Cash Flow Positive

Property that is cash flow positive is the best investment to make. Cash flow positive means that the returns or income is more than the expenses incurred. In the case of property it implies that the returns from it, in the form of rent, is higher than the expenses involved in maintaining that property. This implies that the property investor is able to save some amount each month after paying off all the property dues.

A related term often used in the real estate segment is positive cash flow property. This property is also called positively geared property which can make money that is much more than what it costs to hold the property.

Cash flow sources for property are in the form of rent when it is leased out. The costs or property expenses include loan repayment, land related taxes, insurance, maintenance and management fees. If loans can be taken at lower rates of interest, the chances of having a cash flow positive are much higher since the cost reduces considerably, when compared to a loan taken at higher interest rates.

Property that is cash flow positive is not easy to find, since it requires a lot of research and effort to find the right deal and act fast to buy it. It is ideal to look for newer properties rather than older ones which have depreciated over time. They will also have fewer maintenance problems and expenses. Typically such properties would be in busier parts of a city where there are more people looking for renting properties, and the demand for properties to rent is more than supply. This would help to get a higher rent in proportion to the total amount spent on purchasing it. These also include properties with high growth potential and lower priced ones.

Many properties turn out to be cash flow positive since they are in middle class areas, are not steep in prices but are in demand, since there is always a large middle class segment looking for rental accommodation in localities they are comfortable in. This ensures a steady positive cash flow even though there may never be quick money coming in during boom times.

Cash flow positive for property offers multiple benefits to property investors, like:

  1. It is a safe investment that brings in money and cash inflows are more than outflows, and hence a certain amount can be saved.
  2. It is ideal for retiring people since it becomes a source of income
  3. It does not require cutting other expenses to meet property related costs
  4. Helps to build capital and increase wealth over time
  5. A passive income source that is not time consuming
  6. The income is stable and predictable.

Cash flow positive is the best solution for property investment since it yields both short term and long term returns. It does not dig a hole in the pocket with higher outflows and inflows, and is also safer, with a steady stream of income that can be a godsend in financially difficult times.

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