Will my cash flow service my finance requirements?

It’s a common question and one which is very important to answer before embarking on a new investment: Will the cash flow from this property be sufficient to service my financial requirements?

After all, understanding cash flow can be the difference between a solid long-term investment and a costly mistake.

To understand the cash flow on a potential investment property your accountant can work out the interest, estimate depreciation and give you an idea of the cash flow for the property.

You should have the property inspected and if possible check any Body Corporate records as this could help you find out about any big maintenance or structural repairs planned.

If buying that property will put a strain on your finances, then you need to move on and find a property with better cash flow.

While crunching the figures you can also work out if you’ve taken into account all the costs and outgoings and work out whether you have a financial buffer in place to manage any shortfall.

This is when you want to factor in possible interest rate rises and potential vacancies and again highlights the need to set up a cash flow buffer in the form of an offset account or line of credit.

RealRenta has all the tools that a property manager has but for less than ¼ the cost of a property manager.

Join now and the cost is less than a cup of coffee a week to manage your rental property

RealRenta also has a free vision, so why not check it out

Jason Gwerder
Tuesday, 7 June 2022

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