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How Positive Cashflow Can Save Your Life

By Edited Jun 12, 2015 0 0

Positive cashflow can be defined as income you get from an investment after you deduct the expense of maintaining the investment. For example, positive cashflow real estate is a term used when an investment property puts money in your pocket each month after all expenses such as management fees, loan repayments, and other miscellaneous expenses like household maintenance and repairs are calculated. When an investment returns positive cashflow to your pocket, you life truly will get rosier, and here's why.

Repay your debts even faster

The positive cashflow income you get for your investment property can be used to repay extra amounts on the mortgage you have on the property – that way you are reducing the principal of the loan, and therefore you will be saving interest in the long run and owning the property outright quicker. But more importantly in my view, reducing the amount of the loan you have on the property increases the level of your equity, and therefore your ability to extend your investment options. That's always the most exciting part of reducing debt early – the increased new options it gives you. Call me wild, call me crazy, but I just love repaying debt – it's a great feeling to get rid of that responsibility and know that the money you were using to repay the debt is now at your disposal each pay period.

Money Tree (36314)

Extend your investment options

Any extra money you make from your investment should be thrown back into your investment fund – the pool of money you draw from to make extra money. Of course the best thing to do with any positive cashflow you get is to reduce your level of debt. This means (ideally) repaying every cent of money you owe on the asset before you redistribute the income. To see how much money you can save and how much earlier you can repay your debts try a simple debt calculator – you will be excited by the results, and the possibilities! Wouldn't it be fantastic to repay all the debt on your investment property for example, and then have all the rental income as positive cashflow? The mind boggles at the possibilities – they are endless!

Positive cashflow is simply magic – it's a satisfying result of good investment strategies and can be used to cement the excellent position you have placed yourself in, and improve your financial balance sheet for each pay period. Invest what you can and reap the benefits – but make sure you know what you're doing (or at least have a little bit of an idea). Enjoy!

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