Getting your strategy right – 2. Positive Cashflow


This is the second post in our ‘Getting your strategy right’ section of the Everyday Property Foundations series and I’m sure it will be a popular one.  After all, who doesn’t want to own property that actually makes you money?  Our post today will look at positive gearing and positive cashflow property, including what these terms mean, the pros and cons and where or how these properties can fit into your investing strategy.

What is Positive Gearing

We’ve previously looked at negative gearing and we determined that a negatively geared property is one where the rental income is less than the expenses and interest on borrowings.  A negatively geared property is one that makes a loss and this loss is then able to be offset against your taxable income.

A positively geared property is pretty much the opposite of this.  It is a property where the rental income exceeds the expenses and bank interest payable and therefore the property is making a profit.  The profit from a positively geared property must be declared as part of your taxable income and therefore you will pay tax on this profit.

So basically, it comes down to this:

  • You buy a property
  • The income from the property exceeds the expenses (including interest) from the property
  • You are making a profit
  • This profit is included as your taxable income for the year


Positive Cashflow

This is where the waters can get a little muddy  in terms of definitions and terminology.  Many investors will recognise a distinction between a positively geared property and a positive cashflow property and so we’ll define a positive cashflow property here.

Sometimes when an investment property is negatively geared but the investor is able to claim a lot of on-paper tax deductions for a property, then these deductions can be enough to see the investor receive a taxation benefit that actually exceeds the cost of the property.  This means the overall effect is that the property generates a positive cashflow, putting money into your pocket!

So basically, it comes down to this:

  • You buy a property
  • The expenses and interest from the property exceed the rental income
  • There is a loss on the property
  • You are able to claim on-paper deductions for the property
  • The tax saving to you is greater than the loss made on the property
  • You receive cash back as a result; hence it is positive cashflow

Additionally, you can elect to receive this cash back throughout the year by varying your PAYG withholding via the Australian Taxation Office.  So rather than wait until the end of the tax year to receive your tax benefit, you can elect to forecast what this taxation effects of your investment will be and reduce the amount of tax in your regular PAYG income, effectively giving you more money in your pocket each payday.

In both cases, positively geared property or positive cashflow property, the overall effect is a positive cashflow to you, the investor, so from here in, we’ll simply refer to ‘positive cashflow’ to cover both of these terms.

The Advantages of Positive Cashflow

Well you don’t have to think too hard to come up with the major benefit of a positive cashflow investment.  It’s err…well…positive cashflow.  This is, of course, a great thing because not only are you making a profit but it means that you are still able to maintain and potentially even improve your borrowing potential.  When you think of negative gearing property, you can see that at some point your borrowing capacity will be limited by your ability to support the expense of owning the property. But with positive cashflow property, this limit on borrowing capacity is not an issue.   You may use the profits of your positive cashflow properties to live off or to reinvest.  And of course, if your investment location is well chosen and/or you have a bit of luck on your side then you may also experience capital gain on your property— now there’s a win-win for you.


The Disadvantages of Positive Cashflow

At this point you may be thinking, well, “What on earth could be the ‘downside’ of a positive cashflow property?”, as making money is what it’s all about, isn’t it?

Positive cashflow properties can be harder to find than negatively geared properties.  There was a time (well before my investing career, that’s for sure) when positive cashflow properties were abundant in some areas, but that time has well passed.  Nowadays you have to look harder or think smarter.  You may need to think creatively in order to manufacture a positive cashflow situation.

Traditionally when people have looked for and thought of positive cashflow properties then these properties have often been in regional locations rather than the capital city locations.  The issue there may be that these regional locations may experience slower capital growth.  Of course this is not always the case; however, it’s worth looking closely at capital growth history and potential for future capital growth before jumping on that high yielding property in the middle of nowhere!  If going for purely cashflow positive properties is your aim, you need to think about how you plan to make your money in property— if the plan is to build enough passive income on which you can retire, then you really need to have properties that are substantially positive or you’ll need to own a lot of properties.

