Investment Property Cash Flow
Managing your cash flow when investing is a crucial step, there are many things
the first time investor forgets to take into account when calculating their cash
flow. Whether you have decided to go for a positively geared property or a
negatively geared property with high capital gains then you must know what you
need to have in order to keep them for the period that you want.
With positively geared properties you may think cash flow is not a concern. Some
considerations that need to be taken into account are interest rates and non
tenanted properties. If you are closely positively geared you need to ensure you
have sufficient funds to make up the difference if the interest rates cause the
property to be negatively geared.
If there are no tenants in the property for 2 months will you be able to hold
onto the property during this time. A buffer must be kept for all investment
properties to help through the bad times. They do come and you need to be able
to hold on to your property during these times. Remember that you don’t lose
money unless you sell your property.
Council Rates/Land taxes usually go up each year, and I am still not convinced
on their reasons why, besides giving them a bigger budget. You must make sure
you calculate this into your calculations. Normally rents will increase
sufficiently to counter this, but make sure you take note of it.