Real Cashflow, Fake Cashflow – Part IV


For new readers: Do NOT APPLY … this was my 2009 April Fools Day Joke ๐Ÿ™‚

Thanks everyone for your comments and support for the first money-making opportunity that I have ever announced on this blog! I wanted my loyal readers to have first opportunity. Sure, it’s a bit unusual (horse racing), but it comes from a trusted source … and, we never know where the next opportunity will come from ๐Ÿ™‚

However, Expressions of Interest have now CLOSED!

But, stand by as there will be a follow up post announcing how The System works and what it means for you next Thursday …

This is the fourth – and, final – installment of our series on the three types of Positive Cashflow Real Estate:

1. Tax Cashflow

2. Fake Cashflow

3. Real Cashflow

After introducing Tax Cashflow “cleverly designed to make Negatively Geared real-estate look like a good deal”) we spoke about manipulating the amount of deposit that you put into a property to ‘force’ it to produce a kind of ‘Fake’ Positive Cashflow.

This kind of cashflow comes at the expense of: (a) cash – you are typically forced to put in a lot – and, (b) returns: typically, the more cash you put into an investment, the lower its return.

So, what is the secret? Simple, it’s to look for a property that produces …

Real Cashflow

For some unknown/stupid reason, we look at property exactly the wrong way around:

We let the bank and public opinion of the day tell us how much capital (i.e. deposit) to put in; then we look for the greatest tax benefits; then …

… we buy!

Of course, there is no ‘secret’ to Positive Cashflow Real-Estate at all: we should simply ALWAYS treat ANY property acquisition as though it were a business … and, we would NEVER buy a business that needs to be manipulated in order to make money:

First, it must produce cash

then we can ‘tweak’ the income statement and balance sheet for greater tax benefits and return on capital.

It’s exactly the same with property; the problem is that we:

(a) Buy in the wrong market – we buy when everybody else is buying and property is too expensive, and

(b) Buy in the wrong sector – we buy what everybody else is buying – residential real-estate, which rarely produces positive cashflow … and, when it does, it’s usually a ‘dog’ when it comes to appreciation.

So, here is the real 7million7years Patented Positive Cashflow System:

1. Look for real-estate that will produce Real Positive Cashflow with a reasonable deposit (say, 10% – 35%); typically, this will be commercial real-estate … BUT, in the current market (low prices and low interest rates) you will probably find some residential real-estate nuggets if you look hard enough. Just don’t forget to lock in the interest rate, or you may find your diamond turning into a lump of coal as interest rates rise again.

2. Then, tweak the deposit that you actually put in according to the Fake Cashflow return that you want to get: in the Making Money 201 wealth accumulation phase, I recommend putting in ‘just enough’ deposit to break-even (perhaps with a buffer for contingencies, unless you have the spare income to cover these elsewhere) and then using you spare cash to buy another!

3. Then, take every tax deduction that you can get! Accumulate the extra Tax Cashflow that you get until you have enough accumulated to put down as a deposit on another property.

If you buy right … then manage your capital and tax right … you will have a large and Positive Cashflow real-estate portfolio before you can say “negative cashflow sucks lemons”.

If you can’t find one now, you ain’t looking hard enough ๐Ÿ˜‰

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6 thoughts on “Real Cashflow, Fake Cashflow – Part IV

  1. I couldn’t agree more.

    People sometimes don’t realise that positively geared properties exist and think you must manipulate tax or get the find of a century.

    I will say that Australia is looking excellent for positively geared property at the moment as it was in a boom just before the crash and has cushioned it nicely from the world economy.

    And another great tip is that in this market if it isn’t positively geared, what offer would make it positively geared, I think people are more willing to accept lower offers at the moment.

  2. @ Adam – Great advice … I think the idea of low-balling will work even better in the US, at the moment.

    But, you MUST hold a cushion against possible loss of tenancy (esp. in commercial)

  3. I would love to get into commercial re, but have assumed that the barrier to entry is too big to start there. Am I wrong? What are some good types of property to look at for a beginner wanting to get a piece of commercial re?

  4. @ Ryan – The barriers really are in required deposit; can be higher than on residential. You can buy a small shopfront for the same price as a single family home and a small office for the same price as a quadraplex … I prefer small office to retail (esp. in the current market), but that’s just a personal bias.

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