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Positive cash flow or positively geared investment properties…what is the difference and is one better than the other?<\/p>\n
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Yes, there is a difference.<\/p>\n
Positively geared investment properties are those which essentially pay you to own them.<\/p>\n
So for example, let\u2019s say your investment income on a particular property is $2,000 per month and you pay out $1,800 in property expenses.<\/p>\n
Then, let\u2019s add to that surplus another $100 for taxes and you have a positive balance of $300 per month on that property.<\/p>\n
Put simply, then, positively geared investment properties will provide cash over and above liabilities both before and after taxes are accounted for.<\/p>\n
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<\/h2>\nUnlike positively geared investment properties, positive cash flow properties are those which are only positively geared after taxes, depreciation, expenses, etc. are deducted from the property\u2019s income.<\/p>\n
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Quite simply that depends.<\/p>\n
It depends upon your personal financial situation, where you\u2019re at in your property investing career and what you hope to achieve.<\/p>\n
Consider the following examples of what impact each type of positive cash flow property will have on an investor\u2019s ability to grow their portfolio:<\/p>\n
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Positive cash flow property (after taxes)<\/u><\/p>\n <\/p>\n Jane can recoup her expenses when she files taxes, but if she wants to buy another property her lender might have an issue with her financial situation.<\/p>\n Here\u2019s why.<\/p>\n A lender will typically deduct the property expenses (in this example, $5,000) from Jane\u2019s $50,000 income which of course automatically impacts her serviceability.<\/p>\n Positively geared investment property<\/u><\/p>\n <\/p>\n John\u2019s lender will count the additional $5,000 annual pre-tax income from his positively geared investment property. This means the lender will use $55,000 per year in their calculations…obviously an improvement for John\u2019s serviceability.<\/p>\n <\/p>\n If you have negatively geared properties they can become positively geared investment properties, however what if you want an investment property that\u2019s positively geared from the start?<\/p>\n How do you find positively geared investment properties?<\/p>\n Consider market indicators such as:<\/p>\n <\/p>\n Look for<\/span>:<\/p>\n Positively geared investment properties require growth markets. Look for economic drivers that are strong and find out where the market lies within the property market cycle.<\/p>\n <\/p>\n <\/p>\n Five things you can do to improve your rental income or your property\u2019s capital growth include:<\/p>\n\n
John<\/strong><\/h4>\n
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Finding positively geared investment properties<\/h2>\n
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Creating positively geared investment properties<\/h4>\n