What Is A Cash Flow Positive Property

By Shane | Investing

May 08

Have you heard the term “cash flow positive” and weren’t exactly sure what it means? In a nutshell, cash flow positive property is whereby the rental income exceeds the expenses of the property. Let’s say for example that you’re making a thousand dollars a month and your bills were roughly seven hundred dollars, then that means that you would be getting around about three hundred dollars’ cash flow positive from your property every month.  

Why positive cash flow?  

A positive cash flow property can create a passive income. By its very definition, a cash flow positive property generates more in income than you need to pay in expenses. This leaves money over at the end of every month or the end of every year that you can use for whatever you want.

You could use it to pay off the mortgage faster. Use it to reinvest or you could use it to put into your lifestyle so you can work less. Also, hopefully, you can eventually become financially-free without the need to work at all.

Cash flow positive properties can make money even in a declining market. One of the things that most people don’t like about negative gearing properties is that you can only make money when the market goes up. While with positive cash flow property, because you’re generating passive income, if the market’s going up, then you’re doing great. If the market’s going down, you’re still generating passive income.

It allows you time to make money even when the market’s going sideways or downwards. You can hold on to that property and continue to make a profit. When it does come time for the market cycle to swing around and goes up in value, then you’re making even more money.

When times get tough, the positive cash flow properties are actually going to help you and your lifestyle. On the other hand, if you invest in negative-geared properties, properties that cost you money every single month, that negative-geared property is going to eat you alive if times get tough and you lose your job or you’re under financial hardships. Chances are, you’re going to sell that negative-geared property because you won’t be able to afford it.

However, when times get tough and you invested in positive cash flow property, those properties are paying for themselves and then some. The extra money can be used to pay your bills, to pay your rent, to pay any medical fees that you may have, or whatever might happen. You won’t have to sell because you won’t be in a position where you can’t afford your investment property.

Why invest in a Cash Flow Positive Property?

Why are you planning to invest in a positive cash flow property?

Do you want to invest to be financially-free?

Do you want to be able to support your parents or to not worry about money?

What is motivating you?

What is moving you forward to invest in positive cash flow properties?

 

Feel free to leave your comments below.

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About the Author

Shane specialises in helping Gen Y professionals and business owners make an impact by accumulating more assets, generating more income, and having more time to enjoy life. He has a Master of Applied Finance, an MBA, and a Master of Financial Planning. He is also a terrible golfer.

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