This is probably one of the biggest misconceptions in the market place and one which costs many potential investors big money in lost opportunities. Don’t you fall into this trap!

Positive cash flow properties are NOT hard to find if you know where to look and how to find them. However, some people give up after a few phone calls and when they can’t immediately find a property that meets the formula.

Our response to this question is comprehensive so please take the time to read it carefully. It may be worth hundreds of thousands of dollars to you if you make the mental shift to understand how and where to find the gold nuggets. It will set you apart from the crowd.

The first thing to understand is that you need to know how to recognize an opportunity when you see one.

Please understand that some of the biggest opportunities in life are not going to come chasing after you. You need to go looking for them AND you need to know what they look like when you find them.

This is probably the second biggest misconception that many property investors buy into and it simply isn’t true!
There are basically two ways to make money in property.

One is through capital gains and the other is through rental returns.

Some of the capital gains enjoyed by property investors have been very substantial and create the impression that this is the major reason for holding property.

While we enjoy the capital gains of property investing, I think it is a safer strategy for the future to focus on positive cash flow rental returns.

The cash flows from your properties offer you a greater degree of certainty and security than the speculative opportunity of a capital gain.

For long periods of time, real estate appears to do nothing. Then all of a sudden it may increase dramatically and before you know it, the value of your properties seems to skyrocket as buyers scramble to buy up everything they can get their hands on.

Rents on the other hand, tend to be far more stable and predictable. During property booms, rents will have trouble keeping up with the escalation in property values, however they tend to climb steadily in small increments as the rental demand continues.

One of the biggest lies perpetrated by property marketeers is that positively geared properties do not enjoy capital growth.

This simply isn’t true!

Often there may be a timing difference between when inner city properties enjoy massive growth and when this filters out to the outer areas.

So next time someone tells you that positive cash flow properties DO NOT enjoy the type of capital growth that negative geared real estate does, recognise it as a lie and ignore what you are being told.

Yes we’ve heard these horror stories BUT we believe the key to stress free property management is good tenant selection, firm property management and insurance.

If you (or your property manager) check out your tenants past history, check up on their references and generally interview them, you will usually sort them out fairly quickly.

The next key to success in this area is to carry out regular property inspections as often as permitted by law (or have you manager report to you in depth). If your tenants do not look after your property properly, do not pay the rent on time or cause lots of complaints, it’s time to be firm and move them on.

Just to make sure that you have taken every other precaution, you need to insure the property and recognise that if things go wrong, you can always fall back on your insurance.

When you buy a new property you would certainly expect to have fewer maintenance issues than with an older property and where issues arise, it is likely that they will be covered by the builder’s warranty for a number of years. You also have far greater deprecation aspects.

Depending on the age of the property, your depreciation deductions will be lower when you buy an older property. Nevertheless if you obtain a quantity survey for your property, you may be surprised at how much depreciation can still be claimed.

In addition to depreciation there are many other tax deductions available to you as a property investor, irrespective of whether you have bought new properties or older ones. You need to discuss these possibilities with your tax adviser.

When you are told things like this, it is a good idea if you ask yourself whether what you are being told is just sales talk, or whether it is fact. You also want to think about whether what you are being told is coming from someone who really knows what they are talking about or whether what they are saying is just their opinion.

Listening to opinions is a waste of time. Remember talk is cheap – especially from armchair experts.

Absolutely! Find yourself a good property manager, tell them what you expect of them and keep a close eye on what they do.
Be willing to change your property manager if they do not perform to your expectations.

That will depend on how many properties you want to own and your particular family and tax circumstances. We advise you speak with your tax specialist to structure your portfolio, minimise tax and pass on your wealth to your loved ones as effectively as possible.

Yes, but we advise you speak with your tax specialist to structure your portfolio, minimise tax and pass on your wealth to your loved ones as effectively as possible.

A small or DIY (do it yourself) superannuation fund is an individual, family or small business based fund of one to four members.
The DIY fund is a separate legal entity. This is what makes having a DIY fund different to holding a member account within a larger superannuation master trust or retail superannuation product.

Because of their small size, and the closeness of the relationship between the fund members and the fund trustees, the fund members have a far greater say in how the funds operate.

