CashFlow Positive Property – 7 Reasons That You MUST Consider Investing In CashFlow Positive Property
CashFlow positive property, it is one of the most untapped investment strategies available to you and it is also one of the best investment strategies out there. This article is going to outline the 7 reasons you absolutely must consider investing in cashflow positive property.
WARNING: Don’t read this article unless you want to have your investment ideals turned upside down. Don’t read this article unless you want to radically transform your life and increase your passive income so much that you will be able to quit your job.
What Is CashFlow Positive Property?
What would you rather own
A) A property that cost you $100/week out of your pocket. (That is money you can’t spend on food, clothes, the movies, travel or any fun stuff)
B) A property that pays you $100/week into your pocket on top of your wage. (That is $100/week on top of you wage that you can spend on anything you want…clothes, nights out, presents for friends, take away, a new iPod…and the list goes on)
CashFlow positive property is the second one, it is property that pays you for owning it, not property that you have to pay to own. It is also known as positive geared property or positive cash flow property. They all generally mean the same thing. Property that pays you bucks!
Does It Still Exist And If So Then Where?
There have been a lot of critics, magazines and investors out there who have stated quite adamantly that positive cash flow properties just don’t exist anymore. I want to tell you right now this is complete rubbish, they just don’t know where to look or (more importantly) how to look for them.
These people are ignorant and haven’t put time into educating themselves how to find these properties and why they should look for them (like you are now).
I can find houses with 11%+ rental returns, blocks of units with 13%+ returns, houses in capital cities with 8%+ returns and commercial property that pays. It is out there. For more information on where to find these properties get my free eBook by going to the free eBook page
Why MUST I Seriously Consider Investing In CashFlow Positive Property?
There are 7 main reasons that investing in positive cash flow property can be an extremely good idea for you. I encourage you to read through the below list and think about how each of these items applies to your individual circumstances.
Everyones situation is different so everyone will need to respond differently. If any of these 7 reasons appeals to you I propose that you begin expanding your investment knowledge by reading one of the top ten books on positive cash flow property investing. Start looking into positive cash flow investing and start looking for the properties that pay you to own them, not the ones you have to pay to own.
1. It Generates You Passive Income
Passive income is income that you don’t have to work for, and it is income that you can retire and live off. Cashflow positive property can generate you passive income from day one.
Because the income from the property is greater than all the expenses you can begin using this money for a number of things. You could pay off your loan quicker, you could use the money to reinvest or you could use the money to live off and cut down on the money you require from your regular job.
2. Your Income Increases Over Time
Do you think that petrol is ever going to become less than $1.00/Litre again? I bet you said no to that question. We wish it would go down to less than $1.00 but the reality is that it isn’t going to happen.
It is the same with rents. Do you think rents are going to go down in the next 10 years? It is extremely unlikely.
When you invest in positively geared property you income can increase over time. This is because your income source (the rents) increase over time but your major expenses (you mortgage) stays relatively the same. The more rents go up the more cash you can put into your pocket each month.
Eventually the property can pay itself off until you own it outright and then you are free to pocket even more money as you won’t be servicing a mortgage.
3. You Can Afford To Service Unlimited Amounts Of Property
Let me ask you another 2 questions:
a) How many properties could you afford to own if each property cost you $1,000/ month?
Unless you are earning a great deal of money ($200,000/year plus) then the answer is “not many”.
b) How many properties could you afford to own if they PAID you $1,000/month?
Even if you are on minimum wage the answer would still be the same…”as many as you can get you hands on!”
If the property pays for itself then you can afford to service more loans which means you won’t have a cashflow problem and it also means you won’t (bearing a disaster) struggle to make your mortgage payments.
Technically speaking you will be able to afford unlimited amounts of property, assuming that they all paid for themselves. The more properties you buy the more money you can make.
4. You Can Get Great Capital Gains
Just because a property is positively cash flowed doesn’t mean that you have to sacrifice capital gains. You can have your cake and eat it too!
Many investors who encourage negative gearing will tell you that if you purchase positive cash flow property you are going to lose out because you will miss out on capital gains. But this is not true. If you buy a decent property in a good and growing area then you can still achieve positive cash flow and capital gains.
Also you have the advantage of being able to afford more properties (see point #3) and thus you will attract capital gains on more properties. You may only be able to purchase 2 properties by negatively gearing, but positive gearing might allow you to afford 20 properties. Even if the capital gains on 20 properties is small (say 4%) then you are still going to get more capital gains than if your 2 negatively geared properties outperform the market and earn 20% capital growth.*
*Assuming all properties are the same price ($300,000) then 20 properties increasing at 4% per year would give you at $240,000 gain in the first year. If you owned 2 properties increasing at 20% then you would achieve a $120,000 gain in the first year. That isn’t even taking into account the money that goes into your pocket from your properties being positive cash flowed and the return on investment that would bring you over time.
5. You Are Lowering Your Risk
If you invest using a negative gearing strategy then you have only one way of making money, the property must go up in value. If the property doesn’t increase in value at a rate higher than what you are paying in expenses then you will run at a loss.
Cashflow positive property has the opportunity to give you a lower risk investment because it has 2 ways of making money instead of just one. You can make money from the rental income (being more than your expenses) and you can make money if the property increases in value.
So even if the property goes up in value slower than you had hoped you don’t have to stress so much you can’t sleep at night, because you can rest assured that you are still making some money.
This changes from property to property, but if you choose wisely then you will be less reliant on market price fluctuations in turning a profit.
6. If You Are A Low Income Earner You Can Afford To Invest And Grow Your Portfolio
Negative geared property investing is the domain of the high income earner. The tax breaks you gain from the government encourages high income earners to invest using this strategy. However, looking only at this strategy, low income earners are left in the lurch. They don’t pay a lot of tax to offset their losses against and they can’t afford the expensive monthly payments.
Property that is cashflow positive offers a great alternative investment strategy for low income earners. Because they don’t have a lot of dispensable income they can instead allow the properties to pay for themselves and give them the money that is left over.
This allows low income earners to not only afford to service property loans, but it allows them to expand their portfolio and increase their income in the process.
7. You Could Become Financially Free And Quit Your Job
This is where cashflow positive property becomes really exciting. It provides you with a tangible and simple to understand way of becoming financially free and being able to quit your job.
With each cash positive property you buy you are increasing your passive income. With each passing year and increases in rents you are also increasing your passive income. If you own enough properties or give it enough time then you can generate enough passive income to support your lifestyle.
You will then be free to work where you want and when you want, you will also be free to not have to work if you don’t have to. You will have a great solid financial foundation to live out your life the way you want and to continue to increase your income through investing (if that is what you decide to do)
So Where Do I Begin?
If you think this sounds pretty good then you would be 100% right, if you think it is too good to be true then let me share with you some of the downfalls…
Cashflow positive property is notoriously hard to find, you can’t Google “cashflow positive property” and expect to see one for sale. Sometimes it needs to be created and most properties just dont fit the bill for positive cash flow. It is hard work to get these properties, but once you get them they will continue to pay you for the rest of your life (unless there is some financial disaster or extremely unfortunate circumstances). For more information on where positive cash flow properties are located read my blog post on the 10 Places You Can Find Positive Geared Property For Sale.
To get started you should begin learning more about property by reading books and by searching for property and doing the financial figures on their cash flow. You can use our property calculators if you need help in your calculations.
Begin making offers on properties and getting used to the market. Get confident and get preapproval from your bank if you are ready to start investing. Start saving a deposit and start getting ready financially so that when the right deal comes along you can jump on it without hesitation.