Have you been thinking about investing in a positive cash flow property? If so, it’s important to ensure that it aligns with your risk profile, future goals and budget. At Bolt & Hunter, we’re passionate about helping you attain financial and emotional security through smart property investment.
In this article, we explain what a positive cash-flow property is and how it can benefit your wealth creation strategy.
In a nutshell, this type of property generates more income than it costs to own. Let’s assume you own a unit which earns an annual rental income of $32,000. The unit’s annual expenses, such as interest payments, property management fees and maintenance total $11,000. This would equate to positive cash flow of $21,000 per annum.
For an investment property to generate positive cash-flow from the get-go, it needs to have high rental yield and low-interest rates. Investing in positive cash-flow property contrasts to negative gearing as in investment strategy. With negative gearing, returns don’t offset the holding costs. But the investor can take advantage of the losses as far as their tax goes.
Below are some of the ways in which a positive cash-flow approach to property investing may benefit you.
Whilst properties with a high rental yield are known to experience lower capital growth, they’re also known to come with a lower price tag, less stamp duty and reduced associated taxes. So, for someone looking to build a juicy investment property portfolio and reach ultimate financial freedom, a positive cash-flow property may be very appealing.
Having access to an income stream through a cash-flow positive property makes this type of investment a great starting point for those entering the market for the first time. It offers the investor peace of mind knowing a change in market conditions or personal circumstances won’t require them to dig into their own income.
Many investors buy a positive cash-flow property to assist in offsetting the loss from a negative cash-flow property. Of course, one must pay taxes on income. But these taxes can be reduced with eligible deductions on the positive cash-flow property and any loss incurred on the negatively geared property.
In summary, positive cash-flow properties can balance your portfolio. They do this by providing cash for shortfalls associated with holding properties with potential for high capital growth.
Many investors can't look past the serviceability that a positive cash-flow property offers. For some investors, the cash-flow from an investment property may be a determinator of their ability to buy the property in the first place.
Cash-flow will assist you in building your investment portfolio. Regardless of where your income comes from, it gets viewed collectively by lenders when considering your ability to service a loan.
Generating a good income from your investment property is important for investment longevity. That is an investment that will serve you over the long term, despite fluctuating conditions.
At Bolt & Hunter, our dynamic, innovative and client-centric team has a common goal. To support you on your wealth creation journey. We do this through guiding you through smart investment property purchases.
If you’re looking for a positive cash flow property, leave the hard work to us. After all, it’s where our passion lies – it’s what we do best. Contact us today to see how we can help you live your life, on your terms.