Peter Gordon Dip.FP. & Dip.FMB.
e peter@investoproperty.com.au
Ph: 0401 214 134

Cash flow and why it is so important when investing in property

Friday, 29th May 2015

The key to investing in property is knowing your ‘number’. What’s the money coming in the door and the money going out? The average investor forgets this step. They forget to budget and plan.

Remember, if you are investing, then you are building a business. This business will be worth hundreds of thousands of dollars.

As with any business, it’s important to give it a name and manage your cash flow. What you need to know is how much the investment property will cost you each week, fortnight, month, or year, and then plan accordingly.

 

Step 1

Open an investment property business bank account.

 

Step 2

List your property expenses in a spread sheet:

• mortgage repayments

• council rates

• water

• insurance

• real estate management fees

• strata levies (if it’s an apartment).

 

Step 3

List your annual rental income.

Weekly rent x 52 = Total yearly figure

(Investo Property recommends Weekly rent x 50 for any vacancies).

 

Step 4

Calculate your rental income minus expenses.

 

Step 5

If the figure is ‘negative’ you are making a loss on your investment property. When investing in property, this loss can be offset against your taxable income, and you can receive a tax refund.

 

Step 6

The hidden investment nest egg is deprecation. What does this mean? Simply put, if you purchase a new property, you can claim the cost of depreciation (a percentage of what it cost the developer to build your property) as a loss against your income.

 

If you have a question or would like to know more about cash flow you can download our ebook why property, join us at our next seminar or contact me, I would love to talk to you peter@investoproperty.com.au