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Cash Flow Importance in Property Investment

What exactly is cash flow? Well…without sounding obvious, as the name indicates it is the cash flowing in and out of your affairs, your business, your investments and your property. You want to have a positive cash flow – basically you want more money coming in than you have going out. Below are 4 scenarios showing how cash flow can be important when investing in property. 1. Getting someone else to pay off your mortgage A path that many property investors tend to take, is to rent out their property assets. Rather than paying off their mortgage themselves, this can be an effective way to generate positive cash flow, getting someone to pay off the mortgage. 2. To Grow Your Portfolio By creating a positive cash flow, or if you have properties that generate cash flow, is a great way to generate surplus funds, which can then be reinvested into future expansion of their property portfolio or even other types of investments. 3. Investment Traps A lot of people invest in properties that are negatively geared. This means that every week or every month they are paying out-of-pocket expenses to maintain the property. If you do have investments that are generating positive cash flow, then generally you’re not going to feel trapped, because an investment that pays for itself actually gives you extra money. 4. Helps You Achieve Financial Freedom Here at Moneysoft we know the importance of setting clear financial goals and how crucial it is for your financial growth, (In fact it’s a key function within the platform to allow users to realise and track against these goals themselves). Whether you invest in property that is negatively geared, positively geared, or even a mixture of the two – we see people that accumulate a mass of properties and allow them to go up in value over time. Eventually many investors then tend to sell down a couple of properties and use the equity that they’ve gained, to pay down the debt on the properties they have kept. Paying off the mortgage then perhaps renting them out and turning them into a positive cash flow situation, then starts to fund their lifestyle and help them to achieve financial freedom. In a nutshell, staying on top of your cash flow is like having a budget and is extremely important for financial planning purposes. When you know when cash is coming in and going out… and where it is coming from and going to, you can plan large purchases and anticipate things, such as when you may need to tighten your financial belt. Whether you have one or many properties it is a relatively simple and proven investment and it can lead to greater cash flow in the long run.   Disclaimer: The content within is general or publicly available information only. Speak with your accountant or financial adviser for advice on your specific circumstances