The other ‘con’ that people often mention is that you’ll need to pay tax on your profit.  Personally, I don’t have a problem with paying tax on my profit.  It means I’m making money…surely, that’s a good thing!

Why would you use positive cashflow in your portfolio?

Balance.  Owning several negatively geared properties can be a difficult thing to sustain— it is a drain on your income and depending on what that income is, this can really impact upon your lifestyle.  Being able to balance out your portfolio with a mix of negatively geared and positively geared property can be a sensible course of action.

Passive Income. Some investors elect to only include positive cashflow properties in their portfolio and can even look to creating sufficient passive income on which they can retire from their ‘job’.

Growth. Whether the properties you buy are negatively geared or positive cashflow you should always be making educated and intelligent choices about the locations in which you choose to invest and the properties you choose to own.  These choices should be about maximising the potential for capital growth.  It is the leverage obtained from capital growth that can really build your wealth.


Positively gearing is where the income related to your rental property exceed the expenses, including interest, so you are making a profit.  Another means of generating a positive cashflow property is where a property may have sufficient on-paper tax deductions to provide a taxation saving so that, when coupled with the rental income of the property, the overall effect is a property that provides a positive cashflow for the investor.


  • You are making a profit each month
  • Doesn’t limit your borrowing capacity, can continue to service more properties
  • Can live off or invest the profits
  • Can experience capital growth in addition to the income from the property


  • Harder to find than negatively geared property
  • You may need to be creative to generate a positive cashflow situation
  • Can be in areas of slower capital growth
  • You pay tax on your profits

What do I think?

Positive cashflow property…hmm…let me see…yes, please!  I love this concept; however, I also think that it’s very important to think about your strategy when you say you are looking for positive cashflow property.  Holding a few properties that earn you $10 a week in areas with limited capital growth isn’t what you want to aim for, so you need to think about whether your plan is to build your portfolio for growth or your  to build passive income on which to retire.  The timeframe in which you want to achieve these goals is also a big consideration and will drive the strategy and types of deals which you will need to do.

Positive cashflow property can really make the difference for many investors between stalling their portfolio at 2 or 3 properties and really going on to create their ‘empire’!  Of course, no matter what your strategy is, you can always look at the properties you own or wish to buy and think creatively  how you can increase the yield on those properties to generate the optimal cashflow situation.

EPI 047 | Being Invested with Nathan Birch

Things we talk about:

  • How to choose the right locations in which to invest
  • The 3 key factors that must be present in a good investment property before you purchase
  • How to choose the right type of property (hint: it has nothing to do with the type of property!)
  • – mentoring, education, buyer’s agency service
  • – deal finding subscription service
  • – renovation project management and trades
  • – property portfolio management software service

Four Property Investing Strategies for bigger profits



There are more ways to make money in property than most people realise.

Many property investors, like myself, concentrate on one or two property investment strategies. Most portfolios are negatively geared, positively geared (or positive cash-flow) or a mixture of the two. If you’re an enthusiastic investor, and you have a little time, you might be interested to find out a little more about some alternative (and a little more advanced) investment strategies.

You’ve probably already heard of some of these strategies, such as renovation and development. The average investor feels as though these are strategies that “other people” do. It’s always worth keeping these strategies in mind, and here’s why.

1. Renovating

The Complete Renovation SystemA good renovation to the right property can increase its value by thousands. It can turn a dud property into a shining star. It can turn an otherwise ordinary yielding property into a positive cash-flow gem.

Renovating can be far more than splashing a coat of paint on a wall or covering a chair in some nice fabric. Knocking down walls, adding rooms, building up, building out… There’s a big difference between what you might be comfortable doing, and what you can get an expert to do.

Whether you choose to do a light (D.I.Y) renovation, or get the experts in, renovation for investment is strictly a numbers game. It’s critical that you plan well and assess the feasibility of the project before you even buy the house. You need to manage your budget carefully and know your costs. There are great packages that can guide you through the process and it can be worth investing in one, especially if you plan on renovating more than once.  Check out Kaz’s review of  The Complete Renovation System – the system she used for her recent renovation!

