For investors in property, cashflow is very important.  You will need to be able to cover the expenses involved in owning a rental property, such as interest payments, maintenance costs, letting costs (e.g. advertising for tenants), rates, and so on.

Some properties will be cashflow positive – which means the income from rent will be higher than your expenses, producing a cash surplus.  Others will be cashflow negative – which means income from rent will not meet your expenses, so you will need to find additional funding.

Whether your investment property will be cashflow positive, or negative, is usually the result of a combination of factors, including:

• The purchase price
• Your mortgage repayments (which depend on how much you borrow and at what interest rate)
• Tenancies – particularly how much rent you charge and how often the property is vacant (and for how long)
• Maintenance costs – these will vary according to the type of property you buy.  Older properties usually require higher maintenance than newer ones, and higher value properties may have correspondingly higher costs such as rates, and body corporate fees, etc.

Tax implications of positive or negative cashflow
If you have a positive cashflow from your investment, you will need to consider the best ownership structure from a tax perspective – see our section on Ownership Structures.

If you have a negative cashflow, you may be able to offset your losses against your personal income (see our section on tax).  This may help reduce the overall loss.

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This material is for information purposes only. You should seek professional advice related to your individual circumstances. While The National Bank has taken care to ensure that this information is from reliable sources, it cannot warrant its accuracy, completeness or suitability for your intended use. To the extent permitted by law, The National Bank does not accept any responsibility or liability arising from your use of this information. Our lending criteria, terms, conditions and fees apply.