Published on May 28, 2015

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As a property investor you are a business owner and need to approach your decisions with a business-like attitude.

Investing in property is a very different process from buying a family home where decisions tend to be made around lifestyle and emotional choices.

Knowing the numbers

At MRD our goal is not a transaction but to partner with you on your investment journey. We work with you to ensure you know (and understand) the numbers around your property investment.

Garbage in = garbage out

A property cash flow analysis report is designed to give property investors a pretty clear picture of what the bottom line numbers associated with an investment are. That is, will my property deliver a surplus or will there be a shortfall?

No doubt you have heard the saying ‘garbage in, garbage out’; well this is very true when it comes to a cash flow analysis report.

What you receive back by way of reduced taxes is included in the cash flow calculations but it will not be accurate unless you use actual taxable incomes. If you are not on the top marginal tax rate then it would be wrong to use such an income as ‘an assumption’.

There will always be things that we need to assume, especially when buying an off the plan property. We may know the interest rates today along with the expected rental yield, however, these may change before the property completes and settles.

Things to look out for in a cash flow analysis report

Probably the most erroneous figure I see in cash flow analysis reports which have been produced by other companies (i.e. not MRD) is where the borrowings are listed as being just 80% and the balance of deposit and settlement costs (incl. Stamp Duty) are shown as cash deposits.

This is fine if someone is putting cash into the deal, however, in most instances they are taking those additional funds from another source such as equity in their home or another investment property that they hold. If the money is borrowed, regardless of where it is borrowed from, it is borrowed and needs to be shown as such in the cash flow analysis report.

There have been numerous instances over the years where clients show us a cash flow analysis report prepared by the ‘XYZ Property Group’ on a property they are considering, and the report shows a positive cash flow surplus where in fact the property will be negatively cash flowed.

My advice is simply; know your numbers and invest wisely. I love property and the possibilities investing in property can deliver a family over time; you just need to get your ducks lined up and know that those supporting you are helping you to learn along the way.

Download your complimentary copy of the MRD ‘Your Guide To Cash Flow Analysis Reports’ >>>here

Are you considering investing into property?

If you would like to consider residential real estate as a vehicle for creating wealth then please speak with us.

  • We will meet you where you are and coach you from there
  • We will work to a timeframe that you are comfortable with
  • If education and learning is all you need now, then that’s where we will start
  • We will show you respect and never interpret your hunger to learn as a licence to sell

MRD offers a full spectrum of services relating to property acquisition, investment options, superannuation, SMSFs and insurance underpinned by our commitment to partnering with you on your investment journey.

To engage with a finance strategist, property strategist or licensed financial adviser about anything finance, property or financial advice leave your best contact details and tell us briefly what you would like us to do for you >>>here.

Alternatively, pick up the phone and call MRD now on 1300 883 854.

Partnering with you for your investment success.

Nick Lockhart.