The word “positive” suggests something good, something beneficial. Positive Cashflow Property Investment can be good, as long as you have all the facts and get help from professionals who know the market.
What is Positive Cashflow Property?
If you invest in a Positive Cashflow Property, the annual rent you receive will be greater than the total annual expenses. A Positively Geared Property gives you an ongoing cash surplus, before considering deductions like tax and depreciation.
A Positive Cashflow Example
So, “positive” does offer something good – as a self-sustaining property means you do not have to open your wallet for any shortfalls that may occur – from day one. For example, if you purchase a property in a well-researched growth area for $479,000, and charge $615 per week in rent and have an interest-only mortgage with interest of $15,320 per year and expenses of $2,000 per year – your rent will cover your expenses and leave you with cash in hand.
Benefits Of Cashflow Positive Property
Yes. You have ready cash from day one to use for debts or unforeseen expenses. This is good for first-time investors. You can use the cash to pay off the mortgage in less time and so hopefully grow your property portfolio quicker. You can also borrow more. You have the potential to benefit from capital gains, as over time your property’s value should increase if you have bought wisely. Cash Flow Positive areas should produce a 6%-7% yield plus capital growth per annum.
What are the Disadvantages?
You also only get benefits from depreciation on a new property. There are no losses incurred to offset against your personal, taxable income as you can with a Negatively Geared Property. Capital gains can be slower as it is more costly to find properties in high growth areas like capital cities. You might be pushed into a higher tax bracket as the positive income you generate is taxable.
How do you find the right property?
Our team at Investn are constantly researching areas Australia-wide to target high growth, future hotspots. We have access to property data that analyses demographics and population growth; supply and demand; the time period houses are on the market and if houses are discounted; how many days rental properties are vacant and what kind of properties are in high demand.
We research trends and seek out areas which are likely to experience economic booms leading to job creation and growing housing needs. We look at areas near high demand suburbs as well as future developments of schools, infrastructure and shopping centres.
Investn has access to off-market properties in high cash flow, quality areas with growth potential. For example, in a growth area just outside Brisbane, we have just sold a property for $529,440. The new owner will rent the property for $600 per week.
We help you find top professionals like solicitors, tax accountants, finance brokers, depreciation specialists, building inspectors, property managers and more. These highly trained professionals will help give you peace of mind as you grow your portfolio.
What are some of the properties to target for Cash Flow Positive Investments?
Duplex and Dual Living Houses are ideal as you have a positive cash flow from day one. These structures look like an individual home but they have two entrances and inside they consist of two dwellings – usually one with three bedrooms and the other with two or one-bedrooms. They sell from $ 459,000 and up. Tenants like the fact they are brand new, look like a single swelling and the rental is lower than a standalone home.
There are no strata fees, they are usually in high demand areas and if one half becomes vacant for a while, you still have the benefit of the rent from the other dwelling.
Granny Flats are also good for the instant cash flow of a second income. Investn can source the property and help with the construction of these dwellings making it easier for the investor. A one-bedroom granny flat would cost about $100,000 and can be rented for at least $250 per week. The yield would be about 13% per annum.
Subdividing properties can lead to building two houses, with the benefit of two rental incomes. This strategy can be risky for those just starting out. The outer Brisbane area offers promising advantages for this strategy.
There are thousands of disabled Australians looking for housing. The Australian Government has pledged, through the NDIS (National Disability Insurance Scheme) $700 million per year for 20 years to help provide accessible housing for the disabled under 45 years of age. The private sector will be charged with developing these properties. There would be a 10%-12% annual return through rent allowances provided by the NDIS. This offers a perfect opportunity to create cash flow positive properties.
In summation, a cash flow positive property can help you sustain your property portfolio and give you weekly money in your pocket. With high rental yields and plus capital gains, there is not much not to like. Make sure you talk to us before you begin this exciting journey as our team of professionals be happy to assist you.