{"id":12249,"date":"2017-06-15T07:00:30","date_gmt":"2017-06-14T21:00:30","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=12249"},"modified":"2017-06-15T07:00:30","modified_gmt":"2017-06-14T21:00:30","slug":"why-high-cash-flow-can-be-a-false-idol","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/why-high-cash-flow-can-be-a-false-idol\/","title":{"rendered":"Why high cash flow can be a false idol"},"content":{"rendered":"

With the staggering number of investors in pursuit of properties with great cash flow it seems almost unthinkable \u2013 high cash flow can\u00a0sometimes hurt you. Here\u2019s four issues many investors never even consider.<\/i><\/b>
\nProperties with high cash flow are what many investors are after \u2013 and it makes sense. The better your cash flow, the easier it is to make loan repayments and persuade the banks to extend you further mortgages.
\nWhile there\u2019s no disputing the many advantages that cash flow grants investors, blindly pursuing only cash flow has drawbacks. In fact, there are a number of acute disadvantages to having high cash flow.<\/p>\n

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  1. Because you are generating an income from the positive cash flow, you pay tax along the way. You get taxed on this extra income and money in the tax man\u2019s pocket is going to make it hard for you to create serious wealth.<\/li>\n<\/ol>\n
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    1. Because these properties are usually in regional or outer areas, they can be quite sensitive to economic cycles. Therefore, compared to properties located closer to the centre of major cities, these properties will generate lower capital growth over the longer term.<\/li>\n<\/ol>\n
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      1. There are also potential higher costs associated with maintenance and more tenancy problems due to socio-economic factors.<\/li>\n<\/ol>\n
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        1. From a finance perspective, it can sometimes be harder to get higher LVR loans for some regional properties due to postcode restrictions imposed by lenders, mostly due to their smaller populations. The result is lower leverage which will reduce your return.<\/li>\n<\/ol>\n

          Property investors who are into cash flow properties may have one or many of the following reasons:<\/p>\n