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
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Jason Gwerder
Tuesday, 7 June 2022
