Hello Property Investor!
I hope you have enjoyed this 5 part series about The Secret To Property Investment!
To finish off let’s have a look at Negative vs Positive Cashflow Properties.
If you’re going to buy property, it’s important to understand the behaviour of a property’s cashflow over time. This next graph explains it.
Investment Property Cashflow Over Time
The vertical axis represents money, and the horizontal access represents time. As time goes by the rent received on our property will go up dramatically compared to the costs, usually consistent with the price growth. The costs of holding the property, like rates, insurance etc, will generally increase only with inflation.
As we can see on the graph, most properties start off being in the negative, or in the red section. It is during this time that the rent is not enough to pay all the expenses associated with holding the property.
After a while, as the rent increases, the property will reach the break-even point where the rent equals the expenses.
Thereafter we enter the positive zone and it’s smooth sailing! You can own an unlimited number of positive properties, but you can only own a limited number of negative ones before you run out of your own money to top them up.
One of the main reasons people fail in property investment is that they get too many negative properties and they sink themselves in the process. So they end up having a bad experience and sell up!
We specialise in helping people find positive properties in strong investment locations. If you would like us to help you give us a call on 1300 372 677 or email email@example.com and book an appointment
The name of the game is just to get through the negative stage, or preferably avoid it all together.
A common misconception is that if you want a positive property, you will have to go somewhere that has low capital growth prospects. This is false.
Come and join our weekly webinars where we discuss strategies to improve your future, property investment tips and tricks, the do’s and don’ts of property investment and much more!
~ Daimien Patterson