Real estate is a tricky thing. The majority of us buy real estate in order to have a place to call home, some of us buy real estate to build our portfolios and make some good money on the side renting out places. None of us, however, want to lose money on our purchases. Whether we are going to use it personally or use it as a source of passive income, we all want to feel like we’re purchasing an investment…not a liability.
Our more real estate savvy friends throw around the term “cash positive” a lot but what does it really mean, or take, for a property to be categorized as “Cash Positive”.
What is a Cash Positive Property?
For a property to be cash positive it has to make money up front. A property can be cash positive if you purchased it at a lower price than the average in the area so you can be sure that should you resell the property you would most likely make some money from it. Purchasing property in high yielding suburbs can assure you that your property is going to gain value.
Some Tips on Choosing Cash Positive Properties
Like mentioned above buying low or buying in good locations can spell the difference between investment and liability. We honestly we wish it were as easy as that though but it isn’t. There are quite a lot of factors that contribute to how much return you’re going to property. Below are just some guides and tips to help you make a more informed decision.
1. Before buying a property include renovation cost into your budget
A well planned and executed renovation can add so much value to any property. You will be surprised by how much new fixtures and cabinets can increase the perceived value of the property that you offer. Of course increased rent and property value follows after that.
2. Buy in regional areas or near college towns
Regional properties are cheaper in general so you make more money upfront. Targeting student accommodation by buying in a location near a college town will ensure you have renters all year round for years to come.
3. Target multiple income properties
Look out for properties with a small pool house, guest house or “granny flat”. This is especially true if you are looking into purchasing a home. The main structure could be used as your home while the secondary suite could be used as rental space.