Cash-Flow Positive' Properties Can Be A Winning Investment Strategy

Keeping a positive cash flow is a common investment strategy, especially in property.

In fact, this approach should be the first thing you need to learn in real estate investments because this will provide you with a regular income that you can access instantly once you set up your rental business. 

This investment strategy is typically compared to negative gearing in which the revenue does not offset maintenance costs. 

Benefits of Investing in Cash Flow Positive Properties

Here are the benefits you may enjoy if you choose to invest in properties with high potential for cash flow positive:

  • Ideal for first-time property investors because you can immediately receive regular income
  • Increases your financing score because maintaining an income-generating property will make you more attractive to banks
  • Can help you balance your investment portfolio as the revenue can be allocated to fill the shortfall related to holding properties with high capital growth 
  • Cash flow positive properties usually appreciate fast and are usually considered as the holy grail in real estate market investment

Ideal Cash Flow Rate for Rental Properties

Here are the downsides that you need to remember if you choose to invest in cash flow positive properties:

  • The regular revenue is subject to income tax so it may be challenging to build your wealth if you solely depend on this source
  • Some cash flow positive properties are sometimes linked to lower rates of capital growth even though this is not true for all properties. Working with an investment advisor can help you understand different types of cash flow rental properties and project a possible yield alongside ideal capital growth
  • Rental properties located in the cities are often expensive and requires higher deposit or leverage

Before You Buy a ‘Cash Flow Positive’ Property

Before you purchase any real estate investment that has the potential to generate positive cash flow, you should crunch the numbers.

Check and double check if the numbers are right. Ideally, you should consult an investment advisor to confirm if the projections are correct. 

There is always the risk of losing money or even your property if you fail to work on the numbers and verify if the asset will generate you enough cash. 

Frequently Asked Questions

What is a positive cash flow property?

A property can be considered as a cash flow positive investment if the revenue is higher than the upkeep.

First-time property investors usually use this strategy to make sure that the interest rates are low, and the rental income is high. 

What is considered good cash flow on a rental property?

Obviously, the more cash flow you can generate from your rental business, the more you can become profitable.

But because cash flow is a relative value, it is not always easy to determine the ideal cash flow rate for a rental property. 

The recommended rental property cash flow is therefore any cash flow that you can generate from your property. 

Alongside other investment metrics like cap rate and cash on cash return, you can use cash flow to compare various real estate properties. 

How can investment property increase cash flow?

Aside from the weekly or monthly rental payments, you can also achieve cash flow positive through other revenue such as laundry facilities, vending machines, and other amenities you can provide to your tenants.

Some property investors even offer additional offers such as cleaning services or shared facilities like gyms or spas that can be accessed by tenants for a monthly rate. 

How do you find positive cash flow properties?

There are several indicators to determine if a rental property has the potential to provide you with positive cash flow.

For example, a property that is situated in a popular suburb will normally yield a positive cash flow. 

However, a property investment advisor can still help you explore other factors such as local market insights to make sure that the property you will buy will offer better cash flow.

Moreover, a professional investment advisor can help you work on your cash flow analysis so you can reduce the risk of losing your investment. 

Talk to a Property Investment Advisor Today 

TENX Wealth Australia has a team of investment advisors who can help you determine if a piece of property can help you access positive cash flow.