Now investors can no longer ring-fence their property losses, we’re expecting to see higher demand for cashflow positive properties.
If you’ve been offsetting property losses against your income, now is the perfect time to talk to your accountant about the implications for 2019.
If you’re in the market for another property, particularly considering the slightly relaxed LVR rules this year, positive cashflow can easily be one of your must-haves. In the apartment market right now, positive cashflow isn’t a given, but you can find it – even with the management fees.
Our sales manager, Mike Waldron, has a perfect example. He’s got an apartment listed at a sale price of $280,000, which rents for $650 a week (furnished). That’s a gross yield of 12% and an annual income of $33,800. When you subtract the outgoings – including the body corporate fees, full property management, insurance and more – this property is cashflow positive to the tune of $60 to $75 each week, or around $3500 a year. The figure will depend what mortgage rate you can get, and right now there are some very hot sub-4% deals so you might even find you can nudge that annual profit up further with some sharp negotiation.
The main objection to buying cashflow positive property has always been that the gains you make over the year are peanuts in comparison to the huge gains you could make on a higher-priced ‘capital gains’ property. That might be true. But there are few reasons why that doesn’t really matter:
- You can’t easily use capital gains to help you pay for the groceries each week.
- You can’t be certain about capital gains and it may take years of topping up the debt before the property’s value rises.
- Cashflow positive properties also tend to gain in value when the market rises. Apartments roughly doubled in value between 2010 and 2016. While also, in many cases, making their owners money every week.
If you’ve never owned a cashflow positive property before, it’s really a very good feeling – the property pays you to own it and the capital gains are a delightful bonus. Give us a call and take a look at what’s on offer; you might be pleasantly surprised.