When you begin to learn to about property investment, you will find a lot of different strategies and lots of people pushing different views on the right strategy. Its important to have an element of wise ness and common sense when making decisions in choosing the property investment. This article discusses positive cash flow and talks about what to look for when buying an investment property.
The concept of positive cash flow is straight forward; it simply means that the property that you invest in generates more monthly income for you than you have to payout. In other words, the rent that you generate is more than the combination of your outgoing payments on buy to let mortgage interest rates, your property management fees, bills etc. Having a property that gives positive cash flow means that you have a property that gives you a regular income as opposed to losing any money.
So why would an investor not purchase a property that generates a positive cash flow regularly? The counter view to buying positive cash flow property that people talk about is the fact that with property investment you need to think about 2 main elements; the rental returns (whether the rental income is positive or negative) and capital growth. Many people take the view that you cannot have both elements working for you in your investment strategy and believe that you can have one or the other. It is generally believed that if you get a property with a positive cashflow, it is usually at the detriment of the capital growth. With so much of the money coming from property capital growth, in a lot of cases, the capital growth can be compromised in a positive cashflow property, so it is something you would want to keep an eye on and ensure that having a positive cashflow does not mean you sacrifice capital growth.
If the research is done correctly, there are definitely investment deals out there that offer both capital growth and good rental returns. The key is in doing your research before completing on the purchase. If you are unprepared to do the work, it is unlikely that you are going to find the right property investment deal. That means looking for the right property sellers, looking into untapped towns and areas and getting the properties in the growth areas.