Then they do assist, assess your whole situation and see, but I think one of the cool things you’ve always talked about Ryan is cash flow.
You’ve been able to help people, or you’ve been able to identify properties in good areas that have above average yields. Those above average yields really come in handy right now, because it does help with your servicing.
I don’t know any areas where I’d buy for around 250 grand, and receive the type of cash flow that you’re talking about personally, because I’m a capital growth guy. You might know areas, I don’t know.
Speaker 1: I think, if you’re thinking about this evening night style and investing zero to 270 properties in like seven years, the guy did. Or, zero to 130 in three and a half years, that’s probably going to be pretty hard with the current apro guidelines.
Ben: Yeah, Steve would’ve got to about seven properties.
Speaker 1: Pardon?
Ben: Steve would’ve got to about seven properties before they said, “You hit your limit.”
Speaker 1: You were at seven properties in three point five years, so mine is good. Let me know who would be a best seller. A lot of the people that I speak to, a lot of people that follow us or even the people that talk to you, Ben, they’re not going and trying to buy a hundred properties. They might be trying to buy their first investment or their second investment or their third.
I think for a lot of those people, those opportunities are out there. It’s once you start stretching into multiple, multiple properties, that it can become difficult. That’s when you need a really good mortgage broker to work around that, but yeah, it really just depends on your situation. It depends on your financial goals.
Ben calls himself the capital growth guy, but I know that he also invests in properties that have seven percent rental yields and …
Ben: Like I say, capital growth for our clients, but as Ryan said, when I buy for myself, it’s rising market, it’s capital growth, it’s cash flow, and it’s manufactured growth and I will not buy anything that doesn’t tick off all four boxes. I’m completely aligned with positive cashflow and that’s all I will buy.
Speaker 1: Yeah, and that’s the same thing. I never pitch it, or I never think about it as just positive cash flow. When you’re investing in property, the only … cause if you just think about, I’d like to look at property like a business and to say, “okay, how can this business make money? How can this property make money?” Positive cash flow is one way to make money from that business.
Capital growth is another, depending on market trends, you may or may not have as much control over, but manufacturing growth, like doing a renovation to make that property more valuable that’s another way that you can make money. We can subdivide or we can do rain flats, or there’s so many different opportunities to make money.
To just say, “I’m going to buy an old high rental yield property,” and that’s how I’m going to make money. Well you just taken a business that could make money in multiple different ways and you’ve said, “I’m just going to limit myself to one way.” Not because that’s the only way I can make money, but because I’m too lazy to think about another way.
Ben: Yeah, what you just said, I hundred percent agree with that. You know, that is absolutely everything with this space. Why wouldn’t you increase your earning potential and reduce the time it takes yourself to get financially independent.
Speaker 1: You’ve gotta do that before you jump into the property, cause there is people out there who bought their properties, that made positive cash flow, and there’s nothing they can do to it. Any renovation they would spend, would not be worth it. They wouldn’t get that money back, or they can’t subdivide, or there’s no growth in the area, like that’ll happen.
If you’re going into it, and you’re looking for a property, don’t just limit yourself to say, “I just want cash flow.” Try and look at, “what are these different avenues that I can earn money?”
Like I was talking about before, how I ran through all these scenarios in my head, it’s not like you have to do it, but yet you have to do an extension to a house because it would make money for the area.
It is having that opportunity there, that if you need equity to go again, or if you need to sell the property and it’s only worth what you bought it for, and you’re going to have to pay real estate agent fees, you could do that quickly, and it’s worth more.
You could get that money back. Having those opportunities there, and I’m all about flexibility.
Ben: Yes, so am I. The deeper we both get down this path, the more we want that flexibility to respond to market conditions to increase returns, to sell one property that’s doubled in value, to pay off another one with great cash flow outright.
Having a complementary portfolio, and a property with options up your sleeve, is so much more powerful when times get really tough. Which, in the time that I’ve been buying, even if I dare say, it’s the hardest time to access Finance.
If you’ve got a large portfolio, it’s one of the easiest times, if you’re buying for yourself, as a first property, as a first investment property. If you got a decent portfolio, you got to be smart right now.
Speaker 1: I had something I was going to say. I can’t remember it. It was good.
Ben: Go on.
Speaker 1: It was top quality.
Ben: Hey guys, I hope that you’ve enjoyed the answer to this question, which came from my live Q&A episode with Ben, on YouTube. We will be doing more of these, in the future. If you want to check out Ben, then he is offering free strategy sessions to on property listeners. To find out more about that, go to OnProperty.com.au forward slash session, and you can see all the details over there. That’s it for today, and until next time, stay positive.
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