Positive Cashflow Property
Properties that earn more rent than they cost to hold
What is Positive Cashflow Property?
A positively geared property earns more in rent than it costs to own and manage. After all expenses (interest, rates, insurance, property management, repairs), there is cash left over. This is less common in major cities but more achievable in regional areas or with commercial property.
How it works
- 1Rental income exceeds total holding costs (interest + all expenses)
- 2Net rental surplus adds to your taxable income (you pay tax on the profit)
- 3Positive cashflow means the investment doesn't drain your salary
- 4You can continue buying more properties without straining personal cashflow
- 5Capital growth may be slower than negative gearing markets, trade-off
Worked example
Buy a $380,000 house in Broken Hill with a $304,000 loan at 6.5%: about $19,760 a year in interest (interest only). Rates, insurance and management: $6,500 a year. At $450 a week ($23,400 a year) rent: $23,400 – $19,760 – $6,500 = –$2,860 a year. Cash negative. At $550 a week ($28,600 a year) rent: $28,600 – $19,760 – $6,500 = +$2,340 a year. Cash positive. Depreciation (say $8,000 a year) is a deduction without a cash cost: a property can be cash positive and still show a tax loss.
Pros
- Income-neutral or positive, doesn't drain salary each month
- Can build a larger portfolio without salary serviceability constraints
- Lower risk profile, less exposure to interest rate rises
- Regional diversification, some regional markets have outperformed capital cities
Cons
- Net rental income is taxable, reduces the after-tax surplus
- Often in lower-growth markets, capital gain may be modest
- Higher vacancy risk in some regional areas
- Less demand from high-income investors, can affect resale liquidity
Risks
- Regional markets can be driven by single industries (mining, agriculture), economic concentration risk
- Vacancy periods hurt more when the investment thesis is cashflow-dependent
- Management from a distance: quality property managers are critical in regional markets
Tax treatment
Net rental income is assessable income, taxed at marginal rate. Deductions still apply (interest, depreciation, expenses). A property can be cashflow positive but tax-negative after depreciation, this is the ideal outcome (positive cashflow + tax deduction). Depreciation schedule from a quantity surveyor maximises deductions without cash outlay.
Official references
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General Advice Warning
The information on this site is general in nature and does not consider your personal circumstances, financial situation, or needs. Before acting on any information, you should consider its appropriateness having regard to your own situation and seek professional advice from a licensed financial adviser, mortgage broker, accountant, or solicitor.