Positive Cashflow is the Foundation of any Successful Investment Strategy
Part 1: Positive Cash Flow
Positive Cash Flow as an investment strategy is great, especially if you’re just starting out.
To get Positive cash flow from property investing you must be able to produce more income each week instead of losing money each week ie: Negative Gearing.
This is where you make a loss each week, month and year.
You may spend 1 dollar to claim back 30 cents from the ATO ( Australian Tax Office).
This is not good if you would like cash flow IN instead of OUT to PROFIT from your property investments.
If your mortgage payment is $1000.00 per month
> You are only receiving $970.00 per month from your rent
> You are $30.00 per month in the negative
> You will soon run out of cash to invest in more properties to invest in
Vendor Finance is where you are making more each week, month and year from your property investments and this way you are able to purchase more properties to make Positive Cash flow.
In your real estate portfolio, positive cash flow will help build it up.
- A property than earns positive cash flow gives you less stress in your property investing
- A cash flow positive property will mean an investor does not need to use salaried income to cover property expenses
- You can't lose having money in your pocket
What is the best way to be making Positive Cash Flow from your Residential Real estate?
- This way it can help you pay the Mortgage off quicker and also can help you purchase your next property sooner
- From a finance perspective the income generated from the asset means it is easier to get a full- doc loan with a lower interest rate
- If you are not sure about the capital growth from your property, at least you can count on the cash flow today
What is Cash Flow?
Cash flow simply refers to the rent you take in that exceeds the costs of operating and owning a property – much like running a business.
Many novices buy real estate anywhere they find a deal. The major problem with this strategy is investing takes a lot of research to do it properly. So every time they buy in a new community, they either
- Spend too much time getting to know the city’s local economy and real estate market, OR
- They don’t spend enough time, which leads to lost revenue and opportunities
So when you become a specialist you’re not only saving time, you’re also saving money.
Sticking to places you know helps you to make deals faster because you know what the home purchaser (Wrappee) profile of the area is, what the property costs are on average, and how much you expect you can pay for the property.
Just remember you do not pay for any repairs or maintenance of the property as this is done by the purchaser.
Put simply, it’s really the opposite to negatively gearing. Whereas a negatively geared property is an investment that actually leaves the property owner in debt at the end of the financial year (albeit with a Federal Government tax break in hand) positively gearing a property investment means the owner is left with a profit in their pocket.
Positively geared properties are actually giving the property owner an income stream, so at the end of each week, month, or year, the owner has money left over that they can reinvest into that existing mortgage, or put towards a portfolio, save or just spend.
Do you like the sound of Cash Flow IN or OUT?
I worked out my preference and will be sharing more of that with you
until next time
To Your Success
The Aussie Wrapper
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