Property investment is a good way to maintain a good cash flow. Cash flow can be positive or negative and a good cash flow implies that there is money to spare after all dues have been paid. In the case of property, a good cash flow means that the income earned from it in the form of rent is more than the liabilities or dues to be paid, including mortgage payments, maintenance dues and other payments.
Property yields a good cash flow if it gets a rent that is higher than average as compared to the buying price of the property, and there is something left over after meeting all property related dues. While such properties may be fewer and not easily found, they are most likely in prime localities where people prefer staying even on rent. A high demand leads to higher rents which will lead to a good cash flow.
When cash flow is positive, more and more properties can be added to an investment portfolio since the net returns are positive and they do not pose any burden on the investor. Properties also help a good cash flow. This is due to the reasons explained below.
How property helps good cash flow
- Yields passive income- Property yields passive income for all investors. If it is used for living, it helps to save on rent, and if it is rented out, a passive income is earned, which supplements regular salaries. With the earning amount increasing, all expenses can be met easily and some cash left-this is the positive cash flow accruing to the investor.
- Balances asset returns- Since property is less volatile, and does not decline sharply, it helps to make up for losses incurred in other investments. This keeps the cash flow for an individual on the positive side.
- Leads to capital growth and appreciation- Property appreciates in value over time, and the capital invested to buy it, grows with the increase in its value. For those using the flipping property investment strategy, every sale leads to a positive cash flow, which can be either reinvested fully or used partially to meet expenses.
- Tax benefits helps cash flow- When a big sum of money is invested in property or a mortgage taken, several tax benefits accrue to the investor. This means that he will now have to pay less tax and this saving helps the cash flow situation, leaving money in his hand.
- Capital creation and capital gain- Property is a highly capital intensive investment, which often means taking a mortgage loan. This helps to create capital for an individual by helping him pay for it in small amounts, over a period of time. Once the mortgage is paid of it amounts to having capital gains through complete ownership of a valuable asset, which in turn indicates a good cash flow.
Thus property investing is good for cash flow for investors, leaving them with money to spare after meeting all their financial obligations.
| For further reading on Property Investment NZ, click on the articles below: Setting Goals for Financial Independence – click here Tips for Becoming a Property Expert – click here Buying Rules for Property Investment – click here 5 Tips to Add Value through Renovation – click here |
January 17, 2012
Wealth Mentors