Positive Cash Flow

When income from an investment property exceeds outgoings (interest plus expenses), the property is said to have positive cash flow or to be positively geared. Positively geared properties are almost impossible to find in or near the capital cities and are now mostly confined to outback mining towns where the resources boom has caused a large influx of workers into those towns that have limited accomodation. Of course this causes a large demand for rental properties which has caused rents to go through the roof. There are risks however. These returns are totally dependant on the continuation of the resources boom and the continuing undersupply of residential property in that paticular town. The boom could continue, but a developer could come in and build 100 properties and overnight cut the rental demand by half !

We consider these properties to be a risky proposition. We believe that a house and land package in a city to be a far safer option, and given time, these properties will also become positively geared as rents increase. 

As advertised, many of our properties have positive cash flow. Whether a property is positive cash flow or not varies from investor to investor; i.e. the same property with the same rent will have different nett income implications for different investors.

Whether a property has positive cash flow or not depends on the following variables:

• Property price
• Size of loan
• Depreciation available
• Interest rate
• Investor’s marginal tax rate
• Other deductions

The best way to find out is to chat to one of our consultants who will quickly analyse your situation with our state of the art software.