As cash flow positive property seems to be on the mind of every would-be investor in the current market, we show you how to track down the deals!
Finding a cash flow positive investment is “like mining for gold”, says Judith Taylor, buyer’s agent and principal of Select Property Finder in Newcastle: “The good deals are not sitting on the surface, you need to dig deeper.”
“It’s amazing how many people tell me that they’ve been searching for cash flow positive property on the computer every night for months on end, and the conclusion that they come up with is that it doesn’t exist,” she says.
The truth is, positively geared deals can be found all over Australia, according to Taylor – but property buyers must be willing to put in the hard yards to find them.
“The cash flow positive deals sitting on the surface are usually either found in mining towns or regional areas, and by the time an investor does research on a specific mining town, quite often the prices have already risen disproportionately,” Taylor says.
Investing in these types of towns can be quite risky, she adds. The alternative, Taylor suggests, is “to go gold prospecting” and by that she means you must be prepared to put in some elbow grease in seeking out a profitable deal.
“I am a great believer in investing in an area that has multiple industry and employment opportunities, signs of expanding infrastructure and population growth,” she says.
“Look for the types of properties that have potential to add value and increase the yield. For example, a cosmetic renovation or adding a room under the roofline to create an extra bedroom could add significant value.”
Alternatively, look at suburbs that have large university campuses and consider converting your property into student accommodation. “When structured as rent by the room, this type of investment – when well managed – is usually cash flow positive,” Taylor says.
“Look for areas where student numbers are on the increase, such as Newcastle, which was one of only four Australian campuses to have an increase in student numbers over the past 12 months, in addition to forecast future growth.”
Granny flats are another way to add value to a property very quickly. “In NSW, approval for a granny flat can be obtained in under 14 days. The cost of the granny flat is quite low and when added to the initial property, it results in almost double the rental income,” Taylor says. “Furnished accommodation, serviced apartments and holiday letting are other considerations to achieve higher yields.”
When shopping for property, she recommends that you keep these strategies in the back of your mind and with each deal that you assess, ask yourself, “How can I add value to increase the rent?”
“Take care to carefully research so that you are purchasing at less than market value, and check the comparative market rents to ensure that you can achieve the yield that you require,” she advises. “Remember too that a yield that is neutral now, in a good location, will gradually become more cash flow positive as rents increase over time.”