As I said, a good renovation to the right property can do wonders. But a bad renovation, or even a good renovation to the wrong property can be a sure way to throw your money away. Do your homework first!

2. Property development

Property development is almost the next step for an experienced renovator. If you’re considering property development as a strategy, you can leave your options open by focusing on buying investment properties on large (especially corner) blocks. This leaves you two options:

a. Keep the existing dwelling, earn some rental income along the way and build a second property on the block

b. Knock down the existing property and build a number of dwellings on the block

A great way to learn about property development is to find a mentor who has developed property before. Ask a lot of questions! Remember, also, that property development takes time so you will need to be able to cover shortfalls in your cash-flow for two or three years.

Development is a strategy which can give great rewards. Coupled with these rewards are higher risks and a more hands-on approach. This is definitely a strategy where you need to plan well, educate yourself, consult with experts and budget well.

Make sure your checkout our podcast episodes 25, 26 and 27 which feature interviews with Troy Harris, property developer from Rookie Developer.

3. Vendor financing

Vendor financing often comes into play when the purchaser cannot obtain finance through conventional means. The vendor essentially becomes the lending institution. The vendor and the purchaser come to a financial arrangement that is mutually beneficial and enables the buyer to buy the property and the vendor to provide a financial arrangement that yields a profit for them also.

This is clearly a strategy where all the legalities need to be sorted out. If you’re considering entering into such an arrangement, you’ll need a sound team including an accountant, lawyer and possibly a broker. Make sure they all have experience in vendor financing, and make sure you cover yourself in every possible eventuality.

When it works, vendor financing provides a win-win for both the purchaser and the vendor. When it doesn’t it’s a mess.

4. Flipping

Flipping is the rapid sale of a property, prior to the settlement period expiring. The big advantage of flipping is that the purchaser may make a lot of money in very little time, with very little outlay. Only the deposit for the property needs to be provided as it is never actually owned by the purchaser, and at the right sale price the vendor can potentially make a significant amount of money.

Flipping is one of the less conventional and probably more risky strategies. Expert flippers make good money without putting a lot of money down. If the flipper, however, is unable to sell at a profit then one of two things will happen:

a. They may find themselves being forced to take out full ownership of the property. This can severely limit their cash-flow, or put them under a lot of financial stress

b. They are forced to sell at a loss

Again, when it works, there’s a lot of money to be made. But when it doesn’t, it can put the flipper in a very difficult situation.

Educate yourself

Every property investor needs to be aware of the options that they can take. Of course, not every strategy is right for you and it’s important to be comfortable with the decisions you make. If a new option interests you, do your research and get educated.

And good luck with your property investing.

EPI 029 | Ten tips for finding Positive Cashflow Property – Part 2

This episode we continue on with our ten tips for finding positive cashflow property.

If you haven’t done so yet, then check out Episode 28 where we list the first five tips for finding positive cashflow property.

Key points we talk about:

  • Tenants – and the lack thereof!
  • Renovating to change the profile of a property
  • Property Development
  • Interview with Property Developer and Property Development Manager – Jo Chivers
  • Maximizing the usage of your investment property
  • Negotiating interest rates
  • Putting in low offers (we bang on about this one for ages!)

Actions & Quick Tip:

  • Ring your bank and negotiate a better interest rate!
  • Using your knowledge and research skills, find 3 more potential positive cashflow deals online.



EPI 028 | Ten tips for finding Positive Cashflow Property – Part 1

This episode we tackle one of the most common questions that we get asked – How do you find positive cashflow property?

Key points we talk about:

  • The Block – making renovations profitable!
  • Auctions
  • Mining towns and boom locations
  • Research steps to find positive cashflow properties
  • Niche properties – retirement village, holiday rental, student accommodation, car spaces, storage units
  • Changing the usage of a property to increase yield
  • Renovating to add value and increase yield

Actions & Quick Tip:

  • Head over to the Everyday Property Investing facebook page join the conversation.
  • Using your knowledge and research skills, find 3 potential positive cashflow deals – this will help you to develop your research skills and find those gems!

