How Does Cash Flow Positive Property Work?
Cash flow positive property is an investment strategy that generates the investor a passive income every week/month/year that they hold the property. It is different to negatively geared property where the investor loses money every week and hopes to make that money back through an increase in value of the property (capital gains).
Positive cash flow property can be a great investment as it increases the investors disposable income and still gives them access to capital gains and tax deductions associated with property.
Many investors retire or become financially free and live off the cash flow their properties provide them.
So, How Does Cash Flow Positive Property Work?
Positive cash flow property is created when the income from the property (usually the rental income) is greater than all of the expenses.
If you are collecting a monthly income of $1,500 from your property an you are paying $700 in mortgage and $600 in other costs (insurance, maintenance etc) then your total income ($1,500) would be greater than your total expenses ($1,300).
This property would be positively cash flowed to the value of $200/month.
What Is The End Goal?
Using the above example the extra $200/month could be used for a variety of purposes.
– To pay off the mortgage
– To buy more property
– To fund your lifestyle
– To be invested in other areas (eg. Shares)
The end goal is usually (but not always) to earn enough passive income from your properties to become financially free and to no longer have to work.
Generally you will need more than one positive cash flow property to become financially free, but even one property that added $100/week to your income would be helpful and make your life better.
How Can I Find Out More
This post only covers the basics of how cash flow positive property works. As you can see it is quite simple and can be a great investment strategy. I would love to direct you to the below resources to help you learn more.
0-130 Properties in 3.5 Years by Steve McKnight – This books teaches you all about positive cash flow property and how to become financially free. The author bought 130 properties in 3.5 years (thus the title) and would be my most recommended book on positive cash flow property. Click here and buy the book on FishPond (Australian online retailer) and save some money on the purchase price.
How To Calculate Positive Cash Flow Property – Read this post that goes into more depth on how you can calculate positive cash flow property.
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