You have no doubt heard the old saying 'Location, location, location'. However, I
don't believe that it is as important as 'Cash-flow - Cash-Flow - Cash-Flow', which
should be your 'mantra' for investing in today's property market.

Achieving positive cash flow is about how you structure the property transaction when you buy and sell.

Too many people buy property purely for long-term capital appreciation. In my experience, properties that do not generate sufficient positive cash flow should be avoided in the current phase of the property market cycle.

Mortgage lenders require you to be achieving a rental income of around 125-130% of what you pay them each month, but even this can soon get
eaten away by any upward movements in interest rates, or overheads of managing and
maintaining the property. So, this 125-130% loan coverage doesn't necessarily mean that you have a reasonable cash-flow cushion.

Especially when starting out, you need cash flow much more than capital growth in order for you to develop and grow your property portfolio. Cash flow feeds you today so that you have got a much better chance of achieving the sought-after lifestyle that property investment can give you.

In fact, I strongly believe that unless your properties aren't returning you around 150% of your initial mortgage costs, then you are exposed to the whims of the market and any unexpected hiccups that can happen along the way.

Positive cash flow is simple maths. Figure out what you can expect to get for the property in rent. Then add up all the expenses you'll have every month such as minor repairs and maintenance, mortgage repayments, and so on. After all expenses are taken into account, the money left over every month is your positive cash flow. If your expenses are more than the money you'll receive in rent, that's negative
cash flow!

"Know your numbers and invest wisely!"
www.rhettlewis.com