What to look for in Positive Cash Flow:

How do you get Positive Cash Flow:

Normal situation where the cash inflows during a period are higher than the cash outflows during the same period. 

Positive gearing is when the payments  from your  property is higher than costs such as loan repayments, and interest,on the loan that you are paying off.

  • Looking in properties that are not high in Capital Growth.
  • Buying properties 20 - 40% below the median price for the suburb.
  • Buying in regional or in towns that are out of the main city centres..
  • To find and purchase a property that produces surplus cash flow (pre-tax). So we are not talking about depreciation or tax at this stage, the property needs to produce cash upfront.
  • To understand key suburb fundamentals and property facts that will help us make a good buying decision. 
  • Accurately analyse the long term cashflow and set a maximum purchase

Positive cashflow from day one

Insurance,  council rates and  water rates are payed by the (Wrappee) purchaser of the home.

A positive cash-flow property  allows you to focus on the things that matter in life & not worry about the net position of your investments each day.  A portfolio comprised of more than one cashflow positive property minimises risks,  reduces debt & allows you to buy your next investment in a much reduced timeframe. 

Real Estate Financing and Investing. A necessary task in analyzing an income producing property is determining the before tax cash flow. When you know the cash flow, you can figure your return on your investment, calculate the tax shelter, and evaluate the investment, in other ways.

Normal situation where the cash inflows during a period are higher than the cashoutflows during the same period. Positive cash flow does not necessarily means profit, and is usually due to a careful management of cash inflows and expenditure.

Pros:

  • The positive or neutral cash flow that they generate. You can't lose having money in your pocket.
  • Typically lower entry prices (as well as lower stamp duty and land tax) because of their location - so for investors who don't have much equity or income it is easy to get started.
  • You can use the surplus cash flow to pay down principal and allow you to draw on the equity to invest further into other properties.
  • Because of the popularity of these types of properties it is not uncommon to occasionally achieve strong capital growth gains due to the demand for high yield properties. 
  • 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.

Positive geared investments mean that all costs (expenses and mortgage repayments etc.) are covered by any rent, and there’s still money left to spare. As with all real estate, it pays to be careful – some agents advertise that a property is “Positive Cashflow”, when in reality it is negatively geared and only becomes the former after tax deductions have been made. If you are trying to find a positive cashflow property for sale you best do your own research.

The benefits of cash flow positive property are clear in terms of your investment strategy. The house essentially pays for itself – this is where you make Positive Cash Flow. These types of real estate opportunities increase your serviceability, making you more attractive to banks and lenders. In short, if you can find the right investment property and increase your income, you are able to borrow more.

 

Negative cash flow means the money coming in from the property does not cover the mortgage and other costs. This is similar to Negative gearing.

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To Your Success
Paul Zalitis
The Aussie Wrapper

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