INVESTOR INTELLIGENCE
During the recent historically lowinterest-rate period , we were fortunate to have had investment opportunities in new developments that provided us with the capital growth required for refinancing while also providing a positive monthly cash flow . That is why we have strongly focused on assisting our investors to buy properties in new developments over the past few years . Usually , the ROI of a new development is too low to provide an initial positive cash flow . Still , we managed to find perfect investment properties for our members .
Buying a refinance-type property with a positive monthly cash flow from day one allows you to do your first refinance on the property much quicker than usual . You could even refinance the property in year one or two .
However , the situation has now changed due to the increase in our interest rate . That same property in a new development we bought which had a positive monthly cash flow , will / could now be cash flow negative – in other words , it will have a monthly shortfall .
Who will be paying this money ?
There are two answers to this question : 1 . The Trustees of the Trust holding the property will need to make payments into the portfolio / property personally , which is not ideal as this can influence their lifestyle negatively , which is why investors often give up on growing their investment portfolio too early .
The following answer will solve the cash flow problem created by the higher interest rate and avoid the need for a Trustee to cover a shortfall personally .
The answer :
2 . Buy a property with a positive cash flow , also known by our members as a ' provider-type property '.
68 DECEMBER 2022 / JANUARY 2023 SA Real Estate Investor Magazine