How Can I Improve The Cash Flow Of My Negatively Geared Property?

How can I improve the cash flow of my negatively geared property? Improving your cash flow is an important step for many investors. By turning a negative geared property into a positive cash flow property you are moving towards your own financial freedom.

There are a few things that I’m going to outline where you can lower your expenses or increase your rental income. I’m also going to look at how you can actually switch your investment from a property that you own to a property that you’re collecting cash flow from through owner finance.

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Can This Investor Go From Minus $1,000+/month to Positive Cash Flow?

I was having some back and forth emails with one of my readers this week. He was talking about a property that he purchased of the plan that wasn’t delivering the results that he wanted. It was quite negatively geared and costing him over $1,000 a month.

He’d bought it off the plan, and it had actually not gone up to the value that he had paid for it. He paid $420,000 for this property, but once it was built it was actually only valued at $390,000. For him, selling the property wasn’t really an option because it means he goes backwards $30,000.

It also means he has to pay the real estate agent fees and things like that. He might even go backwards even further than that. I wanted to give him some ideas on how he can improve his cash flow of his negatively geared property.

Let’s get straight into it. My tips and ideas for improving the cash flow of your negatively geared property. Just a quick disclaimer that this is not to be considered financial advice. It is of a general educational nature.

1. Focus On Your Loan

Your mortgage is going to be your biggest expense right off the bat. If you can save money on your mortgage, then you can save a big chunk on your weekly or monthly cash flow expenses.

I will recommend talking to a mortgage broker, but you don’t always have to go with a mortgage broker. You might be able to strike up a better deal with a lender by yourself. Mortgage brokers deal with a lot of lenders, and that can help you get the best loan for you.

a. Interest Rates

Things to think about when you’re redoing your loan are the interest rates firstly. How low can you go is basically the name of the game. If you’re got a mortgage of $400,000, a 1 percent change on that is $4,000 a year. If you can get a one percent reduction in your interest rate, then that’s $4,000 a year and over $300 every single month.

Focus on the interest rates and try to get a very competitive interest rate.

b. Interest Only Loans

Also look at interest only loans because it lowers your monthly expenses. You’re paying principal and interest. It means you’re paying interest, plus you’re paying money off that loan each and every month.

If it’s the cash flow that’s the issue, then it might be better to look at an interest only loan instead of that principal and interest loan. It means your monthly expenses will be lower. Obviously you’re not going to be paying off any of the loan, but we’re hoping here that the property’s going to increase in value so we gain equity through capital growth.

c. Utilise an Offset Account

The third part of the loan would be to look at getting an offset account, and to put your spending money and things in there to offset your mortgage repayments and make them lower. If you’re getting paid back to $60,000 a year, probably getting after tax around $4,000 a month into your bank account.

If that’s going into your offset account, well then you’re offsetting $4,000 of your property mortgage. That can help to lower your expenses because you’re not paying interest on that $4,000.

If you have any savings, you can put that in your offset account as well to help really offset that monthly cash flow strain.

2. Look For Ways To Increase Your Rental Income

Number two would be to look for ways to increase your rental income. Always be asking yourself, what can I add to this property that can make it more valuable?


a. Valuable Additions

Things like a dishwasher, things like air conditioning, things like an internal laundry. If it has a bathroom without a bath, look at adding a bath. Can you find a way to add an extra room or maybe an office or something like that?

b. Differentiation in the Market

Is there a way to differentiate your property from other properties in the same building? Look at ways of being able to increase your rental income. Maybe people prefer carpet over tiles, so by having carpet you can increase your rental income.

c. Adjust to the Rental Market

You really need to adjust to the market. Talk to your real estate agent and say look, I really want to increase my rental income. What does my property need? Try and get some ideas from them.

3. Find Ways To Lower Your Expenses

I know one of my friends did this with property manager fees. He was paying seven or eight percent for a property manager. Wasn’t quite happy with it.

Shopped around, and ended up going with someone that was I think around six percent. He was saving one to two percent of his rental income that was coming back into his pocket.

Because he shopped around and tested them out, he actually got a better property manager than he had in the first place. There’s one way to lower your expenses. There are other things like having tenants pay for water, or look for other ways where you can lower your expenses on the property.

4. Lower Your Vacancy Rates

That would be really differentiating your property from other properties and making it more valuable in the market. If you’re renting your property for $400 a week and someone else is renting it for $400 a week, how do you make yours stand out and be a better bargain than the other properties so you have more people applying to yours?

5. Maximise Your Depreciation

Capitalize on all the depreciation available to you. Especially for a new build like this, you can have a large amount of depreciable assets. This would mean getting a quantity surveyor into your property and getting them to show you, what you can depreciate. What can you count as an on paper loss that you can claim against your tax?

You’re not actually lowering your cash flow on a month by month basis, but when it comes around to the end of the year, you can claim that depreciation and get some tax back which effectively over the course of that financial year has improved your cash flow.

6. Get A Scrapping Schedule Done When Renovating

Again, if you’re going to do any renovations or things like that, get a quantity surveyor in and get a scrapping schedule done on the things that you’re pulling out of that property.

7. Sell Your House Via An Owner Financing Agreement

Lastly, I just wanted to talk about selling by vendor finance.

If you can’t afford to rent your property, and you’ve tried these other things, and it’s still too negatively geared, you can’t sell it because you’re going to go backwards, you can look at selling via vendor finance. Look at how this investor did it and generated a positive cash flow.

What that means is that rather than the banks extending a buyer a loan and that buyer paying you fully in cash, you as the owner of the property is actually extending the loan to the buyer yourself. More about owner financing sales

You can charge a higher interest rate for that. You can also often charge a higher purchase price for that. You can sell it slightly above what the market would sell it otherwise. You can get a stay on deposit as well which you can then put into your offset account.

You obviously have to be careful with this and talk to your lender about whether you’re allowed to do it on the type of loan that you’re on. Talk to your solicitor or a lawyer who specializes in these sorts of sales, so they can help you do that.

There are my ideas on how you can improve the cash flow of your negatively geared property. There are a few things there such as lowering your expenses and focusing on that mortgage rate.

Also, finding ways to increase your rental income or lower your vacancies. Really consider a vendor financing as an option if the other options don’t work for you. I hope that has helped for everyone, especially for that reader than sent me an email.

I hope this has really helped you and given you an idea of how you can help improve your cash flow. I wish you guys all the best in your investing. If you want more information on investing in positive cash flow property, then join our free five part audio master class series.

Read more: 10 Places You Can Find Positive Geared Property For Sale

Read more: How To Create A Positive Cash Flow Using Owner Financing

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