Property Cash Flow Basics For Creating Passive Income

Property Cash Flow Basics For Creating Passive Income

Buying real estate is similar to running a business – good performance is derived from your ability to generate cash flow. 

For a property investor, this means eventually living off the passive income that your real estate generates. Therefore, it is especially important that you map out your ability to build a portfolio that will deliberately achieve this level of success from the get-go. Because let’s be honest, we’re not going to be able to rely on a pension in later years to give us the basic security we want or need. 

The good news is, we don’t have to take huge risks to get a sensible return; after all, you can get home loans well below three per cent and easily find a six per cent return. What this means is your real estate ownership is completely covered by the tenant’s rent without you having to dip into your own pockets. 



Let us start with some cash flow basics.

There are three parts to the cash flow riddle: your wage, the taxman, and your tenant. If your tenant can pay the rent and it covers your mortgage, you are doing well. 

Your own cash flow is freed up, so you are not constantly forking out to hold your property. The longer you own real estate the more likely this is to occur. 

Having a combination strategy that includes both cash flow and capital growth will provide you with serviceability and equity as a borrower, and will allow you to continue to move forward, so focusing only on yield is a flawed approach. 

Equity and servicing allow you to buy more properties, borrow more money and keep building your wealth. 



Often investors hear the terms ‘positively geared’ or ‘positive cash flow’ but are not sure exactly what they mean. 

The easiest way to understand these terms is that positively geared properties occur when the rental return and tax breaks cover your loan repayments and outgoings, leaving your wage or income unaffected. 

Positive cash flow properties are self-funding, and you do not need your tax deductions or your wage as the rent pays for everything. 

Conversely, negatively geared properties occur when the rental return and tax deductions are less than your loan repayments and outgoings, placing you in an income loss position on the property. 

There is, however, the underlying expectation that the accumulated losses will be more than offset by the capital growth on the property. In this circumstance, the rental return is not considered as important in the decision process, and you should also have a wage that you are happy to access to help cover the mortgage.

Many people today find the right negatively geared property and ownership may only cost $50 per week.

The key benefit associated with negative gearing is that the loss attributed with ownership of the property can be offset against other income earned, reducing your assessable tax income, thereby reducing your tax payable. 

The result is that the cost of owning the property is being funded by your tenant (in the form of rent), the Tax Office (in the form of tax savings) and your surplus cash flow. 

Ultimately, most investors will aim to be positively geared in the long run. As your rents increase and debt on your property drops, you can even begin to replace your wage with rental income. 



I recently had two clients buy a property on the same street. My first client paid about $600,000 and bought a high-pedigree piece of real estate and received $700 per week in rent, which is a pleasing return. 

My other client decided to pay less and bought an inferior property with inferior inclusions for $550,000, believing they were getting better value given the $50,000 price difference but not realising the fixtures, fittings and design matters in real estate to renters. 

My second client is now only getting $450 per week. The difference in rent is huge. Yes, they were comparable properties in terms of price range, but one was superior and true value for money, while the other fell into the cheap category and is now in a race to the bottom. 

The superior rent allows that client to pay off debt faster and fast track their wealth creation. 



Moral of the story? Cash-flow is king when it comes to being a successful property investor. Learn how to build a strong and profitable property portfolio by mapping out a clear cash-flow pathway at our free property investing seminar

Our expert coaches will explain all the components required to create a strategic and robust property plan so you can move forward fast. 


Register now for the free property investor webinar


By Sam Saggers

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Property Cash Flow Basics For Creating Passive Income

Buying real estate is similar to running a business – good performance is derived from your ability to generate cash flow. For a property investor, this means eventually living off the passive income that your real estate generates. Therefore, it is especially important that you map out your ability to build a portfolio that will deliberately achieve this level of success from the get-go.

Leadership & Property Investing

It’s time we had a conversation about leadership – real estate investor style. Some people are unwilling to run their own financial affairs. If you are listening to this show, that means you are a property investor or preparing to be. This means you have to be the leader of your financial life. This episode is dedicated to unpacking your primary question, what’s stopping you from being more self-led, and an unwelcome visit to the podcast from my hearth and home neighbour.

Oh yes – and it’s dedicated to three awesome listeners of the podcast! Alison, Sue and Peter – this one’s for you! No Lake Weirdo for you!

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Here we go again, APRA is back with banks and non-banks and are they really safe? who and what are they? Come along and find out why Jason thinks it will be a better choice going forward for investors. Let’s Wealth Coffee Chat!

House Prices To Drop 12%!

Why do we think that CBA is predicting this will happen? Come along and join Jason to take a deeper look into this. Let’s Wealth Coffee Chat!

From Mortgage Disaster to Financial Freedom with Helen & Ian Morse

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Once you’ve listened to this episode, I’d love it if you hit the subscribe button so you get notified every time a new episode drops.

Your Burning Questions Answered (Part 2)

I failed you on the previous episode! I had so many questions from you that I didn’t answer on the previous ep! The last show was a failure because I didn’t get to nearly as many questions as I wanted. So we are doing a second Q+A show. Listen to hear the answers to the most pressing questions in the real estate space and my expert opinion.

Difference Between Thoughts and Facts

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Here Comes the Media Circus Again!

Are prices really going to drop 10-12%? Let’s see what all the fuss is about. Let’s Wealth Coffee Chat!

How Property Investors Can Reduce Tax Down To Zero!

Every smart property investor knows that to create and maintain a portfolio, we need to have good cash flow. One of the ways we can support this is by using depreciation and tax. But, just like equity, depreciation only works for us if we know how to access and then leverage it.

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  1. frolpwecerit

    I want reading through and I think this website got some genuinely utilitarian stuff on it! .

    1. EdgeBlack

      Thanks for the reply, let us know if you need any help in your investment journey to reach your goals! Cheers

  2. Commercial Storefront Door Repair Fair Oaks

    Thank you, I have just been searching for info about this subject for ages and yours is the best I’ve discovered so far. But, what about the bottom line? Are you sure about the source?

    1. EdgeBlack

      Thank you for your kind words, ultimately at the end of the day with property investing you need to put a number of what passive income you want in how many years and work your way backwords, if you want to build an passive income of 2000 per week, then how many properties would you need to get there? if one property is giving your 500 per week and it cost you 500k, then you will need 4 properties that is paid outright, how do you get them that has no loans attached to them? you would acculamte 8 properties and then go through a property cycle and with the property that has doubled, sell the 4 properties to pay off the other 4. Now you have a passive income of 2000 a week, we wouldnt say this is the best strategy but its a good one for people to get their heads around it. This is not financial advise, just giving you a scenario. If you want to talk to us give us a call to help you to financial freedom. Cheers

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    Wonderful site you have here but I was curious about if you knew of any message boards that cover the same topics talked about here? I’d really love to be a part of group where I can get feedback from other knowledgeable individuals that share the same interest. If you have any suggestions, please let me know. Appreciate it!

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