Why Units Are Less Likely To Be Positive Cash Flow
Units and apartments are less likely to be positive cash flow when compared to houses. This is because they have a body corporate or strata fee that strips a good chunk of your cash flow.
Did you know that units are actually less likely to generate you a positive cashflow than houses? That’s something that a lot of people don’t think about when they’re looking for positive cashflow property. Hey, I’m Ryan from on-property dot com dot EU. I help people find and invest in positive cash flow properties and today we are going to be looking at this exact topic, why it’s harder for units to generate a positive cash flow than it is for houses and it’s really, really simple. And so if you’re out there searching for positive cash flow properties, then you might want to be looking at houses instead of units. Units can still generate a positive cash flow property. Don’t get me wrong, they still can, but there’s just an extra element in there that makes it harder. So let’s jump into some examples that I have here. So I found this property here, one 95 ps street in Boulder, who I didn’t even know, where boulder, who is the example like where it is, doesn’t really matter for this example.
Okay? It’s near Calgary or in Calgary. Um, okay. So we’ve got this property that’s selling for $159,000 and it is renting for $250 per week. So we’re going to jump over to property tools.com dot a u, which is a calculator that I created myself for analyzing the cashflow of properties. And so let’s have a look at this $159,000. And this one is renting for 2:50 per week. So 2:50 per week. We can see that we’ve got an eight point one, eight percent rental yield and a weekly cashflow estimate of about $17 50 per week for this property. All right, so this is a house. Okay, I’ve got another example here. That’s a unit that has a very similar rental yield. It’s actually more expensive and as we talked about in episode four, 99 on how rental yield isn’t the be all and end all of finding positive cash flow properties.
The more expensive a property becomes and the more rental income you’re generating, the less rental yield you need to generate a positive cash flow. So the fact that this property is more expensive and it’s generating three, 10 per week in rental income rather than to 50 should main, it’s more likely to generate a positive cash flow with a smaller rental yield. So let’s go ahead and check this one in $200,000 renting for three, 10 per week. We can say the rental yields eight point, oh, six percent. So slightly lower than the last one, but not a big deal. And we can see the weekly cashflow is estimated at about $39 per week. And here’s the ticker. Here’s, here’s the reason why units can be harder to generate a positive cash flow. If we scroll down here and we zoom in, we can see here body corporate levies of 2000, $131 per annum.
Now, if you don’t know what body corporate levies are, they’re often called body corporate fees, body corporate levies, or strata fees. Now this is a fee that you have to pay when you own a unit. When you own townhouses, when your own villas, when there’s common areas that you share with other people. So you pay body corporate fees or strata fees, and so this pays for the maintenance and the repairs of the common areas. So the driveways that you all share, the gardens that you all share, the elevator that you share, if you live in a large unit block, maybe even pools and gyms, all of this sort of stuff. So body corporate levies go towards that. They also go towards a sinking fund ideally, which is a big pool of money that’s there for big expenses when they come up, like fixing an elevator or fixing a roof or things like that.
So body corporate levies, $2,131 per annum. So we’re going to go in this calculator at property tools and we find our Australia body corporate here and we’ll put in that figure 2000, $131 per year. And we can now see that cashflow has gone from being positive $39 per week to being negative $1 62 per week. Now dollars 60 to negative. Not too bad if you didn’t have vacancy, because I’ve got vacancy rates of five percent in here, so if you take away vacancy, then you could still generate a positive cash flow with this property. So as you can see it’s still possible with units it’s just harder because you’ve got that extra fee of the body corporate and startup. So that’s just something to think about. Quick little episode today that if you are looking for positive cash flow properties, units can be harder to get positive cashflow than houses.
So if you have a unit that has the same price, same rental income as a house, chances are the house is more likely to generate a positive cash flow. Now this obviously depends on the property, depends on the vacancy rates in the area, depends on things like how much of the property manager fees going to be depends on repairs and stuff like this as well. So it’s not like a golden rule that is going to apply across every single property. Each property is individual, so you need to take that into account when you’re doing it, but houses don’t have that body corporate fee, whereas units do and you have examples like Ben Everingham from pumped on property purchase a property in Sydney, body corporate fees were fine, you know, they were just standard and they jacked the body corporate fees up massively by multiple thousands of dollars per year for I don’t even know why.
Maybe they didn’t have a sinking fund and they had a big expense that they had to pay and so you don’t have control over these body corporate fees as well, which is something that I don’t like. They may be low, but they may also get jacked up and be extremely high, which is going to strip you of all your cashflow, so not having that control. I hate that aspect of it. That’s something to think about as well. Obviously there’s some benefits with units in that they are cheaper to purchase than a house in the same area. Depending on the particular area of vacancy rates for units may be lower. Often they’re higher like Brisbane at the moment. Units that just an oversupply of them. So anyway, that was today’s episode on why units can be harder to generate a positive cash flow than houses. If you’re interested in investing in positive cash flow properties, but you need some help finding properties, then I do have a course showing you exactly how I find a positive cash flow properties.
I actually have a service where I find properties and share them with my paying members. So I’m finding positive cash flow properties every single week. Sending a new one out every single day so I know how to do this. I’m doing it all the time. And so in this course I show you exactly how I find positive cash flow properties, the different methods that I use. There’s about five or six different methods all from the comfort of your own home as well. So if you want to invest in positive cash flow properties, if you want to learn how to find these properties yourself, then head over to on-property dot com dot forward slash find. That’s fin de in case you know my Australian accent, 10 site it probably so on property.com, forward slash find. You can check it out over there, sign up for that course if you want to learn how to find positive cash flow properties and then you can go out and do it yourself and you can compare houses, two units and you can find positive cash flow properties all over Australia. Thanks so much for watching today guys. I hope that this episode was helpful. Just gave you a little bit of insight when you’re out there in the market looking at houses versus units. That’s it for me today and until next time, stay positive.
"This property investment strategy is so simple it actually works"
Want to achieve baseline financial freedom and security through investing in property? Want a low risk, straightforward way to do it? Join more than 20,000 investors who have transformed the way they invest in property."