Positive Cash Flow Properties and Investment

A positive cash flow property is one which enjoys a net gain based on the rental income being greater than costs associated with owning the property. These costs may include the expenses associated with purchase, legal/ management fees, rates, electricity and upkeep of the property. A positive cash flow property is often what many investors aspire towards, with their investment property actually generating a profit rather than recording a loss. The current conditions are creating a market where positive cash flow properties are now becoming more common. Property values have fallen in many regions while at the same time some areas are showing increased rental rates and interest rates are falling. The combined effect is that rental yields are trending upwards.

With confidence low, inflation high, some value declines having been recorded, more and more investors will be looking to purchase positive cash flow properties in order to reap the benefits of a return from their property and to also capitalize on future property value growth. With vacancy rates dropping, positive rental growth and value growth being minimal, it is anticipated that more and more properties will be moving into positive cash flow property. The most important thing to know when seeking a positive cash flow  property is how much income is required to offset the expenses associated with owning the property – this will vary from buyer to buyer depending on their own financial situation. It is also important to ensure you research the rental market and get a firm understanding of what the expenses associated with the property will be and pay the best price possible for the property. The benefits of a positive cash flow property in your strategy are clear. The property pays the investor for having it in their portfolio. Positive cash flow property increases your serviceability therefore it makes you more attractive to banks and lenders; increasing your income and giving you the ability to borrow more. For investors looking to balance their portfolio, the extra income from Positive Cash flow properties can be used to cover the shortfall associated with the costs of holding high capital growth properties.

Buying investment property can be extremely profitable, when done correctly. However, most investors never make a significant income due to faulty technique. If you are looking to make money in real estate, here are some tips that work.  Buying investment property and holding is a much smarter strategy than merely flipping. This is because the income is much more long term, and it is passive. Buying investment property and holding allows you to keep earning from a property for years to come. When you are buying an investment property you should inspect it thoroughly. This will ensure that there is nothing major that needs to be fixed on the home, or else you are going to have an expensive repair. Do not be overeager. Sometimes while buying investment property, beginning investors are anxious to get their feet wet, and so they just buy the first property they look at against their better judgment. Do not make this mistake. Instead, you want to take your time and shop around until you find something that looks good.

Positive Cash Flow Property | Buying Investment property | national rental affordability scheme

Property which is purchased with the sole intent of using it to gain financially is called an investment property. It is not intended for the owner to use as a residence, though in the case of a multi-family property purchase, the owner may sometimes reside in one of the units, while renting out the others. The types of property to be invested in can be a single or multi family unit, including duplexes, condominiums and apartment buildings; it can also be unimproved land.

Investment properties in Victoria are also being occasionally purchased as fractional properties, whereby a group of individuals collectively own a property and each investor owns an interest in the property and is entitled to the same use and rights of the property as every other investor, regardless of his investment percentage. Income and expenses in this type of investment properties are usually proportionate to the ownership share. That is, the higher your share in the property, the higher your income and expenses.

Investing in property in Victoria is an ideal way to preserve an asset base, grow wealth and hedge against inflation. There are several ways to profit from investment properties, including regular cash flow from income streams, property appreciation, whether the property is flipped, meaning that it is rehabilitated by the investor and quickly resold, or held long term, leveraging the equity in one property to buy additional investment properties, and for the tax incentives derived. While some investors will avoid properties that generate negative cash flows, meaning that the rental steam is inadequate to cover the monthly carrying costs, i.e. mortgage and maintenance costs, generally properties that have negative cash flows tend to appreciate at a higher rate than its income producing counterparts.

Purchasing investment property can be a lucrative venture, whether one simply hopes to purchase a home or plans to make a business out of such investments. One strategy for beginners is to purchase an investment property such as a duplex, or other multiple family dwelling, and live in one unit while renting out the other(s). This way, monies collected from the renter or renters covers the note, leaving the owner without a mortgage payment. Eventually the property is paid off, and the purchaser continues collecting the rent for a profit.

The owner may also purchase another investment property, using the equity in the first property to finance the purchase. Equity simply means the fair market value of the property minus the amount still owed, including any liens. It is common to borrow against the equity in a property. Rates for such loans are fairly competitive because the property acts as collateral to secure the loan. The less risk there is in lending, the better the rates are.

It’s important for an investor to understand not only their investment goals, but exactly what their investment goal time horizon is, since each investment property will generate revenue at a different rate of return and cycle.

Property investment is a business, and the investor should understand that the benefits derived from it are often offset by the challenges, including property management difficulties such as dead-beat tenants, evictions, high turnover or high vacancy rates. Furthermore, investment property is also susceptible to the market conditions, and in a soft market, an investor may find that investment related expenses are higher than the revenues generated by them.

The Australian experience provides Landmark Investments with the winning edge to identify and evaluate strategic property investments , establishing business structure for each acquisition and providing corporate and funding expertise in managing the individual investment portfolios.

Landmark Investments have excellent working relationships with various strategic partners including financial institutions, real estate professionals, building industry consultants and other local authorities.

Positive Cash Flow Property | Property Investment Victoria