Property Investing – is reducing tax what it’s all about?

Negative gearing - tax


There is only one way you can ensure your property makes you money – ensure it brings in the dollars from Day 1.

If your property does not make money from the start then you’re speculating on something changing:

  • Values increasing
  • Interest rates decreasing
  • Rents increasing,
  • Or a combination of the the above!

Property is quoted as showing an average annual appreciation of anywhere from 6% to 10%.

In a seven-year cycle, however, there are normally only two or three years in which properties significantly increase in value.  For the other five years you generally find prices are pretty stagnant. This doesn’t mean property won’t go up in value, it just means you can’t always count on it.

This is only bad news for the investor who is choosing a negative gearing strategy. Those choosing negative gearing often do so to reduce the tax they pay.  To make negative gearing work, you need to be sure your property is going to increase in value (and you can only speculate when or if that will happen!).

Tax reduction can be great but not if it means you have to speculate!

Last week I heard a commercial on the radio advertising “tax reduction through property investing”.  Now I’m no accountant but I do know the general rule that if you’re paying less tax, you’re bringing home less money.  The sales pitch was to buy a property that “will go up in value” which sounds great, if you can be sure it will (and let’s be honest, not every property has increased in value in the past three years!).  In the meantime, your property will lose you money and you will pay less tax. Frankly, I just don’t get it. Why would I invest in a property knowing I would lose money?  The ad left me scratching my head.

Then I thought about other investments.  How many share traders would choose to buy a stock on the promise that it would lose them money and therefore reduce their tax bill?

Would you throw your hard-earned dollars into a bank knowing that you’d get less back? Nope, nor would I. Nevertheless, it seems that so many property investors are keen on negative gearing. Keep in mind, also, that selling the property for a profit will also attract capital gains tax.

Negatively geared properties can be very successful investments, provided that there is good capital growth over time to well and truly offset your losses – but to negatively gear purely to save tax, well, you might want to think it through.

I generally choose to invest in positive cash-flow property. Positive cash-flow properties are harder to find so I spend more time searching and carefully do my sums. I know that I will profit from my investments from the outset and I’m not relying on capital growth.

You can do the same and, really, it’s not that hard. It just takes a little more time.  And it takes the guesswork out of successful investing!

The biggest mistakes investors make: Mistake number 9 – Forgetting about depreciation

Property depreciation

Successful property investing is easier than most people think. The mistakes that prevent most would-be property millionaires from realising their potential are predictable and easy to avoid. In this series of blogs, Den details each of the most common mistakes and how to ensure you don’t make them.

Mistake number 9 – Forgetting about depreciation

Depreciation is the process by which the value of a house’s building and fittings decrease as the house ages. The Australian Tax Office (and most other countries’ tax offices) allow you, as an investor, to claim this  depreciation in your annual tax refund. This depreciation can be quite significant, and it can be the difference between a property making you money, and one costing you money.

How much depreciation can you expect?

Depreciation depends on a number of factors including:

  • the age of the dwelling
  • the value of certain objects in, and features of, the dwelling
  • the type of depreciation you can choose (ask your accountant about this)
  • whether the depreciable item is fixed or not – a fridge, for example, is considered to have a higher % loss of value each year compared to, say, the external structure of a house

A new dwelling could attract a depreciation in excess of $10,000 in its first year, older dwellings can still give you a decent amount of depreciation and I’ve never known a dwelling that has zero depreciation!

So what can we learn?

A person who specialises in depreciation is called a Quantity Surveyor. Quantity surveyors can look at a property, its features and contents and give you a schedule which you can use in your tax return. Even older properties with very few “special” features can give your tax return a decent boost!

What can we do now?

