Turn a negatively geared investment property into a cashflow positive investment.
At any one time, there are hundreds of property investment opportunities being advertised for sale in Australia. Whether a house, townhouse, apartment or unit, typically the first assessment made by an investor is to determine if the property will be positively or negatively geared.
Negative gearing has long been used as a strategy to reduce personal tax costs. The property investor offsets their total income (salary/wages + rental income) with the expenses incurred through holding the investment property (mortgage interest, insurance, rates etc).
With a negatively geared investment, the investor must be able to continually fund any shortfall until the asset is sold or until the investment becomes positively geared.
It is this ongoing funding of shortfall (cashflow negative) that is recognised by many as the major issue with negative gearing. Many Australian investors are placing their personal cashflow under significant strain in order to maintain ownership of their investment assets.
It’s scary when you stop and consider this strain is real for many investors today, even though interest rates are at record lows and many investors are paying back interest only loans.
Why go positive?
To generate a positive cashflow and passive income stream. This will reduce the burden on your personal cashflow freeing up cash for lifestyle enhancement.
How to go positive?
- Reduce your expenses – renegotiate mortgage interest rates, insurances, property management fees etc
- Increase your income – put up the rent, add value to your property to enable greater rental rates or look for second income stream opportunities (see details below).
- Increase tax refund – ensure you have an accurate tax depreciation schedule completed by a quantity surveyor before and after you renovate.
Generating a second income stream
Traditionally, rent has been the only income stream generated by an investment property. However, advancements in technology combined with some lateral thinking have opened up a new way for landlords to generate passive income from their existing assets.
Astute landlords are now using appropriately designed rooftop solar systems to generate electricity which they can then sell to their tenants to use.
Landlords with a typical 4 bed, 2 bathroom, 2 split system AC unit house can expect solar cashflow returns of $1,432 in the first year along with an additional $850 of tax depreciation benefit. By year 10, the income earned can exceed $25,000 and $3,500 in tax depreciation benefit.
Interestingly, many Landlords are funding their solar upgrades with no cash upfront.
For more information and case study examples click here.
For a no obligation quote and ROI analysis based on your own investment property contact us today.