How to achieve positive cash-flow

In this week’s Ask An Expert feature, David Whitburn talks positive cash-flow.

I am a newbie investor and find myself struggling with many investment jargons thrown around at APIA meetings.  What is ‘positive cash-flow’?  How important is it to have a positive cash flow?  How do I achieve it considering I am only on my first property?

There is a lot of jargon in property investment.  Positive cash-flow is where the rental income from your property exceeds the outgoings (rates, insurance, repairs and maintenance).  Positive gearing is where the rental income from your property exceeds your loan repayments.  

With the centuries long old trend of population increases in Auckland, and the fact we are the third most liveable city in the world, house prices are rising in Auckland.  Our gold sponsor Barfoot & Thompson publishes excellent data on house prices and rentals, which shows a gross yield of 3.7%.  Interest rates are at least 2% higher than this, let alone extra costs for rates, insurance, and a provision for repairs and maintenance.  If you are wanting to build a sizeable property portfolio since the banks look at deals with a higher interest rate to best ensure you don’t get into trouble (a stress test), you need to focus on cash-flow or you are likely to get your loan applications declined as you try to build your portfolio unless you have high cash-flow from...