When it comes to property investing, most people assume the only way to buy property is by using negative gearing so they can "save tax".
However, many investors fail to realise that to "save" at the back end, you need to lose money at the front end.
Yes, an investor can offset property losses against their taxable income and therefore reduce their tax but this means they must have some additional income- usually a job - to supplement the shortfall in the meantime.
And with interest rates having risen sharply, carrying a loss-making investment can be unbearable for some.
So, what about positive cash flow property? It's still possible to buy property that is positively geared, even in the current environment.
By positively geared, I mean not only are all of the outgoings covered by the rental income but extra cash flow can also be earned.
You will just need to do a little bit more homework to find them.
First, you usually need to look further afield. For example, Australia's mining boom has fuelled a sharp rise in rental returns from regional areas.
Generally you will be looking for opportunities to buy houses at reasonable prices that show relatively high rental returns.
So what's the secret? Look at areas where prices are relatively low but where there is strong demand for rental accommodation.
Many of these properties have the potential to be positively geared, however, to really get the numbers to stack up a little creativity may be required.
For example, the properties may need a tidy up or be rented under market value.
One property I purchased (four flats) was negatively geared on inspection, as the owner lived on site, self-managed the rentals and had not maintained the property.
A quick cosmetic renovation significantly improved the flats, allowing rents to be increased in line with the market and the property immediately had positive cash flow.
Simple and inexpensive things can improve rental returns, such as cleaning carpets, replacing door knobs and taps, painting or replacing tired bench-tops. Think like a tenant -- what would they want?
With regional investing, due diligence is key.
Don't take things on face value. Ask plenty of questions. Use tools such as the internet to source as much information as possible. Get a map to understand the town layout.
Find out what shops and industries are in town and give local businesses a call - ask them about the town but also about particular houses and streets.
Local real estate agents are a great information source, as they are often familiar with properties on the market being sold by other agents.
A hidden gem is the town's tourism information bureau, while the local council can advise of any future development plans.
Overall, always make sure you know your exit strategy, should you need it. Review your properties every six to 12 months and make sure you are prepared to get out when you need to.
* Wendy Moore is founder and managing director of www.affluencia.com
