10 Advantages of Positive Cash Flow Property


If you’re considering whether or not you think
positive cashflows, a good strategy for you, then it’s important to look at some of the
advantages and disadvantages. I remember doing this back in the day when
I was looking at which investment strategy too I want to take, what do I want to pursue? What are the advantages of positive cashflow? What are the advantages of negative gearing? What are the disadvantages of each, so it’s
really important that you consider these and then consider how they fit into your financial
goals and your investment strategy. So in this episode we’re going to look at
10 advantages of positive cashflow. Hey, I’m Ryan from on property, helping you
achieve financial freedom that let’s get into it and look at the 10 advantages of positive
cashflow. The first advantage is that you can start
making money from day one. If you invest into negatively geared property,
you’ll be losing money from day one and you need that property to go up in value in order
to make money. You also have cost to get into the property
expenses like solicitor fees and mortgage fees as well as stamp judy. There’s a lot of costs to get into the property
and if you want it to sell to liquidate your equity, then you’ve obviously got real estate
agent fees as well, so you need that property to go up a significant amount before you make
any money. However, with positive cash flow properties,
because they’re making their money in rent, so the rent coming in is more than the expenses
going out. You have potential to make money from day
one. If your property is rented or if it’s not
rented on day one, then a couple of weeks in you can turn into a positive cashflow property. This is really exciting to see yourself making
money from the very outset of your property and obviously you can have potential for capital
growth as well. The second reason is that they can pay themselves
off. Me and Ben Everingham, the buyer’s agent from
pumped on property have taught a lot. We Bang on the drum of the two properties
to financial freedom strategy. We’ve purchased two properties build to granny
flats. You have for incomes coming in and then if
you pay off that debt over time, eventually own those properties outright and that rental
income can create financial freedom for you. One of the awesome things about positive cash
flow properties is that they can pay themselves off because you’ve got extra money coming
in in the form of rent, so your rent is more than your expenses. That leaves extra money left over to put on
your mortgage and to pay off your property. You might start with an interest only loan
so you’re not really paying off the property are you just putting little amounts into the
offset, but eventually as your cashflow increases, you can switch over to a principal and interest
line and then that property can affectively pay itself off, which is a really exciting
idea. The third reason is that they can help you
when life gets hard. Now, I’ve recently been through some difficult
stuff. If you’ve been following the channel for a
while, you’ll know what that is, but expenses went up and business income dips. Now I have a bunch of assets online that generate
me passive income and they actually helped me through this circumstance. I’ve got the cashflow coming in, which is
keeping me afloat during this difficult time. The same is true for positive cash flow properties. If you lose your job, if you need extra money,
if you fall on hard times rather than having a property that you need to pay to keep afloat,
a property that’s eating you alive, you have a property that can help support you in the
midst of that hard time in your life. Now maybe your property’s only $20 per week
positive cashflow, but that’s $20 per week. They you’re able to pull out of that property
and able to use for your living expenses and to pay for some food that week. Or if you have a situation where you’ve bought
a few properties, you’re in a much better position and you’re getting $200 or $500 per
week positive cashflow than rather than using that money to pile up on your offset account,
you could potentially use that money to live your life and to pay for your expenses until
things improve for you. So having that there to help you when life
gets hard is extremely valuable and I found that really valuable recently. The fourth reason is that you don’t actually
need capital growth in order to make a profit or in order to achieve financial freedom. So a lot of the investment strategies out
there, you’re required capital growth in order to make money. Property might go up $100,000 or $200,000,
which is awesome, but what happens if you purchase a property, it’s negatively geared
and the market stays flat or what happens if you purchased a property is negatively
geared and the market goes down. You’re not making any money. In fact, you’re losing money. One of the benefits with positive cash flow
properties is that you don’t need the market to go up in order to make money, your making
money through the positive cash flow on that property and as well overtime that property
you can also pay itself off. The fifth reason is that it can help you finance
more properties. Now, back in the heyday of Steve McKnight
and his zero to a hundred and 30 properties in three point five years. This works absolutely epic for him to be able
to finance so many properties because they are paying for themselves. Now. Lending climates have changed, so you will
need to speak to a mortgage broker about this. I’m not a licensed mortgage broker, so I can’t
give mortgage advice, but having a property with a good rental yield can help you to jump
into the next property versus a property that has an extremely low rental yield. That’s something to go into more detail with
