Negatively Geared or Cash Flow Positive?

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February 22, 2020

Should you look for an investment property that is cash flow positive or negatively geared?

This is a question that gets thrown around a lot when people relatively new to the game are looking to buy their investment property. Don’t get me wrong, it’s a really important question, however there are a few misconceptions around this idea.

In the past it was a common trend to have an investment property that actually loses money, so you can claim back certain expenses and have deductions against your tax to bring your overall payable tax down, resulting in less money that you owe the government. While that may be true to some extent, you still need the investment to be viable and not actually lose you money.

The real question you should be asking is whether you’re buying this property for short term or long term gain. Or more specifically, do you need the property to be cash flow positive, and have the rental return cover the monthly mortgage and expenses? Or do you have the disposable income to support a shortfall in rent compared to expenses. In this case your goal would be to hold onto the property long enough in hopes of getting capital growth.

The thing that a lot of people don’t realise is that you can actually look at property’s that would potentially be cash flow positive and have expected capital growth. This is where the services of an expert can really help. As a Buyer’s agent, we will look into the yield and the growth viability of every property for you. We do the research and ensure that you’re investing in a high quality home (existing or after renovations) in a high quality suburb (now or in the near future).

So what are the benefits of each option?

Cash flow positive, gives you peace of mind each week, knowing that whatever happens in your life, the house will cover its own costs. Eventually if you were to pay off the mortgage, you’d have a passive income each week, which equals financial freedom.

Capital growth means you have the potential to make a large chunk of money in a short time. You can then use this equity in the property to purchase more investment properties…or you can sell and make a profit.

Finding a property that does both is the gold nugget of the real estate world, and that’s the type of property we aim to find for you. Whether it’s your first home, or you’re upsizing, downsizing, or investing, or goal is the same; to find you that gold nugget that you can call your own.

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