Ways to get positively geared properties
Positively geared properties are ones that will provide you with an income per
week as your expenses on the house are less than the cash you receive for
renting the house. Positive cash flow real estate is easier to find in certain
property conditions. It tends to go upwards in a see-saw action. Rents will rise
over time while properties experience a lower growth rate. As soon as the rental
amount passes the cost of mortgage repayments, the people renting see it far
better to buy a house than to rent. Then the property prices will rise rapidly
(a property boom). Once the boom is over and it’s now far more expensive to own
your own home, new people into the market will rent, and the rental prices will
slowly continue to rise, until the breaking point again. See the article on
Property Markets for a greater understanding.
Just before the breaking point is normally the best time to buy an investment
property as rental prices are just about covering the mortgage repayments if you
were to consider a 100% mortgage and it will only be a few years until the rents
start climbing once again. Just after a boom the rental prices are generally far
lower than the cost of the mortgage repayments and hence it’s harder to find a
positive geared property.
So why would we want to get a positive cash flow property. Well it gives you
money each month instead of taking it away. One thing to note with positively
geared properties is that they generally make a lower capital growth than
negatively geared properties.
Ways to get positive cash flows vary dependent upon the location of the property
and the how much money you have saved up. Some ways include
·
If it’s near a university you can rent it out to
students, normally 3 or 4 people paying a weekly rent that adds up to more than
you would get with just one person renting it. For example a house could be
rented for $300 per week normally, but if students were renting it you could
charge 4 students $100 per week.
·
Perform renovations. If the property only
normally attracts $300 a week, a new kitchen or manicured garden may attract
$320 per week.
·
More money into the loan. If you have some spare
cash it may good to put it in the loan hence reducing your weekly payments and
possibly switch it to a positively geared property.
·
If you are on the appropriate property you could
add a granny flat (separate smaller (normally one bedroom house) on the same
piece of land. This way you can collect two lots of rent for the one location.
·
Buy in a mining town. Please be wary of this
option. Mining towns offer positively geared properties for two reasons, there
is a shortage of accommodation and once the mine is shut down your property is
worthless. These properties generally have very low capital growth.
·
Furnish the property. If there is a need for
furnished properties, generally from people who first move out to your country
or new people into the housing market.
·
Short Stay accommodation is another option, where
people who only need a house for a few weeks to several months can rent your
fully furnished house out at a far higher rate than average.
Read more about cash flow property and how to find it.