your mortgage broker about, but the fact that you have enough money coming in to pay for
your mortgages is only going to help not hinder you getting future mortgages in the future. The sixth is that you can actually get capital
growth and cash flow. You don’t need to settle for just one or the
other. You can actually have your cake and eat it
too. You can get both. Now. This requires a decent amount of research
before you buy your property. You need to identify a good suburb to invest
in a suburb that has good rental yield and you may need to actually generate that cashflow
yourself by doing something like a renovation or by building a granny flat, but you can
actually get both. You can get cash flow so you’re getting that
money every single week. Taking advantage of all of these advantages
we’re talking about today, making money from day one, paying off your debt. You can get that, but then if you buy it in
the right area, you can also get cashflow as well and make those big chunks of money,
so that just means you need to do your research from the get go and invest in a good area
which you should be doing anyway. And if you need help doing that, check out
my course on advanced suburb research at on-property dot com, forward slash research. The seventh advantage is that cashflow tends
to improve over time. Generally when you purchased the property,
it’s going to be in the worst cashflow position it’ll be in, unless interest rates go up or
unless the area goes down, vacancy rates increase, and you can’t rent your property generally
when you purchased your property, you’re going to be in your cashflow position in the beginning. But what happens overtime, if you bought in
the right area, then rents tend to go up and as rents go up, your cashflow is going to
improve because your mortgage is likely going to stay the same amount of interest rates
don’t go up. You’re not getting more income coming in,
but you don’t have as many expenses so your income is going up faster than your expenses,
meaning the difference between your income and your expenses grows, making your cashflow
better. So you might start with just five or $10 per
week, positive cashflow. But as that rent goes up, $10, $20, you’ve
moved from five to $10 into 20 to $30 positive cash flow per week, and then overtime as rents
continue to go up, you get in a better and better cashflow position and then as you pay
off your debt, and especially when your debt is completely paid off, then your cashflow
position drastically improves. The eighth benefit or positive cash flow properties
is that they can actually protect you from future interest rate rises. As you may know, interest rates are pretty
low at the moment, but a lot of investors are in a situation. If interest rates go up half a percent, one
percent or two percent, that would severely affect their cashflow position and they would
no longer be able to afford their properties and they will be forced to sell. If you’re in a positive cashflow situation,
however you can survive, a few interest rate rises before cashflow gets tight. Obviously, the better your cashflow position,
the more interest rate rises. You can survive. You won’t be making as much money in terms
of positive cashflow, but continue to be able to pay your mortgage, continue to own that
property, continued to hold it, and you won’t be forced to sell. The ninth reason, and we’re getting towards
the end now, is that you can even make money in a downturn. If you’re negatively geared, required to make
money solely of capital growth, then you can only make money as the markets going up. However, if you’re a positive cashflow and
you’re making money from the rental income of that property, even if the market goes
down for a time, which it does from time to time, we see markets go up. We see markets go down. If you’ve purchased and then the market goes
down, you’re still making money anyway. Ideally you want that property increase in
value and you do that by buying in the right area at the right time of the market, but
if for some reason the market’s going down, you can still make money. You can weather that storm. You can make money in the downturn and then
hopefully over time that will stabilize and then go back up and the 10th reason, the last
reason and my absolute favorite reason as one of the advantages of positive cashflow
property is that it can give you financial freedom. I am all about financial freedom. I achieve financial freedom at age of 28 through
passive income from my online businesses. I’m back at work now. That only lasted for a short period of time,
but that’s what I love about positive cash flow properties is they can deliver you that
longterm financial freedom if you purchase enough properties or if you purchase a few
and then go ahead and pay off the debt on those properties so the majority of the income
gets to go into your bank account. You can achieve financial freedom and even
if you don’t have huge amounts of equity, even if you don’t have millions of dollars
in the bank, you have these properties where the rents coming in that’s funding your lifestyle. You have achieved financial freedom. You can then choose to quit your job if you
want. You can then go and live the life that you
want. You can pursue things that you love and it
doesn’t stop there either. Just because you’ve achieved financial freedom
doesn’t mean you can’t continue to build your wealth, so that’s a 10th advantage of positive
cash flow properties is it’s just a very clear way to financial freedom and to you being
able to live the life that you want, so they have 10 major advantages or positive cashflow
properties. I hope that this helps you to consider which
investment strategies going to be best for you. Thanks so much for watching and until next
time, stay positive.

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