Wanting to find cash flow positive properties? Arjun Paliwal, Buyers Agent, Director of InvestorKit specialises in finding these types of properties and he outlines what the key metric he uses to find them is.
Check out what Arjun has to say in the video.
What are your thoughts on cash flow positive properties?
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Here’s the transcript of the video:
Investor kit. That's the one. How's it work? Well, we're a buyer's agency. So simply put, we help buyers the same way that sellers would help their sellers, but we totally represent the buyer for their needs. In this case, it's the name itself. Investor kit investors. So helping buyers invest in residential and commercial property across the country. You deal a lot with cash flow positive properties. Hmm. Are they difficult to find and why are you going down that road? Well, I think firstly there's a bit of a myth when it comes to cash flow positive around maybe the expectations of growth or, just the desirability of some of these assets. I think firstly it's important to understand positive cash flow doesn't have to be 10% yields or 9% yields. Like if you're taking in today's interest rates and 90% mortgages such and that's including mortgage insurance. Comfortably a 5% growth yield is enough to be a neutral or slightly cash flow positive, right? Yep. So I've taken that approach to try and find properties where the risk is alleviated for investors from a cash flow perspective, but they're still able to find pockets where capital growth has been fantastic. That's the simplest way to put it. Yep. What are you looking for when you're trying to buy a cash-flow positive property? What's on your kind of checklist. Schools, jobs, growth? What are you looking at? Yes, just as traditional investors would normally look at infrastructure schools, shopping centres, public transport, jobs, affordability, vacancy rates. There's just data everywhere, right? So what you would look for other properties are almost similar to what you would look for positive cash flow properties. However, the key component is that rental difference and what you find is in many years in the past there have been many locations that in today while they're now considered growth locations or areas that are considered, low yielding and since then they've been considered growth locations, but not many people talk about the fact that, okay maybe in 2010 or 2012 these places were yielding four and a half five and a half percent. And if you'd got in then then you've not only had a good cash flow, but now they're these growth assets. So ideally you're looking for the same type of drivers, but you're trying to find areas where the yields might be in well position places now, but you're hoping for the yields not to be in those well-positioned places later on because you've purchased at a different price point. Yeah.