Top 10 Places To Find Positive Geared Property For Sale
This post will show you how you can find positive geared property for sale all over Australia. When it comes to investing in positive geared property the hardest thing tends to be finding the properties that will generate you a positive cash flow.
If you can find the properties then your job as an investor is half done. This list of 10 places where you can find positively geared properties will help you narrow your search and focus on the properties and areas more likely to generate you a positive cash flow.
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It took me years and hundreds of hours of trawling the real estate sites on the web to discover where positive cash flow properties were hiding. I assure you that they DO exist and that you can find them all over Australia.
Before You Start Your Search
Before you start searching for positive cash flow properties it is really important that you know how to identify a positive cash flow property.
To know if a property is going to be positive cash flow you need to calculate the annual rental income and subtract all the expenses (mortgage, maintenance, management, council rates etc.)
Property Tools allows you to estimate the cash flow of any property in seconds. Simply input the purchase price and rental income to get an estimate. Then you can go into more detail on each expense item to get a more accurate result.
Property Tools is hands down the easiest way to calculate positive cash flow properties. Learn more about properties tools.
The first thing I did before even looking for properties was read about how the successful investors had already done it. Mimicking someone else’s success and learning from their mistakes is easier than doing it yourself (and you can get rich quicker too). Have a look at my list of the Top Positive Cash Flow Property Books.
The below list is not a conclusive guide, but it will give you some ideas of where you should start looking. If you want more information on where to find positive geared properties then I suggest you sign up for our daily email tips.
NOTE: This is NOT a list of 10 suburbs where you can find positively cash flowed properties. I strongly believe in the “teach a man to fish” mantra. I want to teach you how to find them yourself. Rather than show you a suburb that may or may not produce a positive cash flow.
Below is a list of 10 places where you can find positive geared property for sale all over Australia.
1. In Rural Town Centres (Regional Centres)
Rural town centres can be a great place to located positively geared property. As the towns are smaller the prices of property are generally a lot less expensive than a major city, and the rents can be quite high. I know of a town centre in NSW with just under 10,000 people and you can get over 11% rental yields (on the purchase price).
Research your particular town before buying. Look at the employment in the town, is it spread over different employment sectors, are there high employment rates and is the population growing? More jobs means more people which in turn means higher rent and housing prices. So you will probably want a town with a strong economy.
Note: Most lenders will lend you money to invest in regional centres. However, if the population of the town is under around 10,000 people then most lenders will only lend you 80%. Just be aware of this when looking to invest.
2. In Blocks Of Units
Funnily enough there are some blocks of units that exist that haven’t been strata titled. Strata titling is where they turn each unit into an individual property that you can sell. However, if you can find a block of units that isn’t strata titled (that means the whole block is under one title) then you can often achieve very high rental yields.
You won’t have to pay your strata fees (which will suck the cash flow out of almost any positively geared property) and buying a whole block of units can minimise your risk. If you own one house then if that house becomes empty then your income goes to $0! But if you own a block of 10 units and one unit becomes empty, you still have the other 9 units bringing in income.
A lot of lenders will treat a block of units similar to a commercial property. This means you will require a 30% down payment (if you have less you can often give a smaller down payment but it will incur lender’s mortgage insurance). But blocks of units can be great with the lenders because the lenders will judge the serviceability NOT on your own income, but on the income of the properties.
3. In The Inner City
Believe it or not but the inner city can often generate high rental yields. I am not personally extremely interested in this area as it does seem to be quite expensive, but there is high demand and thus your risk of vacancy is often low. You also have the security of buying in a large city, so prices are less likely to fluctuate and you can often achieve good capital growth.
It seems that 1 bedroom units and studio apartments usually generate a higher rental yield than 2-3 bedroom apartments. Also in the inner city you can rent out a property by the room. Generally you will rent out a property buy the room that includes utilities (water, electricity, gas). This can help you achieve more rent, but it does create more management that needs to be done.
Most people who rent out properties by the room self manage their properties. But there may be some rental managers out there who are willing to manage this kind of arrangement for you. It doesn’t hurt to ask.
4. In Car Parks
Did you know that you can get a rental income for a car spot? Well it’s true. You can rent out car spots and you can generate a passive income from them. You could purchase a car spot or garage in the city or near a popular train station and rent it out for an income. Often large car parks will sell their spots to surrounding businesses and investors.
