Please explain the postive cash flow concept

Hey GetRichorDie Trying,

To build on TerryW comment, your rental income exceeds your outgoing costs such as interest on loan, property management cost, strata levy etc.

There are two forms of positive cashflow and these are as follow:

    * Positive geared cashflow
    * Cash flow positive

Positive geared cashflow = your rental income is greater than your outgoingcost  (taken into considering your "on paper deduction". What is "on paper deduction"? This is the cost of depreciation of the building primarily which is not really cash expense more like a phantom loss. Also, it is an incentives by the government.

Cash flow positive = your rental income is less than your outgoing costs BUT through "On paper deduction"claim from ATO, it sufficient to wipe out your loss (negative geared) turning it into cash flow positive.

What is negative geared you might ask? Negative means, you are making a loss (i.e., your outgoing costs outweight your rental income). Whereas, gear(ing) is simply means borrowing hence you are borrowing to make a loss (Negative gearing).

If you have any other question feel free to post it here and someone who has knowledge will certainly help you out.

Hope this helps.

Cheers Leo

" Victory belongs to the most persevering"

Hi getrich

If you want to work out whether a property might be cashflow positive or negative you could have a play around with figures on the IP spreadsheet on my companies website – http://www.passgo.com.au/pass-go-investment-property-analysis-tool

Cheers

Jamie