This week’s tip is for those looking for cashflow positive property. As investors, we love cashflow. It helps us build our portfolio and increase our income.
There are a lot of terms related to cashflow positive, and we need to understand what it means and look for the net income of the particular property.
As a bit of a guide, if you’re an investor looking for a property to invest in, and you’re not sure where you should be buying, if you’re looking for a cashflow positive property, you can use the medium yield for that particular suburb. For example, if you’re looking for a property in Sydney, the medium yield for a house in Sydney or a unit in Sydney is 2.5%.
It probably means that by the time you allow for the borrowing costs and the annual properties expenses, that property is probably not going to be positive cashflow unless you’re putting a large deposit into it.
It really comes down to doing a calculation based on your finance structure.
Things to consider when looking for a cashflow positive property
Some investors will be using equity from a current property. So, when you understand the cashflows, it’s important not only to allow for the loan on the investment property but also the other 10% or 20% deposit you’re borrowing from the current equity of your current home or another property.
If you’re looking at a hundred percent financing, you need to make sure that you’ve taken two loans into account.
Quite often we hear about these high cashflow type properties. Very high, gross yield or gross rental income figures quoted.
Always just be very wary of that. It’s really the net income of the property, the net cashflow. What we need to do is have the gross income.
So essentially the rental income and then all the property expenses get to a net yield. There are a lot of great software programs around. Myself, I use a property investment analysis. It’s a very detailed seven-page report.
If you have any questions or would like assistance with your next property, feel free to book a time in my calendar by clicking here.
Regards,
Geoff Tomkins
Buyers Advocate
PH: 0404 852 781
