Create Positive Cash Flow

Strategies For Creating Positive Cash Flow On Your Investment Property

Creating positive cash flow with your investment portfolio is easier than it seems in today’s real estate market.  This is not a ‘fly by night’ comment it is a fact and let me tell you how you can achieve it.

Low Interest Rates

The current interest rate is the lowest in 50 years and this will help you purchase a property with lower than usual mortgage repayments.  This in itself is a help in owning a positively geared property but there are further benefits in store.

Refurbishing a Newly Purchased Investment Property

Let me give an example but do realise the figures are only estimates and do your own calculations to suit your personal circumstances.

If you purchase a property for $320,000 and take out a loan at 4.5% for 30 years your repayments will be $1621pcm.  If you then do $30,000 worth of upgrades, you would have a property worth $350,000 minimum but more likely about $370,000.

When you initially approach the bank you would be working on a rental at approximately $410 per week, but with your improvements you will then be able to ask $460 per week and this is how you create positive cash flow.

If for example, if you took out an interest only loan for 12 months your repayments on $350,000 (initial cost, plus refurbishment) would be $1312 pcm.  At the end of the refurbishment you have a property worth say $370,000, and then at the end of the interest only loan, you can revalue and revert to a loan for interest and principal.  The repayments would be $1773 pcm ($443.25 pw).

Planning Your Next Step

At this point in time you now have an extra $20,000 of equity in your new property.  If you wish to purchase again you can use this equity to repeat the process all over again. 

This is where you need to decide whether you would stay with interest only on your first mortgage or whether you would go for the interest and principal payment.  If you took an interest only loan on the first home for 12 months, the chances are that you could refurbish the second home within that time frame anyway.

Planning is the key

There probably will not be any major interest moves upwards over the next 12 months so if you want to adopt this strategy for creating positive cash flow on your investments take the time to sit and plan it all in fine detail first.

Two very important steps in this process are:

• Knowing what you can borrow
• Detailing the exact property you need to buy to make it happenWhen you have worked through the financial strategies, you then need to look at the practical side of the project.

During these financially critical times there are many companies that have had to quit stock at exceptionally low prices and you may be able to gain from their unfortunate circumstances.

By being able to purchase household fittings, especially kitchen and bathroom wear you could quite possibly add much more value to your house than we have indicated above.  The kitchen and the bathroom are the two most expensive rooms to refurbish and in today’s market they can be done quite economically.

Creating positive cash flow in these tough financial times will put you in an excellent position for future growth of your property investment portfolio as the financial market improves.