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What is "Cash Positive Property"?
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Looking for
Cash Positive Property
NOW?
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This may seem a simple question but it is not a simple answer. There are many variables. In a perfect world for an investor this answer would be where the rental income exceeds all of the outgoing expenses of bank interest, rates, body corporate and management.
In most cases this is where the investor has borrowed 100% of the purchase price (using equity in other property) + stamp duty + legal’s etc. Let’s use an example of a property worth $250,000. If you could find a property for that price! |
+ $250,000
+ $7,225 stamp duty
+ $1,000 legal’s
+ $1,000 bank fees
= total $259,225.
+ At 8% interest only
= annual payment of $20,738
To achieve a positive cash flow
the rent would have to be
greater than this at $400 per week.
If the investor paid the ingoing costs and a deposit this figure would be improved.
The most likely definition of cash flow positive is where the same scenario is in place as above but non cash deductions are also taken into account such as depreciation allowances, bank interest and certain establishment costs. The higher the taxable income of the investor, the higher this deduction and the more likely a cash flow positive situation can be created.
See and download our cash flow calculator on the "tools" page.
HOWEVER:
Read some our our Industry Reports for more detailed Examples.
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