DIY funds form the fastest growing segment of the Australian superannuation industry. Australian Prudential Regulation Authority Statistics of January 2003 show 246,000 small funds with a total of 430,000 member accounts holding total assets of $99 billion.
On average self-managed super funds have 1.75 members, with a member account average balance of $230,000. (Source: The Association of Superannuation Funds of Australia Limited).

Land Tax is a state tax that varies from state to state. Some states have an exemption threshold which applies before land tax is levied. Thresholds may be different depending upon whether you buy the properties in your own name or in an entity.

Larger portfolios will generally attract land tax and it is your responsibility to find out if you are liable for land tax.

It is best if you consult your accountant for specific advice regarding your particular circumstances.

Four things have got to happen for you to grow concerned about the future of real estate. You can start to worry when:
1. People become addicted to sleeping without a roof over their heads,
2. Young families stop making ‘tricycle motors,” (think about it)
3. Someone invents a new way to manufacture vast quantities of cheap, vacant land near major cities.
4. The world’s thirst for Australia’s commodities and resources comes to a standstill… not likely, not for a very long time…

Seriously, can you envision a time when people won’t be buying and selling real estate?

Can you imagine a time when people won’t want to be financially independent?

That’s why we are so confident about real estate. As long as people need roofs and families grow kids, real estate is a sure bet – barring, of course, another Great Depression. In which case, we’ll just keep playing the game at lower prices, because even in a depression, people still need a roof over their heads and families still grow kids.

Good question because these terms are very different.

Positive cash flow means: that after all expenses of owning and managing your rental property have been met, you will have a cash surplus from your properties BEFORE any tax refunds are taken into consideration. At worst, you will be looking for a break-even situation.

Because Land Tax is an expense that only certain investors with larger property holdings incur, we do NOT allow for Land Tax in positive cash flow calculations.

Most people are into negative gearing (whether they know it or not!).

As their property portfolio grows, many negatively geared investors eventually reach a point where they can no longer obtain finance to buy another property. With each property they buy, they need to put in more of their income.

Negative gearing is where the investor needs to contribute money out of their regular income to support their investments. Since they also need to meet their living and lifestyle expenses out of that regular income, there is clearly a limit to how many properties the negatively geared investor can purchase before the banks say stop!

The only way that such an investor can acquire more properties is if he or she gets a substantial pay rise or if the rental income from their existing properties increases dramatically. Even though the properties may be appreciating well, the negatively geared property portfolio still requires ongoing external cash resources to pay the bills and more particularly, to service borrowings.

We’ve heard more than one negatively geared property investor lament: “I invested in property so that I could eventually leave my job but now I find that the more properties I own, the more I need my job to keep paying for the investment properties.”

With all of the attention surrounding positive cash flow real estate investing, some negative gearing advocates have re-invented themselves as positive gearing gurus and marketers.

They pretend that they are talking about positive cash flow when in fact they are merely presenting negative gearing as something different. They say that you can achieve a positive cash flow from these loss making properties through the tax refunds arising from the depreciation allowance.

They talk about positively geared properties with a 6.5% rental return or an even lower return.

This is just negative gearing dressed up to sound like something different. This is definitely NOT positive cash flow.

Just think about it.

If your loan interest rate is 6.5%, how could your property possibly be achieving a positive cash flow when you still have to meet the cost of council rates, water rates, property management fees, insurance, repairs and possibly body corporate fees.
Ah, they say. You have to allow for the tax refund you get on your cash outgoings and non-cash items such as depreciation.
When they do the calculations, these people use the individual tax rate of 48.5% which may or may not apply to you. They also talk about paying the least amount of tax. Here’s the problem.

If you want to pay the least amount of tax, then your tax refund will also be lower and therefore, guess what? – You are looking at a real cash loss. Money out of your pocket! Isn’t that called negative gearing?

You can’t have it both ways!

The problem is that they play these smoke and mirrors tricks which you only discover later on down the track.
And there’s another problem. The depreciation allowances which these pseudo positive cash flow advocates rely on for their cash flow calculations, actually decrease over time.

Furniture and fittings are often fully depreciated somewhere between three and five years. Therefore, if you rely on these items for your cash flow, you may find yourself dipping into your pocket once these depreciation allowances run out unless your rental return increases sufficiently to cover the shortfall.

These people claim to be talking about positive cash flow but in reality they are not.

Beware of these imitators that are selling you down the negative gearing road!

