richdad cashflow 101

Re: Cashflow 101

Hi Slim - IMHO, you should be extremely cautious about accepting any charge on your PPR for any investment (e.g. property or own business or whatever). Banks will not take out a mortgage on a property unless they are prepared to take your property off you if things go bad. I'd accept that the chances of this happening are very slim, but there is a chance, all the same.

Are you prepared to accept the small risk of seeing your family evicted? I'm not.
 
Re: Cashflow 101

>There would be very little margin for vacancy but I could
>carry a little each year.

Treat it as a business. How much vacancy are you allowing for? 10 months occupancy per year is the norm for commercial letting, so that'd be a start. can you offord 2 empty months per year?

In a worst case scenario if you can't find a tennant, how many months can you cover the mortgage? 3 would be a minimum IMHO. 6 would be nice.

I worry about a 100% mortgage for First time Buy To Lets. In the time it takes to asses an investment you should be able to save a bit. If you can't then you may be too close to break even to extend yourself further. How much can you realistically save in 6 months or a year. Have you an SSIA? That'll give you a nice deposit and it's not that long to go.

-Rd
 
Re: Cashflow 101

Rd

Thanks for that. Yes, probably could cover 3 mths. Also could put up deposit of 15 -20% but thought I would go 100% and if it worked out put the deposit cash towards another property. I will treat it as a business.

Cheers

Slim8)
 
Re: Cashflow 101

Would you say that it would be inadvisable to take out a 100% mortgage, cross secured on PPR equity, in order to buy to let?

I personally would be very reluctant to do this because I'm relatively conservative when it comes to money/investments but somebody else who understands the risks involved and can live with them and would not be screwed in a worst case scenario might have a different opinion. Apart from completely wacky stuff it's generally difficult to say that an investment is advisable or inadvisable/good or bad in isolation without factoring in the personal circumstances of the person involved, possible alternative investment strategies etc. Sorry to be vague about it but there are no easy, canned, catch-all answers when it comes to this stuff. :|
 
Re: Cashflow 101

Slim,

If you've factored in a reasonable amount of vacancy per year, and you feel you can cover some unexpected down turns, and you understand the risks and are willing to take them for the rewards, then go for it.

best of luck.

-Rd
 
Re: Cashflow 101

Slim

Another thing to factor into your costs for your rental property are
(a) Do you have to furnish the property? If so what are the costs for that
(b) The management costs of letting a property. A lot of people forget the overhead in maintaining their property so that it retains it's value. Things such as reguarly painting the property, repairs to the building, even cutting thg the grass in the summer (if it is a house). Also if problems arise you have to fix them for your tenants.

Just something that I find people don't consider when considering going into the "buy to let" area. Your investment (time and additional costs) does not finish once you purchase the property.

C
 
Re: Cashflow 101

Yes - another pertinent point and another reason why residential investment property should be considered a business and not just a "passive" investment.
 
Re: Cashflow 101

Thanks all for the advice. I am viewing properties in the area starting Monday. I am just a little worried by recent comments from IMF regarding the possibility of a housing "bust" in Ireland and the overall prospects for economic growth in Ireland. I suppose I would hate to buy at X and then find similar properties going for a discount later in the year or next year. Also, if jobs disappear, who will rent the house?

Slim
 
Re: Cashflow 101

I suppose I would hate to buy at X and then find similar properties going for a discount later in the year
Click to expand...

You need to decide if houses are overvalued or not. You could just as easily put off buying and see prices rise. You can't guess which way the market wil move, but you can try to figure out what the house is worth to you.

Also, if jobs disappear, who will rent the house?
Click to expand...

This is a different issue and well worth thinking about. The worst scenario is getting caught with a double whammy, nobody to rent and prices dropping below what you paid.

But that's business. If property prices were guarenteed to rise and there was always a plentiful supply of tennants, we'd all be millionaires and nobody would need to rent.

-Rd
 
Guys,

John T Reed is a wannabe Guru.

You can check out www.mastermindforum.com/k...toreed.htm for Roberts reponse to Reed.

Here is a little info on Reed:
1) Reed currently owns no investment real estate. His last purchase was 21 years ago and he never owned more than 2 properties at a time.
2) "Buying real estate is scary. Anyone who has done it can tell you that. I was scared every time I ever bought a property, with good reason, it turned out. I lost $750,000 on my last two purchases." --- John T. Reed
3) And lots more here [broken link removed]


I have personally benefitted from reading and playing RK's material. I have setup a few online businesses and make a profit. I attended a real estate internship during the Summer which taught me a lot. I am now investing in Stocks and Shares.

I wish you all the best.
Matt
 
It was free, all I had to do was pay the flights from Ireland to the USA and back.

The internship was more geared towards personal development than real estate. It also went a lot into business. It was awesome.

Matt
 
Anyone have a whirl at the game at the Money Show, in the RDS, over the weekend??
 
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