Getting the right property is critical to setting yourself up for success in property investment. One of the strategies used by investors are to acquire cashflow positive properties. But what are they? Where can we find positive cashflow properties?
What is a Positive CashFlow Property?
A positive cashflow property (cashflow positive property) is an investment property where the returns (typically rental returns) are more than the expenses for the property.
How do you know if a property is Positive Cashflow?
Very simply, a Positive Cashflow Property means:
Positive Cashflow: Total Income > Total Expenses
A property is considered positive cashflow when your returns from the property are more than your outgoings for the property. But there are no definitive answers to this question. As every individual's circumstance and every property characteristics are different.
What Expenses are considered in a Cashflow calculation?
Remember, each property is different, but broadly as an investor, these can be considered your expenses for the property:
Mortgage costs, including interests, fees, etc
Property maintenance costs
Property management fees
Property listing and marketing costs
Landlord insurance
Property insurance
Council Rates
Body Corporate Fees (Strata Fees)
etc
What Income is considered in a Cashflow calculation?
In a typical rental investment property, only the rent collected is considered your income. If the property is eligible for any special grants, subsidies or rebates, these can also be considered as income, but note that these special rebates, etc, are likely only once-off income.
The more you can improve the property to increase the rent, the better the rental returns will be.
Where can you find a Cashflow Positive Property?
They can be everywhere and anywhere. But because everyone wants one, you have to be diligent, fast, and decisive.
To locate a positive cashflow property, you will need to know the area well, and review each and every property you come across, the instant they are available.
With thousands of listings being added, you literally need to be online almost 24 hours a day, and you must be experienced to know a good deal when you see one.
What else can you do to find a Cashflow Positive Property?
Consider engaging the services of a buyers advocates. We are informed of new listed properties the moment they are available. We also have access to off market properties which aren't listed anywhere.
Why do sales agents prefer to work with buyers advocates?
Sales agents almost always prefer to work with buyer's advocates as buying with a buyers advocates are easier to work with.
Buyers Advocates are usually self sufficient
Buyers Advocates know the area well
Buyers from good Buyers Advocates are properly qualified, finance ready and ready to make an offer
Buyers Advocates have realistic expectations
Buyers Advocates are not time wasters
As such, sales agents tend to keep buyers advocates in the loop with off-market properties, as it is a lot easier to sell.
This is also why offers and representations from buyers advocates are considered favourably and more seriously. This explains why buyers who buys their properties through a buyer's agents have a much higher success rate.
Your next steps to securing a cashflow positive property.
Other than outsourcing the acquisition to a buyer's advocate, there are no short cuts to finding a positive cashflow property:
Diligence
Review
Know a deal when you see one
Buy
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