Having a positively geared property in a suburb that achieves high growth is in essence sharing the benefits of both negative and positive gearing strategies. If you find an investment that fits this description, you have hit the jackpot. In my opinion, this is the least risky path to wealth using property. All you have to do is sit back and wait for your capital growth to make you wealthy.
These properties are extremely hard to find and when they do become available, you need to be in the right place at the right time, otherwise other well informed investors will be there, ready to pounce. My first property at Sutherland in Sydney, is a good example of a positively geared investment that also grew in value. The property paid my pocket $250.00 per week income after all expenses. It also increased in value by $260,000 in five years.
Although there was low market confidence at the time, there was still a line of buyers ready to purchase the Sutherland property, motivating me to move fast to secure it. Most high yield and growth properties I have found require a similar urgency to purchase them, as other investors will never be far away.
There are many ways to have a positively geared property in a high growth area. Below are the most common examples:
Under market value purchase – Pay less than the property is worth
Multiple incomes – Such as granny flats, unit blocks, etc.
Add value – Turn a three bedroom house to a four or five bedroom and rent for more
Subdivide and sell off land – To pay down your loan and create a positively geared investment
Student accommodation – Room by room rentals
So what’s the major advantage with positive gearing in growth areas? You can build a growing multimillion dollar portfolio, as the banks will be happy to keep lending, as long as the rentals cover the repayments. (Note – not all banks will count 100% of your rental income). Most negatively geared investors have one or two properties due to lending restrictions created from being in a poor cash flow position.
Less than one in 15 Australian adults own an investment property, and more surprisingly, less than one in 65 own more than one investment property. That’s because most of their properties are negatively geared or they might just be part time investors.
It’s much easier to grow a large portfolio using this strategy as you can buy more properties without using any of you own cash. Sounds too good to be true?
Well it is a position we can help you get to using Rethink Investing’s strategies. If you would like to know more contact us via firstname.lastname@example.org