If you search on the internet, it's not difficult to find out what some are saying in relation to positive cashflow properties and the way it is being interpreted.
If you check on Google you will discover various interesting definitions and explanations about this term.
This is due to the fact that a lot of people are trying to present their viewpoints of properties that are really not up to the standard that will qualify them as properties that have positive cash flows.
What are the recognised benchmarks for positive cashflow properties?
Basically, after the property has been financed at 105% (to take care of purchase costs) and you have calculated the incoming cash flow as well as the expenditures (taxes included) you should still have extra cash at hand.
You may read statements which claim that it depends on the level of returns that you need before it can be called positive cashflow property.
Others say it is determined by your income, tax bracket and the amount of debt that you are comfortable with.
Although a few of these factors can influence your investment in real estate. However, it is assumed that people who want to invest in property are gainfully employed and they have a steady income.
Having a source of income is necessary because, it is a requirement for getting loans from a bank to fund your purchase. It also follows that the individual pays taxes regularly (although there can be exceptions).
And they kind've know what level of additional debt they're going to be comfortable with when they buy an investment property
Some people may try to suggest that all you have to do to get the positive cashflow properties that you want is to put down a 10% or sometimes a 20% deposit.
These statements are simply not true.
To shed more light on the subject, if you have regular employment with an annual salary of about $50,000 (it may be a lower or a higher amount) and you can fulfill other requirements for getting a loan from a bank for investing in property in the range of $320,000 to $450,000, you should be able to find and acquire property that will have a positive cash flow in a good location.
Do not forget that the yardstick for positive cashflow properties is the ability to finance 105% of the price for purchasing the property. Additionally, after you have calculated the taxes and all the expenses, you should still have some money left over in your hand.
There should be no if's or but's about this process because within reasonable expectations, these are the benchmarks for a property that is positively cash flowed. It is advisable for you to adopt this principle to be sure that your strategy will not leave you short of money once you have done your sums.
In the past you may recall having seen ads on TV or hearing them on the radio about investment properties you could own and all it was going to cost you was a pitifully low $40, $50 or $60 a week out of your pocket.
This out of pocket expenditure is usually called the holding cost which is just a name for extra expenditure. This cost you continually pay until you experience one or two events that will transform your investment in real estate from having a negative cash flow to becoming positively cash flowed.
The first dynamics is a situation where the level of your rent income increases to a point where it covers all the expenses that are made. The second one is where you pay the balance of the investment property loan to the point where the interest cost is reduced to a very low level whereby it doesn't consume all of your incoming cash flow.
In today's Australian property market that has an acute shortage of housing and a lot of areas that have very low rates of rental vacancy with increasing rents, there should not be any reason for you not to be able to find secure, affordable and profitable positive cashflow properties.
Of course, many past investors will find this concept really strange because they have been used to paying what is known as a weekly holding cost to keep up the investment property purchases that they made.
Although, as time goes on, the capital growth they would have received will be able to compensate them for the modest contributions they have been making every week.
However, in today's market, unless you need the tax loss, it would almost be financially foolish not to do your research and find an investment property that you could purchase and finance to the tune of 105% of the purchase price and still have it nicely positively cash flowed.
If you check on Google you will discover various interesting definitions and explanations about this term.
This is due to the fact that a lot of people are trying to present their viewpoints of properties that are really not up to the standard that will qualify them as properties that have positive cash flows.
What are the recognised benchmarks for positive cashflow properties?
Basically, after the property has been financed at 105% (to take care of purchase costs) and you have calculated the incoming cash flow as well as the expenditures (taxes included) you should still have extra cash at hand.
You may read statements which claim that it depends on the level of returns that you need before it can be called positive cashflow property.
Others say it is determined by your income, tax bracket and the amount of debt that you are comfortable with.
Although a few of these factors can influence your investment in real estate. However, it is assumed that people who want to invest in property are gainfully employed and they have a steady income.
Having a source of income is necessary because, it is a requirement for getting loans from a bank to fund your purchase. It also follows that the individual pays taxes regularly (although there can be exceptions).
And they kind've know what level of additional debt they're going to be comfortable with when they buy an investment property
Some people may try to suggest that all you have to do to get the positive cashflow properties that you want is to put down a 10% or sometimes a 20% deposit.
These statements are simply not true.
To shed more light on the subject, if you have regular employment with an annual salary of about $50,000 (it may be a lower or a higher amount) and you can fulfill other requirements for getting a loan from a bank for investing in property in the range of $320,000 to $450,000, you should be able to find and acquire property that will have a positive cash flow in a good location.
Do not forget that the yardstick for positive cashflow properties is the ability to finance 105% of the price for purchasing the property. Additionally, after you have calculated the taxes and all the expenses, you should still have some money left over in your hand.
There should be no if's or but's about this process because within reasonable expectations, these are the benchmarks for a property that is positively cash flowed. It is advisable for you to adopt this principle to be sure that your strategy will not leave you short of money once you have done your sums.
In the past you may recall having seen ads on TV or hearing them on the radio about investment properties you could own and all it was going to cost you was a pitifully low $40, $50 or $60 a week out of your pocket.
This out of pocket expenditure is usually called the holding cost which is just a name for extra expenditure. This cost you continually pay until you experience one or two events that will transform your investment in real estate from having a negative cash flow to becoming positively cash flowed.
The first dynamics is a situation where the level of your rent income increases to a point where it covers all the expenses that are made. The second one is where you pay the balance of the investment property loan to the point where the interest cost is reduced to a very low level whereby it doesn't consume all of your incoming cash flow.
In today's Australian property market that has an acute shortage of housing and a lot of areas that have very low rates of rental vacancy with increasing rents, there should not be any reason for you not to be able to find secure, affordable and profitable positive cashflow properties.
Of course, many past investors will find this concept really strange because they have been used to paying what is known as a weekly holding cost to keep up the investment property purchases that they made.
Although, as time goes on, the capital growth they would have received will be able to compensate them for the modest contributions they have been making every week.
However, in today's market, unless you need the tax loss, it would almost be financially foolish not to do your research and find an investment property that you could purchase and finance to the tune of 105% of the purchase price and still have it nicely positively cash flowed.
About the Author:
Dave Fleming has been a positive cashflow property devotee for over 15 years. His outstanding free mini-course on Positive Cashflow Properties is available for a limited time. Also, be sure to check out other vital information on his NrasQld online home page.
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