Cash flow property – are you confused or frustrated why some home buyers and property investors can quickly and easily build substantial wealth via profitable positive property portfolios?
Cash flow property, perhaps you’re thinking why do so many struggle just to get past one or two investment properties?
Truth be told, finding real estate which makes you money each week sounds like the perfect investment vehicle, right?
If you’re just starting out in property investing or even if you’re a seasoned pro investor, is it essential to buy positive cash flow property as part of your portfolio?
Cash flow property, allow me to explain…
There are pros and cons of positive cash flow property in terms of a buy and hold strategy. There are ways to manufacture a positive cash flow from flipping houses or renovations. It really depends on your goals…do you want passive income?
Positive cash flow property also known as cash flow property (often incorrectly referred as) positively geared property, is defined as a property which makes more money than it costs to hold….makes sense, right?
Negative cash flow property is a completely different strategy which takes money from your pocket as the holding costs out weigh the rental income.
Positive or negative gearing refers to your overall cash position after taking into account other factors like tax benefits.
Let’s quickly look at an example whereby you’re in a better position from cash after negatively gearing, if you have a large taxable income to offset.
Cash flow property…let’s focus on generating cash into your bank account every week because the total costs for holding property are less than the rental income you receive.
Property costs include:
- Mortgage Repayments
- Land Taxes or Land Rates
- Home Maintenance
- Building Insurance
- Landlord Insurance
- Management Fees
- Advertising Fees
- Fuel Expenses (petrol costs if you are managing property yourself)
- Vacancy (lose of income)
How to determine how positive cash flow properties are calculated for Australia? It’s good due diligence to determine how much these costs affect each property, as different states use drastically different land tax rates/taxes and utility charges…
The income is the rent you would receive for the property. You can actually own two types of positive cash flow properties:
- Cash flow positive
- Cash flow positive on paper, (may take away more cash than you receive, added with tax benefits may end up leaving you better off than before…
Where To Find Positive Cash Flow Property
1. Economic cycles and the location on positively geared property changes with economic cycles.
Property booms start from city centre and span outwards into rural areas. While a boom is happening, positively geared properties are hard to come by.
2. Research where all the positively geared properties are looking into the outer suburbs or rural depending on how long the boom has being expanding.
3. Professional Services. Buyers Agents are professionals that know their area, locate and negotiate property for buyers.
4. Mining Towns are specifically created to house workers of the mine, because houses are always rented as positively geared (if you do your research correctly).
The only set back with these types of cash flow properties…if the mine closes, you’re stuck with a house no one wants to buy and a mortgage to be paid.
5. Renting Out Rooms. If property is close to a university or CBD you could rent out each individual room collecting more cash flow from renting out the whole house.
6. Buying For Less. If a house is negatively geared what would it take to make it positive cash flow? What if you make an offer at that price?
7. Equity. You need to make sure the numbers stack up taking into account capital growth and increase rental costs.
What if you purchased a property below its value? You could redraw equity on the house to cover expenses while the rental income is increasing.
How To Use Positively Cash Flow Property In Your Portfolio
Cash flow property can be a critical component in your property portfolio. Generally speaking, positively geared property don’t always provide great long term growth.
Cash flow property as a strategy can continued provide positive cash flow ensuring you can keep costs of your negatively geared high growth property.
Depending on what strategy you choose to implement, the most common goal of a property investment is to buy and hold.
You could include many positive cash flow properties to support your lifestyle, it really depends on whether you want cash flow for creating wealth for better living.
The ratio on cash flow property (positively geared) to negatively geared property can change depending on how much a negatively geared property costs you each month to maintain.
You need to take into account how much a positively geared property generates each week. The ratio is about four positive cash flow to one negatively geared.
The ratio changes if you have many other sources of cash flow. Again you can keep using a cash flow property for maintaining your negatively geared property.
Why Invest In Cash Flow Property?
Are you primarily focused on investing in property to grow real wealth or are you investing in property to reduce your tax bill?
There are many reasons to invest in cash flow property for tax minimisation, wealth creation and even to reduce you existing mortgage to name a few…we’ll make it easy for you to ask the right questions.
Property Investments Now provides unique strategic property investing knowledge from years of real world in the trenches property investing.
This knowledge is all distilled for you into one easy to use powerful resource for property investments, which allows you to continue building your property portfolio with strong capital growth and continue buying cash flow properties.
Ask yourself, why should you continue losing money and make all the most costly mistakes if you don’t want to? Click here to find out more…
Cash Flow Property