Positive And Negative Cash Flow In Real Estate

The possession of the property for investment requires that the buyer have a clear understanding of the income the property generates. There are two kinds of properties that generate cash flow that is positive and negative gearing.

Here are some details about them:

Negative Cash Flow

This kind of property earns rental income which is less than the number of repayments for the loan. This means that the property is more expensive per month for repayments to banks, which the owner collects from rent returns. The losses incurred are a tax deduction that the owner can claim back. 

In the end, you receive tax-free savings or gains while still relying on the capital growth of the property. One should consult property investment professionals for a clear understanding of negative gear or positive gear  strategies.

positive vs negative gearing

Positive Cash Flow

If the rent earned surpasses the amount of repayment to the bank. The property is considered to have a cash flow surplus. The owner is required to pay an amount that is tax deductible when the result is the rental return. However, this is reduced by the tax advantages of depreciation and repairs to the property.

The distinction between these two types could be minor and a thorough study should be conducted to ensure it is clear what the financing structure of both is established when you purchase.