Get in touch with a quantity surveyor and make sure you have depreciation schedules for each of your properties. Many surveyors offer guarantees to entice you to use their services but they shouldn’t need to – savvy investors know how important depreciation is for your weekly cash-flow.

Put simply, understanding depreciation, and doing something about it, will improve your cash-flow.

And we’d all love more cash each week!

EPI 022 | What YOU want to know about property investing – Listener Q&A

SUBSCRIBE in iTunes: iTunes Store – Everyday Property Investing (NB: Need to have iTunes installed)

This episode let you ask the questions – we’ve compiled a list of great questions sent to us from the Everyday Property Investing community and we dedicate this episode to answering some of these questions.

We give you an update on what’s happening with Kaz & Den in property and we complain about the winter weather and having a cold!

Key points we talk about:

  • Property investing
  • Home renovation and renovation courses
  • How to have a portfolio that weathers a ‘global financial crisis’
  • Investing in rural areas
  • Positively geared property
  • What loan to value ratio (LVR) is good for you
  • Capital growth versus Rental Yield
  • Buying of the plan

We also tell you about our Everyday Property Mastermind group mentoring program as well as our Everyday Property Coaching one on one property mentoring service.  you can read mean about our property mastermind groups and property coaching and property mentoring on our website.


EPI019 | Property development – Interview with Jo Chivers from Property Bloom

SUBSCRIBE in iTunes: iTunes Store – Everyday Property Investing (NB: Need to have iTunes installed)

In this episode of Everyday Property Investing, Kaz had the great pleasure of speaking with Jo Chivers, from Property Bloom.

Jo is an experienced and accomplished property investor, property developer, renovation manager, project manager and even, author! It was a great interview to learn about how Jo took her passion and knowledge and grew a successful business whilst helping others fulfil their property investing goals.

In this episode we also tell you all about our property news, and trust me, there’s plenty! We remind you about our new group mentoring program, Everyday Property Mastermind and we have our listener question comes from Claud who asks about using a buyer’s agent or buyer’s advocate.

This is an another action packed episode, so much so, we’ve gone well over the 1 hr mark this episode – oops! Have to stop having so much fun!

Key points we talk about:

  • Property development
  • Property investing
  • Property education



  • If property development sounds interesting for you and you’re looking for a way to get in and have a go, checkout this Property Bloom Positive Cash Flow flyer. Jo has a great positive cashflow small development strategy that may suit you. It outlines a fantastic high yield positive cashflow property development strategy.


Special Announcement!

Everyday Property Mastermind is open! Check out the videos here and sign up if you’re interested in these group mentoring sessions we are offering.

Everyday Property Mastermind

View the transcript here (Coming Soon)

EPI 018 | The most important calculation you need to know in property investing – Cashflow

SUBSCRIBE in iTunes: iTunes Store – Everyday Property Investing (NB: Need to have iTunes installed)

This is a truly MASSIVE episode of Everyday Property Investing!

We cover THE most important calcuation you need to know in property investing – cashflow.  It’s really important that you make your property investing decisions with a good understanding of what a property will be costing you or making you to ensure that you are in line with your property investing strategy.   So this episode, we go though an in depth run down of what you need to do to calculate your investment property cashflow.

In this episode we also talk about our new group mentoring program, Everyday Property Mastermind.

Our listener question comes from Jeremy who asks about finding like minded investors with whom to talk property investing.

In our quick tip and action we have a great free Property Cashflow Calculator spreadsheet that you can access via our website, by just signing up to our EPI mailing list.

Key points we talk about:

  • Property cashflow
  • Masterminding



  • Download the free Property Cashflow Calculator spreadsheet and calculate cashflow for 3 properties that you have found.  You can access the free Property Cashflow Calculator by signing up to our mailing list.  If you are on the mailing list then we’ve sent you out a link to get access to this handy tool.

Special Announcement!

Everyday Property Mastermind is coming soon!  Check out the videos here and sign up if you’re interested in these group mentoring sessions we are offering.

View the transcript here (Coming Soon)