Finding Positive Cash Flow Property: 10 Top Tips

Finding Positive Cash Flow Property: 10 Top Tips

359878-first-home-buyers-grant-will-end-in-june-ruddThe beauty of a positive cash flow property is that it won’t burn a hole in your wallet but you’ll have to work hard to find one that also delivers good capital growth.

Keep in mind that any profit you make on the rental income is likely to be subject to capital gains tax (after depreciation and other tax deductions), so it’s wise to put aside a component of your rent return to meet the tax bill.

Positive cash flow properties are suited to investors who are looking for a conservative investment strategy and are keen to use the extra cash in the pocket to pay down debt and/or increase their equity to make room for further investment.

Here are 10 top tips for finding positive cash flow property:

  1. Buy a property that generates a strong rental yield (the return your property generates compared to the property’s market value).
  2. Know your statistics. Look for indicators that will drive rental prices upwards like a low tenant vacancy rate or suburbs with a shortage of properties for sale/lease.
  3. Look for market cycles that are ready – places which have not grown for a while and get in at the right time. 4. Look for property that you can add-value to through renovation.
  4. Regional areas are great places to find positive cash flow properties, but make sure your property is exactly what the market wants otherwise it won’t make any capital growth.
  5. Thoroughly research both property and town: look for high employment rates, a spread of employment sectors and a growing population.
  6. Look to buy in places where huge infrastructure spends are being projected.
  7. Borrow as little as possible to fund the property. The interest cost on an investment loan can be one of the more significant expenses of a rental property, so the less you borrow, the lower the interest cost.
  8. Don’t give up on capital growth. In areas that command high rental yields, it’s harder to find properties with good capital growth, but not impossible. It’s still worth looking for locations where there are factors in place to support property price growth like shops, restaurants, transport links and job opportunities.
  9. Buy new. A new property is more likely to provide a positive cashflow than an older dwelling due to its depreciation benefits.
  10. Seek advice. Talk to real estate agents, property managers and other investors. The more advice you seek the more you will learn about growth areas and tenant demand. Contact us to find out how the right loan can play a key role in generating positive cash flow for your property.