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API AUGUST 2014
AUGUST 2014 API
Investors who have been featured in API answer questions from readers
Published: June 2014
Published: June 2014
¿ YOUR NEXT MOVE
QWhere would you like to invest next and
when would you buy your own property?
AI’d like to invest next within Victoria,
preferably a vacant infill block in a
well established suburb, for the purpose of
subdivision and building a dual-occupancy
or more if possible.
I’m going to wait until I have enough
equity and money before I look to
purchase my own property for a principal
place of residence. No point buying my
dream home until I can afford it.
¿ POSITIVE VS NEGATIVE CASH FLOW
QYou say you like capital growth
properties, yet you recently bought
positive cash flow properties. Why is this
the case? Would you only stick to capital
growth/blue-chip properties in future?
AI invest with a range of strategies
and believe it’s possible in certain
markets to buy cash flow properties that
can also earn you capital growth. One of
the reasons I feel it’s important to buy cash
flow properties is for serviceability from
the lenders’ perspective. Banks will be
more likely to finance a purchase if the deal
shows positive cash flow injected into the
portfolio rather than just negative gearing.
To grow my portfolio quicker, I like to inject
cash flow so that my salary isn’t funding
the shortfalls. Lenders like to see portfolios
that are showing strong returns.
By purchasing in certain ‘growth’
markets I believe you can still have both
cash flow and capital growth. These
markets are ones which have new
infrastructure, road upgrades, diverse
areas of employment as well as education,
such as universities. These areas may also
be in ‘sub mining’ towns – towns that
benefit from mining but don’t rely on it.
For me these areas include Toowoomba,
Townsville and Armidale. The capital
growth in these areas is still not as high
as blue-chip areas but it’s there and is all
part of my investing strategy as I work
towards financial independence.
Now that I have a number of cash flow
properties, my aim from here is to acquire
more blue-chip properties to heighten the
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chances of good capital growth. I have a
couple in Sydney and have just purchased
a blue-chip property in Brisbane. The
ultimate aim is to be able to live off the
equity in these blue-chip properties.
The cash flow properties which I have at
present will be used to help pay down my
blue-chip properties. This will be done by
selling certain properties and paying off
the debt on the ones I wish to keep.
Investing in different markets using
different strategies, including cash flow,
is a safer and potentially faster way of
getting there than just buying blue-chip
and relying on capital growth.
A good example is the duplex I’m
currently building in Armidale, (NSW).
The purpose of this development is to
‘manufacture equity’ which will allow
me to reinvest/pay down blue-chip
properties. It’s a quicker way than waiting
for the market to increase in value and
the duplex will also have good cash flow,
which will cover itself.
API recommends seeking independent
financial advice from professionals
regarding their individual circumstances.
Do you have a question for an API
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