Property Investment Tips: What's a cash-flow positive property?

By the resi financial blog team, 30 June 2014

What is a cash flow positive property?

Getting your head around real estate jargon can be difficult at the best of times. Fortunately, there is a wealth of resources available to make property investment something that's familiar rather than in need of deciphering. 

For one thing, you'll probably want to know what the best fixed interest rates are before signing on the dotted line with a lender. Understanding the pros and cons of fixed, variable and split-rate loans is an important first step as a home buyer or investor.

While homeownership comes with its own benefits and challenges, investing in real estate can be a different kettle of fish entirely. 

There may be plenty of fish in the sea, but that doesn't mean they're all identical. The same goes for investment properties - some dwellings will reward you in years to come, while with others you might flounder.

What's a cash-flow positive property?

When buying an investment property, there are a few considerations that don't apply when taking out your first home loan.

When you're borrowing to invest, one chief consideration is whether to buy a cash-flow positive property or not. This essentially means the dwelling's rental income will outweigh its associated costs.

These costs will include loan repayments, as well as expenses and repair and maintenance costs. Cash-flow positive properties are also referred to as positively-geared properties.

Should I buy a cash-flow positive property?

If you're a sucker for certainty, a cash-flow positive property may suit you. You'll still need to find people to live in the property and ensure it remains tenanted, but knowing that your costs will be covered each month can offer a sense of relief. 

Perhaps you've started building your real estate portfolio, and you've got a property that isn't cash-flow positive. You can use the positive return from cash-flow positive properties to mitigate losses elsewhere - a plus when establishing your taxable income each year.

Some investors are less concerned with owning a cash-flow positive property and instead direct their attention to making a profit from capital growth. Have a chat with your lender to see what's right for you.

Categories: Property Investment