Top 10 Powers of Positive Cash Flow

In an era where the Australian property market is ever-fluctuating, the age-old strategy of banking on capital appreciation alone no longer holds the security it once did. With rental yields averaging 3.7% and negative gearing at record levels, it’s clear that the savvy investor’s focus should pivot towards properties that offer positive cash flow.

If you are thinking that cash flow is just immediate returns and doesn’t hold its weight like long term capital growth, think again. Cash flow can be a truly powerful tool in a wealth creation strategy and ongoing financial planning.

Positive cash flow short and long term benefits

Here are 10 reasons why cash flow should be a top priority when considering investment opportunities:

1. Inflation Hedge. Positive cash flow properties offer a direct hedge against inflation. Living costs rose at a record pace of 9.1% last year, a pinch that also included mortgage interest rates doubling. Cash-flow positive properties can provide an additional passive income to counteract inflationary pressures.

2. Immediate Income. Unlike capital growth, which is realised only upon sale, positive cash flow offers immediate, tangible income, essential for maintaining your lifestyle or reinvesting. A second income helps improve your financial situation in both short and long term.

“When it comes to capital growth, there are ways that you can utilise it now without having to sell your home,” says Mark Reed, International Sales Manager for GPFG. “By releasing a portion of the equity in your home and investing into a property that earns cash, you can make that equity work for you to either pay down your mortgage or cover bills, rather than leaving it parked.”

Read more: Equity Release Done Right

3. Financial Stability. With the right property investment and management, passive income is earned on a regular basis. These steady income streams and reliability are invaluable for long-term financial planning, particularly to help weather the storms of market volatility or to save for retirement.

4. Leverage for Growth. The consistent income from positive cash flow properties can be reinvested into your portfolio, accelerating growth through compounding or enabling the acquisition of additional properties.

Mark says, “This leverage is another point we mention when we look at equity release for cash flow. Once you release that equity, not only is it cash in your pocket, but you can use it to pay off debts and better your financial position to invest in more properties.”

5. Reduced Investment Risk. Properties generating positive cash flow are typically less risky, with the right research and planning. Cash flow is earned through steady occupancy, and while it can vary for seasonality in places that are known for vacations or student housing, investors can generally forecast their income from year to year. Cash flow positive properties provide ongoing rental income even during downturns in property values.

6. Enhanced Loan Qualification. Many Australians saw their borrowing capacities shrink over the last year. Cash flow and additional income from investments enhances your profile, making you a more appealing candidate for loans. This can open doors to more investment opportunities and potentially better loan terms.

7. Retirement Readiness. Nearly every item on this list is an essential part of wealth creation, and getting you to a comfortable retirement. Positive cash flow properties not only help you to get there, but if you are about to retire, you can depend on a steady stream of passive income in your golden years. This financial cushion is crucial for a worry-free retirement, ensuring a steady flow of income to maintain your lifestyle without dipping into savings.

8. Flexibility in Financing. The steady income from positive cash flow properties underpins your financial stability. It covers ongoing mortgage and operational expenses, granting you more leeway in managing finances. This flexibility can be a game-changer, especially in times of market volatility or personal financial upheaval.

9. Tax Benefits. Owning positive cash flow properties can be tax-efficient. Rental income often comes with the perk of deductible expenses, like maintenance and management costs, and depreciation. These deductions can significantly lower your taxable income, providing a noticeable boost to your net earnings.

Read more: How Can Property Investors Maximise Their Tax Savings?

10. Wealth Building. Positive cash flow properties are a reliable foundation for wealth accumulation. The predictable income stream not only covers expenses but also offers surplus funds. This surplus can be reinvested or used to improve your personal financial situation, paving the way for long-term financial growth and stability.

“Building wealth and securing a comfortable retirement is at the heart of what we do for our clients, as we emphasise the importance of positive cash flow,” says Mark. This income is much more valuable than just cash in your pocket right now. Of course, use it now to pay off bills and pay down your mortgage, but then you can plan for how you will use this steady income to better your financial position down the road.

Cash Flow Positive Solutions at GPFG

We have written about the balance of cash flow and capital growth before, and we wanted to highlight why cash flow is vital to a wealth creation strategy.

Our positive cash flow opportunities:

– Guaranteed 8% Return During Construction – You can start earning from Day ONE

– Projects that are Open and Operational this year – With a booming tourism market, developments that are opening in April and November are set to earn 15-20% within their first year.

– Fractional Property Investment – Invest with as little as $41,000 with our fractional investment opportunities, and still earn the same returns as whole purchases.

Talk to our team today about earning cash flow in our Premium Partner developments. By focusing on properties that offer positive cash flow, investors can secure a stable, resilient, and growth-oriented portfolio.

 

 

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