The Capital V Cashflow Dilemma

People said to me, are you all about US property, and then I said no, I have huge portfolio here that I love but right now what you want to be able to learn if you want to step up to be a more sophisticated investor how to zig and zag. If everyone else right now is zigging right now, we want to be zagging. Everyone here is like crying about what’s happening in the market there is no opportunities, they are running dry and business his struggling and what we want to do, is kind of say, this pool of water is drying up over here, where else can we find great opportunity to great water supply to make up for that.

So we are in mindful diversification, we talk about diversification here in Australia as for example I’ve got one property in NSW, so we’re going to invest in Queensland, and therefore I’m diversified. And what I’m saying is there is many dimension to diversification, there is also got to do with how much money you got in each deal, where they are, how much risk. Economically, if we boom what happens over here? Does that bust? It’s about thinking about lots of different facets.

So to give you context, I want you to imagine that you’ve got enough number in your head that I want to have a passive income of 200,000. Now if you are all in Australian Property earning let’s say 5%  income stream, gross and after expenses earning 2%, so after all your expenses you get 2% you would need 10 million dollars worth of net assets here is Australia. At the other end of the spectrum if you would go all in, say the US or alternative property investment would only need 2 million dollars worth of net assets earning say 10% to get you that 200,000.

So I’m not saying either of the spectrum is right or wrong, I’m just pointing out that there is a spectrum. Imagine you have 10 million in that assets you can be either earning 200,000 if it was an Australian property at best and I can tell now, I know people who have net assets of 10 million that are earning less than 200,000, they’re earning more like 80 because of the massive maintenance costs all the way through to the other end a million dollars in income stream of this end if your earning let’s say 10 per cent.

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