Once again, positive cash flow means: that after all expenses of owning and managing your rental property have been met, you will have a cash surplus from your properties BEFORE any tax refunds are taken into consideration. At worst, you will be looking for a break-even situation.

It is your choice what type of properties you invest in. It is also your choice whether you invest or not. You alone will decide whether you are willing to lose money by following the negative gearing path or even the so-called positive gearing path, or whether you want to invest to make money. It is our strong hope that you will see the light and become another one of my true positive cash flow success stories.

If you own your own home or any other piece of real estate, you may have equity in this property that you can use to purchase one or more investment properties.
If you don’t own any real estate and have a well paying job, you may be able to start on your investment portfolio straight away. It may depend on how much you have in savings or what type of loan you can get and the type of property you want to invest in.
These days there is a large variety of loan products available including “low-doc” and “no-doc” loans which can suit a variety of investors.
You may also find some joint venture partners who are willing to work with you to invest in property for your mutual benefit.

Some people say yes. We say it depends on the overall market trend, current interest rates and the particular property you are looking at. There are good times to buy property and there are even better times.

Buy during times when the sellers are more negotiable. This will be at times when demand is low and property prices are stable or falling and when it takes a long time to sell a property. It stands to reason that when the market is hot, your chances of negotiating a good deal are lower than when the vendor is struggling to sell his/her property, particularly if he/she is under pressure.

Good deals can still be found in a strong market but they can be harder to find and are more easily recognised by those people who have done their homework and who know what they are looking for and where they are most likely to find it.

Sometimes it just makes sense to learn, study, do your research and to invest when the time suits you. When the market is hot in your particular area it may make sense to check out other markets that may not yet be as buoyant.

Most certainly! Anyone who tells you otherwise doesn’t know what they are talking about. Property is no different to other markets that go up and down with supply and demand and the desire (or need) of particular vendors to sell quickly.

The good news is that property is not as volatile as some other markets and even though values may pull back a little for a while they often tend to stabilise rather quickly. The other point here is that if you don’t need to sell at that time, it won’t really affect you.
Here’s another important distinction to be aware of.

The types of properties we advocate are in regions with massive government spending and intrinsic value through mining, infrastructure, industry and development. This is the biggest sector of the market. This is the sector that experiences the smallest impact in an economic downturn.

It’s the top end of the market that gets hit first because tenants scale back their accommodation expenses in a financial squeeze and look for something cheaper. That means that the demand for average properties actually increases!

They may not be as glamorous as some of the higher priced properties but they are certainly more solid and predictable and you can own more average properties for the same investment that you would need at the top end of the market.

Have 3 properties for $100,000 than one for $300,000 because with three properties splits have the risks three ways. If one of the tenants moves out, you still have another two to pay the mortgage. If the one tenant in the $300,000 property moves out, your cash flow stops. Which would you prefer?

Our free property investment advice is provided to source property market past history and future growth information from reputable independent research companies to locate the right property investment.

Statistically in Australia, over 70% of property investors are on incomes between $35,000 and $40,000 per annum. Over 90% of all millionaires become so through investment in real estate.
“It’s not how much you earn that counts, it’s what you do with what you earn”

What you mean is that you have no cash deposit. Cash is not really necessary when you have equity in your own home.
Having sufficient assets against which to borrow is all that is required and in this way, you can borrow the full amount plus all the additional costs. Finance your investment property with an investment property loan that is affordable with manageable repayments.

It is the compounding effect of property value increases which is so powerful. As each year passes growth occurs on top of growth.
If a property is worth $100,000 today and next year it increases in value to $110,000, then the year after that if it increases at 10% again the value will be $121,000, that is $110,000 plus 10% (or $11,000) and on goes the escalation. Its exponential growth accelerating at a faster rate as each year passes.

To use a well worn gardening analogy, it is a little like planting a tree. Early growth is slow, but as it establishes itself it grows faster, and starts to fruit. The fruit drops, and more trees grow and start bearing fruit. Before we know it, we have an orchard.
It is a similar kind of compounding effect with property. Property wealth creation comes ever so slowly at first, but eventually arrives in abundance. You have to make a start, no matter now small. With prudent property investment all that you need is the right information, time and patience. For a detailed explanation of compounding, please view the Power of Compounding page.

With over 40 years collective experience in the Australian property market and access to the latest past history and future growth property investment information from independent research companies, Pearl Property Wealth can help you with free investment advice on property investment. Simply contact us