Property Management Blog

Cash Flow 101: Key Differentiators of Positive and Negative Cash Flow on Phoenix Rental Properties

System - Monday, August 21, 2017

A lot of investors have purchased properties back at the top of the market with negative cash flow. You might be wondering about how that negative cash flow affects you, and if the property is still a good investment. Yes, properties with negative cash flow can still be good investments. Today, we’re talking about positive versus negative geared properties.


Phoenix Property Management: Positive Properties

Positive geared properties provide a safe and moderate income for the investor. If you have a three bedroom, two-bathroom home that you’re renting out, you are earning a bit of cash flow and expecting a normal appreciation of 3 or 4 or 5 percent annually, this type of property is successfully cash flowing and you have a safe investment.

Phoenix Property Management: Negative Properties

Negative geared properties are a faster appreciating asset, these properties might be in a gentrification area or downtown. You can expect unusual appreciation, and you’re willing to suffer a bit of negative cash flow. It means your mortgage payment will likely not be covered by your rental income. So, you might purchase a property for $500,000, and you’re only renting it out for $1,500 per month. But, you expect to sell that property for a million dollars or more in a few years.

Positive and Negative Cash Flow: Know the Math

Know your goals and whether you can handle negative cash flow. Do your math to figure out if it’s a good investment. Sometimes, you can carry a negative cash flow comfortably. If you can’t, perhaps you can buy some properties that are positive cash flow investments, which will offset the negative cash flow on a property you want in your portfolio. With a combination of the two, you can really achieve stellar results with your real estate investments. 

If we can help you evaluate or reposition your investment, please let us know. We can plug in your numbers with our spreadsheets and see what you can expect for cash flow and appreciation. Please contact us at Service Star Realty if you need help planning your investments or with property management in Phoenix.