Cash flow positive property, otherwise known as positively geared property is a position that eludes most property investors. It is where the property generates more rental income and / or tax benefits than is required to pay its holding costs, resulting in a surplus for you to pocket at the end of the financial year, or even at the time of each rent payment.
The majority of properties in Australia are in fact negatively geared, where after market rent is achieved and tax benefits are applied, the owner still finds themselves having to pay holding costs such as mortgage repayments, water, council and land taxes.
The ideal cash flow position will vary for each property investor’s situation but in times of economic uncertainty, we hear more and more that ‘cash is king’. However, is there ever really a bad time to have a surplus of cash? As a property investor if you have good cash flow, the banks are more likely to lend to you as they can see how you will be able to meet the repayments of another loan, enabling you to keep leveraging into more properties and keep creating wealth.
With surplus cash flow you could choose to pay down personal debt that is not tax deductable, offset other properties that are in superior locations, or put savings aside for a rainy day – when perhaps one the rooves doesn’t fare so well and may need mending, or a hot water system blows up. Cash flow in a property portfolio can help ‘recession proof’ you, in that when your properties are producing enough income to service themselves you’ll never be in a desperate situation and forced to sell at a low point of the property cycle, or if you lost your job or fell ill. In fact if your property portfolio is structured to be cash flow positive, you’ll probably be able to get to a position where you can replace your income or wage entirely.
So where do you find cash flow positive properties and are they good investments? As buyer advocates and active property investors ourselves, we can speak highly of some of the opportunities available in our own regional North West, right now. Contact us through our website or give us a call to find out our top three locations, and choose from a range of properties.