22 Dec 2005

Find the positive cash flow property that suits you

The positive cash flow property investment strategy involves purchasing the property that will create surplus cash flow pre-tax. 

Positive cash flow property is a type of investment property where the yearly profit exceeds the yearly expenses (after depreciation and tax deductions). That is, a positive cash flow property doesn't cost you a cent to own – it puts money into your pocket each year.

Reach out to a Fast Repay Home Loan broker to start your property investment journey the right way.

With the correct strategy in place, property investment is easier than you might think. You might even be eligible to use the assets in your current house to partially fund the purchase of your rental property.

Locate positive cash flow properties

When searching for positive cash flow assets, there are several tactics to target these properties to help enhance your cash flow.

Searching for high-yielding suburbs.

Purchasing houses for 20-40% less than the suburb's median price.

Targeting residences with numerous funding sources, such as those with a granny flat.

Purchasing in rural areas or focusing on student housing. 

Renovating and adding value to increase rents.

Managing interest rates when the current interest rate is at the bottom of its cycle.

Select objectives when buying property for cash flow

With high rental yields in many Australian rental markets, now is a great time to invest! When buying a property with the end goal being positive cash flow, keep the following in mind.

Objective 1: to locate and purchase a property that generates a positive cash flow (pre-tax) So, at this point, we're not talking about depreciation or taxes; the property must generate revenue immediately.

Objective 2: to gain a thorough understanding of essential suburb fundamentals and property details. This will enable you to make an informed purchase choice.

Whether you are investing in property via auction or negotiation, make sure to accurately analyze the long-term cash flow and set a maximum acquisition price for your deal.

If you're new to property investing and don't know where to start, your local Fast Repay Home Loan broker can help you. Call us today to get started.

Acquire returns from your investment

When looking to purchase positive cash flow property, one of the main aspects to consider is the gap between your overall costs and the income you receive from renting out your property, and that is called rental yield.

Rental yield is a measure of how much cash an investment property produces each year as a percentage of the property's value.

Rental yield can either be calculated as a gross percentage (before expenses are deducted) or as a net percentage (with costs accounted for). A property may have a high gross yield, but may also have high expenses, making the net yield low.

Net rental yield = (annual income - annual expenses) / (total property costs) x 100

Gross rental yield = (weekly rent x 52) / Property purchase price x 100

Know the investment property’s numbers

Understanding how property yield works will help you get a better understanding of how much money you'll collect over time. It can also come in handy when it's time to reevaluate the rent on an investment home.

When you know the rental yield of an investment property, you can then decide whether it's the correct choice for your investment goals, or if you might earn a higher rental yield with a different property or in a different suburb.

Disclaimer: Information included in this post is of general nature, it has been prepared without taking into account your specific situation. It is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice. You should not make any decision, financial or otherwise, based on any of the information presented here without undertaking independent due diligence and consultation with a professional accountant or financial adviser.

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