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.
