Is Investing in a Negative Cashflow Property Right for You?

Negative cashflow properties may sound like a less-than-ideal investment choice. But, just because they cost you money each year, that doesn't mean they can't be extremely rewarding in terms of capital growth. If you’re considering investing in such a property, it’s important to evaluate the potential returns against your own financial situation and consider whether or not this type of investment is right for you.

Take, for instance, an investment of $600,000 in a property with an annual cashflow of -$4,000 and a projected 6% capital growth rate. This type of investment may appear to be risky at first glance due to the negative cashflow; however, the potential capital gain of $36,000 in the first year alone could make this property worth it in the long-term.

When you compare this investment against a term deposit, which often have an interest rate of 4% or less, that same $600,000 would only make a little over $24,000 in that first year. Even taking into account the negative cashflow of our property above, you will still be almost $8,000 better off each year.

So, while negative cashflow properties may not be suitable for everyone, it’s important to remember that they can still provide excellent returns in terms of capital growth—just make sure you understand and are comfortable with the risks involved. With the right research and due diligence, a negative cashflow property can open up some amazing opportunities for investors and help them to secure their financial future.

Happy investing!