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How do I offset/reduce negative cash flow

Discussion in 'Real Estate' started by JohnGr, 16th Jun, 2010.

  1. JohnGr

    JohnGr New Member

    Joined:
    15th Jun, 2010
    Posts:
    2
    Location:
    Brisbane
    Hello,

    New to the site and would like ideas from anyone who has developed solutions to the problem of negative cash flow on residential real estate investments.

    I want to buy 5 to 10 properties over the next 5 years. This only seems possible for me at least if I can deal with the cash flow problem. If the first property has a negative of $150 per week after tax deductions etc., it would possibly take five years before rent would get anywhere near covering it. I don't want to wait that long.

    The only idea I have so far is getting a tenant who will pay the extra in return for a share of future equity.

    Has anyone tried this? Do you have other ideas that you have actually used and made work?

    (Update) I just read briefly about wraps. Perhaps what I am thinking of is similar except that a trust might be used to share ownership from the start. This would mean the tenant needs to jointly qualify for finance. Set a date to refinance etc. 50 to 60% equity on 5-10 properties might be better than 100% on one or two?

    Maybe another alternative is an investor to fund the negative for a piece of the action. A group of investors with one who just want this type of financial involvement?

    Open to ideas...

    JG
     
    Last edited by a moderator: 16th Jun, 2010
  2. Paul Dobson

    Paul Dobson Member

    Joined:
    22nd Mar, 2007
    Posts:
    8
    Location:
    Fingal Bay, NSW
    Hi JG

    We believe that our long term wealth is measured by the amout of equity we have in property. To accomplish this we use both +cf and -cf.

    Our +cf properties are properties we buy and on-sell with vendor finance and our -cf properties are the properties we plan to hold forever ;-) Our +cf properties maintain our lifestyle and support the -cf on our long term buy and holds.

    We've bought and sold heaps of our +cf properties but not sold any of our buy and holds. They're our long term wealth. The +cf properties, for us, are just a cash flow business, just like any other business you might own.

    The idea you mentioned, i.e. using vendor finance to help with your portfolio building, is the mainstay of the JV Property Partners website shown below.

    Cheers, Paul

    Paul & Karen Dobson
    Vendor Financiers
    Welcome to the JV Property Partners
    Introduction | Vendor Finance Institute
    Phone: 0447 973 235

    Talk to us about Wrap Training Joint Ventures.
     
  3. JohnGr

    JohnGr New Member

    Joined:
    15th Jun, 2010
    Posts:
    2
    Location:
    Brisbane
    Thanks Paul,

    After our conversation this morning I feel a lot more comfortable about the idea of installment contracts (aka wraps) as a way of generating positive cash flow from investment properties to offset the negative on buy & hold properties - that is a great solution.

    Your joint-venture idea sounds excellent and your approach in dealing with the end-buyer's potential risks under such contracts answers the critics. I look forward to working with you as a JV partner.

    JG
     
  4. merlinnn

    merlinnn Active Member

    Joined:
    1st Nov, 2009
    Posts:
    35
    Location:
    Brisbane
    hmmm......
     
  5. Chris C

    Chris C Well-Known Member

    Joined:
    2nd Apr, 2008
    Posts:
    1,327
    Location:
    Brisbane, QLD
    Agreed.

    :cool:
     
  6. Paul Dobson

    Paul Dobson Member

    Joined:
    22nd Mar, 2007
    Posts:
    8
    Location:
    Fingal Bay, NSW
    hmmmm agreed ;-)

    Hi

    Yes I agree. I've been visiting two other real estate forums since 2003 and if I saw that "setup" I too would be "hmmmming" and "agreeing'. Time will tell I guess but it was straight up (as hard as that is to believe).

    Cheers, Paul

    Paul & Karen Dobson
    Vendor Financiers
    Welcome to the JV Property Partners
    Introduction | Vendor Finance Institute
    Phone: 0447 973 235

    Talk to us about Wrap Training Joint Ventures.