FAQ 69 Where do I find cash flow positive properties?
We get asked this question often accompanied with \”I have been looking but have not been able to find any\”
The fact is that they exist everywhere but perhaps not within the understanding of the person looking.
Fact 1 – Every property can be cash flow positive if the LVR is set at a suitable level. A property with an 80% LVR loan may be negative but with a 60% LVR loan positive.
Fact 2 – A property on a single split able lot when let may be negative but when the lot is split and another building is placed and let on the vacant lot we have a different outcome. The outcome can be cash flow positive when considering both rents combined.
Fact 3 – A property on a single split able lot when let may be negative but when the lot is split and sold and the proceeds of this sale are used to pay down the loan on the property we have a different outcome. The outcome can be cash flow positive when considering the lowered LVR. Incidentally the equity used to pay down the loan may be accessed for other investments using a Line of Credit (providing that serviceability is OK)
Fact 4 – A property when let to a single tenant may be negatively geared but when let to multiple tenants either by way of dual occupancy or by the room will almost certainly become cash flow positive.
Fact 5 – When looking at property the investor needs to consider all classes of property including commercial property. These can be
- Workshops
- Storage sheds
- Business premises
- Hole in the wall cash dispensers
- Retail premises
- Offices
- Factories
- Advertising Billboards
Many of these, correctly located and managed, will return positive yields.
A small number of residential properties are promoted on being cash flow positive. These properties are more likely than not located in mining towns , high demand/ low supply areas or have some unique point which sets them apart from the mainstream property market. The sort of uniqueness that we are talking about is multiple letting by way of
- DUAL OCCUPANCY
- LET BY THE ROOM
- DUPLEX BUILDS
- GRANNY FLATS
When looking to obtain cash flow positive property we need to consider how existing properties ( that are not cash flow positive) can be converted into these.
Off the peg residential cashflow positive properties are less likely to present themselves straight out. There will definitely not be an occasion when a goose that lays a golden egg will be initially encountered. The most likely scenario is that the investor will identify a property with POTENTIAL to MANUFACTURE cash flow by doing something creative with it. It is then up to the investor with the education that they have to do the numbers based on due diligence, check the regulations with the local council to be sure that the proposed changes can legally be made.
Access this website to assist in the location of cash flow positive properties
