What is a positive cashflow investment property and is it worth seeking out?
Simply put, a positive cashflow investment property means that the income received from the investment from rent outweighs all expenses associated with the ongoing cost of the property. So the rent received from the property is more than all costs, such as agency fees, strata or body corporate, if it’s an apartment, council and utilities if it’s a house, mortgage repayments and repairs or maintenance of the property.
However, in this era of historically low interest rates, it’s relatively easy to find positive cashflow properties, so does that mean that these are good investments?
Not necessarily. A good investment is one that will have strong capital growth in the first 3-5 years and attracts quality tenants right from the beginning.
If a property does well in the first 3-5 years, the investor doesn’t need to be too concerned about changes to capital growth, price or rental income fluctuations after that initial boon.
The reason is because, if you get it right, a third of your investment profits of a 20 year investment horizon, will be made in the first 5 years. Which means you can ride the capital growth wave forevermore, knowing that you will never experience price, growth or income below your initial investment.
So despite the fact that interest rates are at an historic low, it is critical that the criteria for assessing a good property investment isn’t lost just because a purchase might be cashflow positive. The key assessment criteria, the macro and micro drivers of growth, are as important as they’ve always been.
If you want to ‘get it right’ right from the beginning, call the experts in property – Calla Property. Susan and her team will take the time required to explain how you make money through property investment, the best suburbs to invest in and the best properties. This could be one of the most important decisions of your life, so for an obligation free consultation, call 02 9016 2852.