Investing in property is all about generating positive cash flow. Therefore, if you are wondering how to find positively geared property, learn here.
Positively geared property is very common in the real estate investing business. It is also the best form of income properties in real estate. Positively geared properties, basically, produce positive cash flow. Thus, if you are aiming to make money in real estate, investing in positively geared property would make the most sense.
Related: What Is a Positively Geared Property and How Do You Find One?
Before we get into the process of how to find positively geared property, we are going to tell you why it is better to invest in positively geared property:
How to find positively geared property: Positively geared vs. negatively geared properties
As we said before, positively geared properties generate positive cash flow. On the contrary, negatively geared properties generate negative cash flow. That is why they are called “capital growth properties”. However, we are not saying that it is not a good idea to invest in these. They just require a different level of real estate knowledge and experience.
Related: Positive Gearing and Negative Gearing in Real Estate Investing
How to find positively geared property: For whom is positive gearing?
Really, there is no one category as to who should invest in positively geared property. However, what we intend to say is that if you are a beginner real estate investor, then you might want to start investing in real estate with a positively geared property. As a beginner, you are always on a limited budget. You are probably financing your investment property with a mortgage. In this case, you will need to be investing in property that is going to pay for itself.
You can still invest in negatively geared properties, however, only when you reach an advanced level of experience. They are good when you want to diversify your real estate investment portfolio.
How to find positively geared property: Why are positively geared properties great income properties?
Investing in property, in general, is great. However, when it comes to positively geared properties, in particular, they are the best. Buying an investment property that is producing positive cash flow is the equivalent of becoming rich.
Another great aspect of positive gearing is comparing different investment properties. When buying an investment property, you start comparing the choices that you have. The main determinant of a property’s profitability is actually the cash flow. The more positive the cash flow is, the higher return on investment you expect on your investment property.
How to find positively geared property: The process of finding positively geared properties
Finding positively geared properties is not a hard thing to do, actually. It is all about how and where you look for them. In this case, all you have to do is the following:
How to find positively geared property: Investment property financing
Investment property financing is very important at this stage. Before getting into any business, the first thing you do is find financing. At this point, it does not matter what financing strategy you go with when buying investment property. The thing that matters the most is doing proper math when dealing with the budget. You can choose to borrow the money from your father or even a bank. The financing strategy is the least important. All that matters is actually getting the money to fund your investment property.
How to find positively geared property: Hire a real estate agent
Needless to say, a real estate agent is a professional when it comes to finding homes for sale. A real estate agent always knows where to find properties that are profitable. Make sure you set your goals straightforward for your real estate agent, so that he/she understands precisely what to look for.
Moreover, a real estate agent will not only help you find homes for sale but also analyze properties. This is a very important procedure you should follow when buying an investment property. Therefore, the next section is all about investment property analysis.
How to find positively geared property: Investment property analysis
Investment property analysis is the procedure that EVERY real estate investor goes through when buying investment properties. It is the secret to owning the best income properties in real estate investing.
Investment property analysis is essentially an estimation of the return on investment for properties. These estimations are calculated using a variety of investment property valuation methods, such as:
The cash flow: The whole point of investing in property is cash flow. Making money in real estate literally means having positive cash flow. The formula, moreover, is simple math: Cash flow = Rental income – Rental expenses. Calculating the cash flow is the easiest and the most efficient way to keep track of your income properties’ performance.
The cash on cash return (CoC return): This basic real estate metric is all about the amount of cash you have invested. To calculate it, you have to compute your annual cash flow and divide that by the amount of cash you have invested. It is a great metric when you want to get accurate figures in real estate investing.
The capitalization rate (cap rate): Another very important, yet basic, real estate property valuation method is the cap rate. Real estate investors depend on it to calculate the return on investment based on the property’s value. The reason why real estate investors rely on it is that it gives them a general idea of the rate of return when buying an investment property.
How to find positively geared property: The investment property calculator
How to find positively geared property? The answer is: Use the investment property calculator. This real estate investing tool is the best when it comes to buying investment property. Its features include dealing with numbers as well as performing market analysis. It deals with real estate facts such as top locations and past housing market trends. It will also contribute to your choice of a rental strategy when investing in rental property. The best thing about it is efficiency, simplicity, and error-free calculations. Therefore, we recommend you check out Mashvisor’s investment property calculator and start finding the best real estate deals right away.
Related: Mashvisor’s Investment Property Calculator: Real Estate Investing Made Easier