- Mortgage Repayments
- Land Taxes or Rates
- Utilities
- Building / Landlord Insurance
- Home Maintenance
- Vacancy
- Management Fees / Advertising Fees and Petrol if you are managing yourself
Click here to
determine how positive cash flow properties are calculated for Australia here at
the Property Domain.
It is good to determine how much these cost for each property, as different states
and countries have drastically different land rates/taxes and utility charges. For
example in the United States (US) land taxes are also used to fund schools and other
surrounding public facilities, in Australia schools are funded by State and Federal
governments from GST and income tax and hence the land rates / taxes are far cheaper.
The income is the rent you would receive for the property. You can actually have
two types of positive cash flow houses, one of them being a cash positive, and the
other being a paper positive property. By paper positive I am referring to, it may
take away more cash than it receives, but added with tax benefits may end up leaving
you better off than before.
Where To Find Positive Cash Flow Property
1. Economic Cycles. While this is more of a when in time, the location
on positively geared property changes with economic cycles. A property boom starts
from the city center and spans outwards into the rural areas. While a boom is happening,
positively geared properties are hard to come by. Look in the outer suburbs or rural
depending on how long the boom has being going for.
2. Automated Services. Property Domain offers a search that detects
where all the positively geared properties are. Give it a try now,
click here.
3. Professional Services. Buyers Agents are professionals that
know their area and try to find and negotiate property for buyers.
4. Mining Towns are specifically created to house the workers of
the mine. Because there is little prospect of gaining value on the house, they are
always rented out as positively geared. If they are not, then someone didn't do
their homework. Be careful of these properties as if the mine goes bust and closes,
you will be stuck with a house no one wants to buy and a mortgage to be paid.
5. Renting Out Rooms. If the property is close to a university
or CBD then you could rent out each individual room and collect more rent than you
would renting out the whole house.
6. Offering Less. If a house is negatively geared at its asking
price, what would it take to make it positive cash flow. Make an offer at that price.
All they can say is no.
7. Withdraw on Equity You will need to make sure the numbers add
up and take into account capital growth and increase rental costs, but if you purchased
a property below its value, then you could redraw equity on the house to cover expenses
while the rental income is increasing.
How To Use Positively Cash Flow Property In Your Portfolio
Positively geared property is essential in any property portfolio. While positively
geared property generally doesn't have great long term growth, it provides the cash
flow to ensure you can keep the costs of your negatively geared high growth property.
Depending on what strategy you choose to implement, the most common goal of property
investment is to have a property in many years or decades time that is worth a lot
of money. You could choose to have many positive cash flow properties to support
your living, it depends on whether you want cash flow for just existing or wealth
for living.
The ratio on positive cash flow (or at least positively geared) property to negatively
geared property can change depending on how much the negatively geared property
costs you each month to maintain and how much the positively geared property generates
each week. The general ratio to be applied is 4 positive cash flow to 1 negatively
geared. Of course if you have other sources of cash flow you want to use for keeping
the negatively geared property then this ratio may change.
Conclusion
Well when all said and done there is only one way to become wealthy via property
and that is to act. The sooner you get into the game the sooner you become wealthier.
Is your first property deal going to be great, probably not, mine wasn't, but the
fact you get into the game and start learning means you are now closer to your end
goal.
Remember to try out the Positive Cash Flow tools of
the Property Domain.
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