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Why is cash flow important in property investment?

A sign of investment success is having a positive cash flow property. This is when your investment home earns more income than you pay in expenses each year. In other words, you make a profit. This profit factors in depreciation (the decrease in property value over time) and other tax deductions.

You’re essentially earning money just by owning and managing an investment property. Sound easy? Well, there is some work involved – and we’re here to guide you through it.

Is positive cash flow the same thing as a positively geared property?

A property that’s positively geared is when the rental income exceeds the expenses without considering the home’s depreciation and tax deductions. Like we mentioned before, a positive cash flow property earns more than its expenses while considering depreciation and tax deductions.

When it comes to deciding which approach is right for you, think about the tax benefits. If you want to make the most of tax time, then a positive cash flow property might be right for you. It’s always a good idea to chat to a financial advisor about which strategy works best for your investment needs.

What are the benefits of a positive cash flow property investment?

Having a positive cash flow property is a self-sustaining form of income. So there’s a strong chance you won’t be out of pocket to cover your property’s expenses – meaning more cash for you to spend or save.

Because your positive cash flow property is helping you maintain the costs of your investment home, you can meet other financial obligations and payments more easily. It also lets you plan around the success of your current investment – whether that’s buying another investment property, achieving a personal goal, or growing your savings.

How can investors maintain positive cash flow?

Maintaining your property’s positive cash flow is much simpler than you think.

  • Buy a property that has positive cash flow potential: Try purchasing a property in an area with low vacancy rates, which indicates a strong appeal, and high rental yield. This means the amount of rental income you make outweighs the home’s expenses – like loan repayments and other costs. This can help maximise the income you earn.
  • Save up a deposit: If you can save up larger deposit, it can help reduce the overall loan amount, which then lowers the repayments you’ll need to make.
  • Renovate your investment property: By renovating your property, you can help increase its rental yield too. For example, you might give the exterior a fresh coat of paint or install a new bathroom. Whatever upgrades you make to the home, you can charge more rent to future tenants once the renovation is done.
  • Monitor your property portfolio: This is a great strategy for maintaining your property’s positive cash flow. You can work out how to adjust your strategy to ensure your investment is helping you stay in the green.

How can investors look for positive cash flow investment properties?

Knowing your borrowing power can help narrow down your investment property options, as you have a ballpark figure to work with. This goes hand-in-hand with market research. Investigate which suburbs have a high rental yield and low vacancy rate and focus your efforts on those areas.

You can also buy an investment property that’s below the median price of your preferred suburb – usually about 20 to 40 per cent less if you can. Another tip is to consider properties that can generate multiple streams of income, like a house with a granny flat.

Lastly, staying on top of the interest rates cycle to ensure you’re getting the best possible rate for your loan. If you know where things are at, you can think about refinancing and securing a lower rate elsewhere.

Can you claim tax on the positive cash flow property?

You can claim tax on some of the costs from your cash flow property, which include:

  • The interest on your loan
  • Property management fees
  • Any repairs you need to do
  • Property depreciation

But if your investment property is running at a loss and is negatively geared, then you might be able to claim certain types of tax deductions to cover the loss of income.

It’s always best to chat to your personal accountant or financial advisor for tailored tax advice.

Learn about property investment

If you’re ready to switch your investment property loan, then check out these articles.

Things to consider when refinancing your investment loan

Refinancing your investment property can be confusing at times. We’re breaking it down so you can understand and consider refinancing with ease.

Read more
What is negative gearing?

Learn about negative gearing and its financial impact with Great Southern Bank's blog. Discover how it works and how it can benefit you.

Read more
A guide to capital growth

Wondering what capital growth is, or how to identify it? This guide explains it’s definition and explain how you can find growth opportunities.

Read more
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  • Interest-only option available5

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Basic Variable Investor Loan
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6.34
%
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Comparison rate^
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Investor, principal & interest, LVR 70% or less. Includes discount on new and additional lending. Minimum loan amount applies.1,2,3
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Important Information

Rates current as at 13 November 2024 and subject to change.

Great Southern Bank, a business name of Credit Union Australia Ltd ABN 44 087 650 959, AFSL and Australian Credit Licence 238317. Lending criteria, limits, conditions and fees apply. Applications are subject to credit approval.

This is general information and does not take into account your objectives, financial situation or needs. Consider the appropriateness of the information, including the Terms and Conditions (T&Cs)  booklet, before acting on it. The Financial Claims Scheme may apply to this product; refer to the T&Cs for more information.

^Comparison rate accurate for $150,000 secured loan over 25 years. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

1 Discounts off the Basic Variable Reference Rate are available to (a) new home loans with a minimum application amount of $100,000; or (b) switching or restructuring of the home loan you already have with us when it includes new borrowing of at least $10,000; and the application is unconditionally approved on or after 13 November 2024. Published interest rates are inclusive of any discounts off the respective Reference Rates. Interest rates and discounts vary based on the loan purpose (owner occupier or investor), repayment type (principal and interest, interest only, construction) and Loan to Value Ratio (LVR). Maximum LVR applies and includes Lenders' Mortgage Insurance and Great Southern Bank loan setup fees where applicable.

2 Great Southern Bank may withdraw or amend this offer at any time without notice. A change in your loan purpose, your repayment type or your loan product will permanently end your entitlement to the discount.

3 LVR means ‘Loan to Value Ratio’. It is the amount of your loan divided by the valuation of your property, calculated as a percentage. For example, if you apply for a loan of $400,000, which will be secured by a property valued at $500,000, your LVR is 80%. We calculate your LVR at the time we approve your loan and your discount won’t change because of changes to the LVR during the life of your loan.

4 A $200 minimum withdrawal amount applies for redraws conducted in-branch.

5 For Interest Only loans, a maximum interest only period of 36 months applies for owner occupier loans and 60 months for investment loans. For Fixed Rate loans, the interest only period must align with the fixed rate period. On expiry of the Fixed Rate interest only period, loans will revert to the Basic Variable Principal and Interest Owner Occupier or Investor Reference Rate (as applicable) which applies at the time of expiry. On expiry of the Basic Variable interest only period, loans will revert to the Basic Variable Principal and Interest Owner Occupier or Investor Reference Rate (as applicable) which applies at the time of expiry, less any discount set out in the loan contract. On expiry of the Offset Variable interest only period, loans will revert to the Offset Variable Principal and Interest Owner Occupier or Investor Reference Rate (as applicable) which applies at the time of expiry, less any discount set out in the loan contract. Comparison rate for Interest Only loan is based on interest only payments for the fixed term and principal & interest payments for the balance of the term.

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