There is always a consistent struggle with investors seeking a balance between growth and cash-flow from their investments.
Ultimately the ability to continually purchase properties will be based on the amount of debt you are able to service with your combined cash-flow from your Salary, businesses and investments. As property investors this is where ensuring your portfolio is balanced with positive cash-flow properties is beneficial.
After the so-called global financial crisis and the battering shares and managed funds received, some investors are turning to property to provide an investment portfolio to not only keep pace with inflation, but also provide cash flows into retirement.
As we have discussed in previous articles, property is the choice of many investors due to its tangibility and its performance over time.
Buying negatively-geared property places importance on the capital gain where the gain will be greater than the shortfall you need to kick in from your cash-flow to support the property.
Positive Cash Flow means that after all expenses, entitlements and deductions your property doesn’t require any extra help to meet its expenses from your cash funds.
The key to finding positive cash flow properties is research.
Recent research produced by RP Data indicated the top yields are generally found in mining and resource-intensive areas.
Resource-rich mining towns, like Gladstone and Mount Isa account for 29 per cent of the cash-flow positive suburbs in Australia while inner-city properties captured just 16 per cent and were only found in Darwin, Canberra and Sydney.
Here are a few tips that will help you in working towards achieving positive or increased cash-flow from your properties.
How much rent can you charge?
The rent charged will vary based on the area and the dwelling. Are you keeping up with the market rent, many investors keep their rents below market value for fear of losing a tenant. This can cost not only in lost rent but also in the price you can achieve if you ever want to sell.
If the property manager says to make the rent a round number eg $280 per week I always have my rents end in $5 eg $285 as in the tenants eyes still see it in the same bracket so we may as well squeeze that extra $5 each week.
Always remember that on all your properties (even your negatively geared capital growth ones) your cash-flow will always grow over time. If you plan on owning a property for 7 – 15 years so you are able to ride a number of property cycles the starting return on the investment upon buying the property is the lowest it will ever be.
Many investors reject a property because it is a few % below where they want it to be. Your vision on assessing the property should be over time. Imagine the outcome if you can get your rents up in the first year or two and enjoy positive cash-flow for the majority of the time you own the property rather than just based on the initial numbers crunched upon considering a purchase.
Outside the box.
Recently a client purchased a property for $279K the market rent on the property was $295 per week, by putting a $5K furniture package in the property the rent has jumped up to $350 per week and they have full depreciation on the furniture. Just on cash alone that’s a 57% return on the $5K investment into the furniture package. To make it easier the property manager shopped purchased and installed the furniture for the investor who lived interstate.
To ensure you find the best prices on investment property, it is best to seek property investment advice from experienced professionals like We Find Houses. We offer customers a personalised property investment service, which is tailored to meet your property investment goals.
You can manufacture positive cash-flow by being creative with your properties. In the past month we have helped clients buy properties that had potential to significantly increase their rental income by making a few changes that increased the rental return without over capitalizing on the project. If you would like more information about this call me direct at We Find Houses on 1800 600 890.
Many investors rip themselves off from legitimate entitlements due to bad advice, or lack of knowledge. Even older properties have an important component of depreciation that can impact on your bottom line. To learn more about this call our office and we will send you out a depreciation kit that also comes with discounts for our clients.
For more information about We Find Houses simply call Paul Wilson on 1800 600 890.