cam someone explain this to me please. i saw steve mcnights story on today tonight last week and i am new to this so i might be a little bit ignorant. they said that because of the property leveling and in some places losing value i was harder to find positive cashflow properties. i dont understand this??? if properties go down, u dont have to borrow as much thus your repayments are lower. if property goes up you have to borrow more to purchase it so your repayments are higher which could overtake and could be more as your rent and overall expences on the property for the year!!!
can someone explain this to me. i could be totally wrong though!!regard michael
ta
Tamtam,
It is about “cashflow” not property purchase price. Sure price to purchase will be cheaper when prices go down and vice versa, but cashflow is not just about what you pay for a property, it is also about HOW MUCH you have to keep paying compared to HOW MUCH IS LEFT OVER once you paid all associated costs.
Positive cashflow means MONEY IN YOUR POCKET once all COSTS (eg. mortgage payments, PM fees, rates, land taxes etc etc etc) are taken out. If you have nothing left over, the property is said to be NEUTRALLY geared, if you have to dig into your pocket to make up the shortfall in all these costs it is said to be NEGATIVE geared, and money spare is POSITIVELY geared or CASHFLOW POSITIVE.
Hope this helps.
Jo
Usually, rents go down when property prices drop so a lot is relative.
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