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Cash-flow positive properties on the rise

By Staff Reporter
9

Low interest rates and reduced first home buyer activity have made it easier for investors to find cash flow positive properties, according to a leading mortgage brokerage.

Smartline Personal Mortgage Advisers said the current rate environment was an iinvestment property ‘game changer’.

“While there is widespread talk of a lack of consumer and business confidence, we are not seeing this at all,” said Smartline’s executive director, Joe Sirianni.

“The combination of very low interest rates and growing rental income returns has created a favourable environment for investors and we are experiencing plenty of activity in the investor segment of the property market.”

With variable interest rates sitting at around five per cent per annum, Smartline said it is now relatively easy for investors to find cash flow positive properties that almost pay for themselves.

Mr Sirianni said variable interest rates have decreases by 2.20 per cent since late 2010, representing an interest savings of around $6,000 per annum on a $300,000 mortgage.

“$6,000 a year, or $115 a week, is a considerable sum of money and would take many investment properties from being cash flow negative to positive,” he said.

“Removing the cash drain opens up opportunities for an increased number of investors to make the move for the first time, and the scope for some investors to add to their existing portfolio.

“It’s a real game changer.”

Despite the potential savings, Mr Sirianni reminded investors that circumstances can quickly change/

“It needs to be remembered that rates won’t stay at these record lows forever,” he said. “Investors need to ensure that the numbers add up on their property investment in the face of rising rates and that they can continue to afford their investment if it does become cash flow negative in the future.”

Mr Sirriani said investor activity had also been stimulated by a dramatic increase in the number of people using money in their SMSF to buy investment properties.

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