What Really Is A Positively Geared Property?
A positively geared property is one that generates more rental income compared to its rental expenses. An investor with such a property has money left after paying all the costs associated with owning and managing such a property. If an investor wants to make profits when investing in real estate, he or she should invest in a positive-geared property. In fact, positive cash flow or positive-gearing is considered the essence of profits for property investments. Positive cash flow deals with properties before and after the tax issues are considered. This article provides information on what really is a positive-geared property.
Positive geared and positive cash flow are terms that are used interchangeably in the US real estate market. Even though positive cash flow is more commonly used in the United States, there is a considerable difference between the two terms where technicalities are concerned. The difference between the two terms is the before and after tax considerations. In fact, positive gearing deals with properties before and after the taxes are accounted for. On the other hand, positive cash flow deals with properties after taxation.
Calculating the positive cash flow of a property is quite simple. It is a positive difference between the rental income and rental expense. There should be more rental income coming from such a property than the rental expense. In fact, the more positive cash flow a rental property has, the better for the investor. There are two major reasons why positive-gearing is important when investing in a property. The most important thing is that such an investment is lucrative and will pay itself off quite soon. The investor can truly make money in investing in real estate with this type of property. Positive-gearing will help the investor when buying an investment property. In fact, a property with a large positive cash flow is a better investment at all times.
It might now be easy to find a positively geared property on the market. A huge determining factor of a positively geared property is its mortgage payment. This will cover much of the property’s income. That is why you need to look for a property with a high positive cash flow. It will place a little burden on the investor.
The above article provides information on what is a positively geared property, and what to look for when buying such a property. Make sure that you do the research before investing in such a property. For expert see Property Investment Newcastle.