Finding a positive cash flow property is generally no quick process, but it’s one that’s worth investing time in. There’re properties that will deliver profits each month; the trick is knowing where to find one.
Like with many real estate transactions, industry experts have differing opinions, however there are some factors that seem to be agreed on across the board.
Understand the numbers: If your monthly repayment on a $600,000 loan is $2,750 and your rental income is $3,000, that means you’ll have $3,000 excess cash across a 12-month period right? Unfortunately, this isn’t necessarily the case. Paul Leydin, Director at Noel Jones Blackburn says, ‘it’s imperative that you take into account all outgoings you may have on the property, including owners corporation fees, landlord insurance, rates, repairs and maintenance, payment of a rental manager and a contingency for vacancies.’ Suddenly your positive cash flow property looks like it might cost you money each year. If that’s the case, keep searching.
How can you increase the rental yield: Sometimes you need to think outside the box. Does the apartment you purchased come with 2 car spaces? Why not rent one out within the complex and generate additional income. Does the house you’re considering purchasing have a large backyard? Consider subdividing the block and selling it to reduce your outgoings, making it a positive cash flow property. Is there a self-contained unit on the property, offering potential of a second rental income? Check council laws and see if this is feasible in the suburb you’re considering.
Buy a fixer upper: Run down properties often offer a reasonable discount because most buyers don’t want to undertake a substantial renovation. If you’ve the time and skill to do some renovating, this could be a great option. If you can purchase the property cheaply, and stick to a reasonable renovation budget, you can create equity and positive cash flow. Again, make sure you’re on-top of the numbers.
Where to look: There’s no hard and fast rule however Paul suggests lower cost suburbs and regional locations will offer more choice in the way of positive cash flow properties. His advice is ‘do your homework on the location, get a professional rental assessment on the property and then calculate your likely yield’.
Finding the right property might take time, but the excess income each month will make the wait worth it in the end. Reach out to one of our expert consultants across the Noel Jones network to help assist with your property search.