Positive cash flow or a positively geared (level of debt) property is where the rental returns are greater than the cost out flows.
For example, a $370,000 property with a $300,000 debt mortgaged at 7% will incur a debt of $21,000 p.a. in interest. The property would need to be rented at just over $400 per week to provide a positive cash flow (exclusive of expenses).
The benefit of a positively geared property is that it does not affect individual cash flow. So, a change in circumstances, such as a break in employment, a change of relationships, illness or worse should not adversely affect the owner’s standard of living.
So how can you help your clients achieve positive gearing over their property purchases?
- The first step is to determine an accurate property value estimate on which to base the purchase price. An RP Data AVM report can help here.
- An area’s potential for capital growth is one of the many sections included in an RP Data CMA report, which you can use to educate your clients prior to their purchase.
- An RP Data Rental Report can be used to help clients estimate the potential rental returns they can expect following their purchase.
An investor that buys a property for the right price and under the right conditions is more likely to move to a positive income position.
For more information on how to put RP Data’s products and services to work finding the data that will help your clients reach their positive cash flow targets, contact us on 1300 734 318 or visit rpdata.com/training to book a training session.