This is a guest post written by William from Australia
With interest rates on the rise, cash flow is an issue of major importance. Luckily, you can put your investment into properties that will give you a cash flow that is positive.
How to find properties with a positive cash flow
The best thing that you can look for is a suburb that has a rental yield of approximately 5% and a 5 year projected yearly capital growth of 5%. There should a proportion of at least 10% rentals to 90% ownership, and the suburb should be active with many property sales occurring. There will be a lot of areas to choose from at this point, so it needs to be narrowed down even further.
The next thing that needs to be done is an analysis of the capital growth of each area. These should be ranked from highest to lowest. Then you will need to start getting information about the suburbs to narrow the list down to about 100 suburbs. Here are the points to consider about the areas.
You can contact local councils and real estate agents to get the information needed on these topics.
High rental yield
You need to be careful of any communities that have an unusually high rental yield. They may be located in areas that are booming due to resources, and when the resource dry up there will be no rental market left.
How to generate better cash flow
One of the things you should look for when you’re considering an investment opportunity in real estate is the potential to increase your cash flow even more. Here are some ideas you can use to make a positive cash flow even more positive.
Look for any minor or major fix up you can do to make the property more appealing to tenants. It is amazing what a fresh coat of paint can do to both the interior and exterior of the building of a home. Landscaping can also raise the value of the property since it is the first thing that will be noticed by any future tenants that are coming to view the rental unit.
Rent out rooms
This can increase your cash flow significantly, but it can also be quite a bother. You may have to do this on your own and you will probably be dealing with students for the most part.
Increase the rent
Some investors often neglect this basic option. Raise the rent as needed but only do it when it is economically feasible to do so.
Get a simple mortgage
You may want to consider getting an interest only mortgage for your property. You will have lower repayments during the term and can put the extra that you would have had to pay for the principle away in some type of offset account.
Furnish the units
You will have to do some market research first to find out if this will work in your area. Many tenants already have the furniture and this will not be a selling feature. In the right market, however, it will attract renters that would view a furnished property as an asset.
Hire a good accountant
An accountant will help ease the pressure of managing your cash flow and can save an incredible amount of money for you at tax time. You may even qualify for a tax rebate every month which will definitely help.
Generating a positive cash flow from investment properties can be a fun investment game if it is done properly. The results can be very lucrative and the risks are usually relatively low as long as you go in with a game plan and stick to it.
This article was written by William. William writes about saving money, property investment and real estate for a home loan comparison service Home Loan Finder. If you’re looking for a cheap home loan, visit the Home Loan Finder website for great advice and to compare home loans today.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.