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If you are thinking about a property investment then you are considering a big investment step. You need to know what your financial expectations are then determine if an investment that is going to create a positive cash flow is your best option.
If you aren’t quite sure just what a positive cash flow property investment is, then you need to know it is the type of property investment that is going to bring you in more than what you are spending on it. If you add up all your costs for the property over the year and it amounted to $40,000, but you collect rent of $50,000. Then your cash flow is positive in the amount of $10,000.
This sounds like a sweet situation but how does it get like this? It usually occurs when the interest rates that you have to pay on the property are low, but the rental market is high. Another way that it can take place is when you have paid a good chunk of the mortgage off so your costs are less compared to the rent you are collecting.
Quite often investors have multiple properties that they own, and some of these are not in the positive cash flow situation. They are negative cash flows. By further investing in a property that will put them into the positive position it helps to offset the negatives of the others that are not in the same situation.
While this seems like a good investment it also comes down to timing. You need to seek out properties that are available that will put you in this position. These are not always easy to come by. There could be some that are available where the demand for renting is high but the growth potential of the investment is low.
There are some great advantages to positive cash flow properties. They often are available at lower prices than others, and there may be stamp duties and tax incentives that can come with them. The money gleaned from a cash flow property can be used to pay down other investments, or reduce the principal owed on the property much quicker. These positive cash flow properties can be ideal for padding your income.
There is also a downside to them as well. You will end up paying taxes on the profit you are making. It may be harder to sell the property if it is not in a good development area and it can have an effect on your capital gains.
Before making any decision to buy a positive cash flow property it is important to do the right amount of research then think it through carefully.