Linz’s Musings – Sydney Property Investment Expo Wrap up

It was great to meet everyone that came down to the Sydney property Investment Expo last weekend, and there was lots of interest in the U.S. market as an option for strong, balanced portfolios.
While we were not the only international option at the Expo (anyone want a Dubai property? Entry costs only $850K USD but does give option to live there!) we were certainly popular with many investors not realising the U.S. market is an option or did not know its strengths.
One of the key focus areas right now, from talking to many investors at the Expo, seems to be cashflow.
Many investors are really hurting now with the meteoric rise in interest rates in Australia. While 3.85% is certainly not a ‘high’ rate, to have gone from virtually zero, to almost 4% in the space of 12 months is almost unheard of in pace.
AND, it appears the RBA will likely look to rise again next Tuesday…
Coupled with the false promise from the RBA back, not 2 years ago, that interest rates would not rise until at least 2024, here we are with round 11 rises in 12 months, and there still seems to be no respite for homeowners or investors alike.
Some investors took the RBA at its word and have purchased investments a little out of reach, or over leveraged, with the incredibly low rates at the time, which has now come back to bite.
Even the savvy investors, who may have had positive yield properties are now finding these properties moving into negative territory. Combined with possibly other negatively geared properties in the portfolios, many investors are finding they are also out of serviceability due to the cashflow impact, and therefore unable to refinance to a better rate, or interest only payments right now.
This is hurting.
While the past 3-5 years in Australia has all been about equity (how much is my portfolio worth; how much growth have I seen in my properties) the current economic investment climate is now all about CASHFLOW.
While I cannot see that properties here will not continue to rise, most economists are also suggesting the RBA isn’t done yet with rate rises either, so this may yet get worse before it gets better.
So, the answer?
It has become more and more imperative to ensure your portfolio is balanced with cashflowing properties as well as growth properties. The cashflow then allows for support to help fund the additional costs now seen on the growth properties, and/or possibly allows for higher serviceability to enable refinance of the growth properties to interest only payments for the short term to help offset the rising costs.
The U.S. market is one of the best options I have found for high cashflow rentals. Yields of over 10% net after costs, is common and multifamily properties can often even perform better.
With low entry costs, and high yields, to balance out an equity portfolio, the U.S. residential market is perfect.
Interested in looking at high yield, positive cashflow? Hit me up!