Why investing for cashflow won’t work in 2023/2024

Summary

If you’re thinking you can invest in cash flow to grow your wealth, I have news for you.

It never has been the case, but especially in 2023 in the current investment environment, chasing cash flow might not be the most financially rewarding decision.

Here’s why – and what you should do instead.

First, you may be wondering what it means to invest in cash-flow properties.

In terms of property investing, you can either invest for cash flow or capital growth.

Note: The choice is entirely yours, depending on your strategy, but there are many factors to take into account.

Put simply, when you invest for cash flow, you receive regular cash income from that investment that is in excess of the cost of owning it.

Cash flow investments are properties with a higher rental yield and a resulting rental income that add up to more than the expenses generated in keeping the asset (such as maintenance, repairs, property management fees, and so on).

For instance: if the property costs you $500 per week in mortgage interest, council rates, and management fees, but it earns $600 per week rent, then you’re receiving a positive cash flow of $100 per week.

Cash flow investments are favoured for their higher income, although investors need to be aware that this almost always comes as a trade-off of lower capital growth.