Advantages & Disadvantages Of Positive Cash Flow Properties

Here are the benefits of property investment with positive cash flows.

Monthly Payments

Of the main benefits of investing in properties with positive cash flow are the monthly payments that go straight into your bank account every month, once the property has been rented out of course.

The one thing to look out for in positive cash flow investment properties is to make sure that the money coming in every month is more than the money that you are spending on the investment. For example the rent should be more than you are paying for the mortgage if you want the most basic way of looking at it.

Once you are doing this with your positive cash flow property then you are in the passive income lane which should bring more profit on your investment.

Tax Benefits

Positive cash flow investment properties enjoy tax breaks because they class as an investment business, and all investment businesses get tax deductions.

Positive cash flow investments also enjoy the added benefit of paper loss, such as depreciation. This depreciation offsets the cash flow that your property brings in.

Appreciation

The Holy Grail of all investments, cash flow properties have tended to increase in value over the past couple of years. This means you should be able to make a bigger profit on your investment than you originally thought.

Here are the disadvantages of property investment with positive cash flows.

Extra Tax

Although you tax breaks for business investment and depreciation you are also earning more money from your positive cash flow investment and because of this you get taxed more.

You may not be taxed on the property investment but the money you receive a month or over the year will be subject to tax. Added on to some people’s wages this could be the difference between the low tax bracket and the intermediary tax bracket.

Geography

Geography affects positive cash flow investment properties because they tend to be in the outer areas of towns and cities and this makes them vulnerable to economic cycles.

For example if the investment property Sunshine Coast was in the centre of the business district then they would generate higher economic growth over the medium and long term.

Maintenance

This might all seem a little general but these properties are indicative of what is being said, and as a result another disadvantage is higher maintenance costs and tenancy problems.