A friend of mine owned a unit and garage in a waterfront unit block. The property above his came up for sale and he bought it. He then sold his old property in the block WITHOUT the garage. This meant that he now owned two garages. Obviously the sale price was lower than if he would have sold it with the garage but he didn’t mind because he wanted a place to store his cars. He could then rent out one of the spots if he wanted to and generate a passive income.
Always look into the fees for this type of property. Some car parks have large fees and some councils will charge you excessive amounts of money per quarter/year for owning and renting out a car spot. So do all your calculations before investing.
Also, look at the resale value. Will you be able to resell this car spot easily or will it take time?
Also make sure to buy in an area where people desire a designated car space. You could buy a car space in the suburbs but who would want it? Make sure there is a demand for your car space or garage before buying.
5. In Commercial Real Estate
Commercial real estate (generally speaking) can generate a higher yield that residential properties. The higher rental yield, mixed with the fact that the renter pays for all renovations and often also pays for rates means that the property is more likely to be cash flow positive.
Commercial real estate can be quite different to residential real estate, so don’t assume they are one and the same. Generally speaking lenders will only lend up to 70% of the value of the property meaning you have to come up with more money. You are also dealing with different rental managers and different lease agreements. As with all investing good advisors are important and building experience over time by starting small and working your way up towards bigger deals can reduce your risk significantly.
6. In Cheaper Properties
Cheaper properties can often have higher rental yields than more expensive properties. This is because the rent you can demand for a cheaper property can be higher compared to the market than the price you can demand for the property compared to the market.
However, this does not mean that cheaper properties are a good or bad investment. There are a few risks you should be aware of. Firstly, cheaper properties tend to be in bad shape. This can mean more money that needs to be spent in renovations and maintenance to keep them (or get them) up to livable standards. Cheaper properties may also attract less desirable tenants who will not treat the property well (more money for maintenance) and who may not make their rental payments promptly (if at all).
Always do your research before buying cheaper properties, or properties in cheaper areas. Look into the demographics and the people who are likely to rent your property. Make sure it is a wise investment. Remember, just because a property is positive cash flow on paper doesn’t always mean it is a good investment in real life.
7. In Popular Suburbs
Positive cash flow properties even exist in popular suburbs. Recently I looked at two properties that could have turned a positive cash flow for me and they were located in south east Sydney. That’s right! In a capital city!!! These weren’t in cheap crime ridden suburbs either, these were in nice expensive suburbs. To give you an idea of the price, on house was on the market for around $640,000 for 4 bedrooms and another house was on the market for $780,000 with 4 bedrooms and a granny flat.
There is positive geared property for sale all over Sydney and all over Australia. However, if you are buying in a popular suburb you will almost always have to CREATE your positive cash flow. It will not happen automatically.
These properties that I mentioned were not positive cash flow as is, but they had the potential to be positive cash flowed. How? By creating dual occupancies.
See a 4-bedroom house will only fetch so much money. There is only so much one family is willing to pay for one house. However, if you split that 4 bedroom house into 2 x 1 bedroom flats and 1 x 2 bedroom flat then your rental yield can increase significantly. This is because by renting the house out as different complete units you can achieve higher rent overall.
One family might be willing to pay $800/week for a house. But people might be willing to pay $300/week for a 1 bedroom unit and $450/week for a 2 bedroom unit. This means you can increase your rental from $800/week to $1050/week and generate a positive cash flow.
Create dual occupancy generally needs to be approved by the local council or other governing bodies. So always get professional advice when doing this.
8. In Smaller Country Towns
You can quite easily generate positive cash flows in smaller country towns. Rental returns can be even higher than regional centres. However, as the population will be less, the rental demand will also be less.
This means it could be difficult to rent out your property. To pull this off you will likely need a very good rental manager and you will need a property that is exactly what the market wants. This might be a 3 bedroom house, or a 4 bedroom house, or a double brick home with a garage. Every town is different so find out the exact property renters tend to want in that town and try to buy that. This means you will have a larger market of people you can rent to.
Also, lenders tend to err on the side of caution with small towns. Prices fluctuate a lot more and it can take a long time to sell you home (sometimes 12 months plus!). Many lenders will simply say no and the rest will probably only lend you 70-80% of the value of the property. Speak to a mortgage broker for a better idea on what you can achieve in terms of lending. You could try Mortgage Choice or Other Lending Institution. I have personally used mortgage choice in the past and they are very good. If you want to do your own research then sites like ComparisonSiteA and iSelect can be helpful.
If you can do small towns well and you know how to research an area and buy the right property then you can make a killing in this market. There also tends to be less competition and houses stay on the market longer which means you have more time to negotiate and settle of favourable terms.
9. In Run Down Properties
Run down properties can often be bought at a large discount (in comparison to the rest of the market) because most buyers don’t want dilapidated houses. They want a house they can live in right away. This offers you an opportunity if you are willing to get your hands a bit dirty and do some renovating.
If you can manage to buy a property for cheap, and you can keep to a reasonable budget when renovating you can create both equity and positive cash flow. For example, you might buy a house that needs work for $200,000. You spend $25,000 on renovations and get the house revalued for $300,000 with your lender. You now have $75,000 in equity.
Also because you only spent $225,000 (instead of $300,000 which is the market value) your rental yield is likely to be higher compared to your purchase price. Giving you a better chance of achieving a positive cash flow.
If you are really interested in renovations then I suggest you check out Sarah Beeny’s book The Renovator’s Bible: Property Ladder. This lady is a genius and her books is full of helpful tips and suggestions. She is from the UK, so keep that in mind when reading.
10. Anywhere In Australia (or any other country)
Almost any property in Australia can be turned into a positive cash flow property by using owner finance. Owner finance is when you sell your home and instead of taking cash (while the buyer gets a loan withe the bank) the buyer assumes a loan with you.
For example (a simple example) you could buy a property for $300,000 (assuming an 80% loan with the bank of $240,000 at 7%) and it only rents for $250/week…making the property negatively geared. You then go and sell this property with owner financing and you sell it for $330,000. You receive a $10,000 deposit plus the first home buyers grant (so a total of $17,000) and you charge the new owner 9% on the remaining $313,000. You just went from a negative cash flow to a positive cash flow of…….
Owner finance is legal and it is done all over the world. It is becoming increasingly common in Australia and it is a great way to turn any property into a positive cash flow that you can take to the bank. The new owner pays you a mortgage and they pay for all the maintenance, insurance and council rates. This means your expenses are minimal.
If you are having a property that is draining your cash flow then why not instantly turn it into a positive cash flow machine that funds your lifestyle? This is a post in and of itself and will take too long to explain in full here. If you want to learn more go to my post How To Create A Positive Cash Flow By Using Owner Finance.
NOTE: There are some laws relating to the issuing of credit that does effect owner financing. See an accountant for professional advice.
Anyone Can Generate A Positive Cash Flow If There Are Willing To Put In The Effort
Generating a positive cash flow is easy if you are willing to put in the effort. If you do your research and choose your property wisely before you purchase then generating a positive cash flow will be extremely easy for you.
The hardest part will be in the beginning when you are just starting out. Finding the properties will be hard and investing in them will be nerve racking. Start small so that you can afford to make mistakes. Learn on the small deals before moving up to the bigger deals.
You can find and invest in positive cash flow property and you can achieve financial freedom by doing this. You just have to be willing to put in some work and be willing to learn on the job. You will never know enough to invest before you start, because the only way to learn is by doing. So start doing. If you need encouragement join our facebook group and talk to like-minded people.
Here Are 5 Actions You Should Take Today So You Can Become A Successful Property Investor
1. Do the figures on the properties you look at. Are they going to generate a positive cash flow? Will they cost you money each month? How quickly can you get your money back from these properties? To estimate the cash flow of any property in just 5 seconds check out PropertyTools.com.au.
2. Start listening to the On Property Podcast. It will change your life and will not only give you a new perspective on investing it will equip you withe the tools you need to minimise your risk and maximise your return
3. Go to whereis.com and look for areas close to you that may generate a positive cash flow. Look for regional centres, small towns, inner city suburbs and the rest of the items in this list.
4. Go onto a property site like RealEstate.com.au or Domain.com.au and start looking for positive cash flow properties
5. Choose your strategy and stick to it! Pick one strategy and stick to it. I have chosen positive cash flow property and I am sticking to that. Yes I can make a lot of money by negative gearing but that isn’t MY strategy. Without a strategy you will be tossed this way and that in the hopes of making a quick buck. A solid goal and an unwavering strategy will increase your chances of success 10 fold!