Cash flow positive properties: suburbs where the homes cost nothing to own

Property investors in many locations can now buy properties where the rents are higher than the mortgage costs, delivering up to $10k in annual profit, due to staggering market rises.

It’s been brutal for tenants but the ongoing rental crisis has been a boon for landlords.

Real estate investors now have an opportunity to snap up properties that will earn them thousands in cold hard cash while costing nothing to own due to soaring rents covering the mortgage bills.

Analysis of PropTrack and Reserve Bank figures showed there were more than 100 locations around the country where the typical rental properties were “cash flow positive”.

This meant the rent eclipsed the mortgage repayments and left the landlord with a profit – in some cases as high as $10,000 a year.

Housing experts attributed the trend to crippling rental shortages, with some cash flow positive suburbs having an expanding tenant base but no vacant rental properties available.

There are more than 100 locations around the country where the typical property is cash flow positive, despite recent interest rate rises.

The bulk of the cash flow positive locations were in regional Western Australia and Queensland.

There were also pockets of Darwin and Perth where rents were higher than the costs of paying down a loan if buying with a 10 per cent deposit and the average investor interest rate.

Higher purchase prices in Sydney and Melbourne meant there were no locations where the average investment property would be cash flow positive, but it was possible in some parts of regional NSW and Victoria.

The highest rental returns were on offer in Western Australia’s iron rich Pilbara region in the northwest of the state.

Both houses and units within the town of Newman had average gross rental yields of over 10 per cent, and landlords of houses could typically get an extra $10,000 from rents after paying their annual loan obligations.

It was a similar situation in other locations in the region including Port Hedland, South Hedland, Baynton, Millars Well and Bulgarra.

Queensland locations where the typical rentals were cash flow positive included a string of suburbs in Cairns and Townsville, along with parts of the Darling Downs region in the hinterland of the state.

NSW’s highest rental returns were in Broken Hill, Lismore and parts of the Capital Region and Hunter Valley.

Propertyology head of research Simon Pressley said investors should do their homework if buying in a high cash flow location as some were risky.

“Cairns and Townsville are some of the strongest markets in the country, and Townsville especially has a diverse economy. The risky markets are ones where there isn’t a diverse economy,” he said. “If you go in with your blinkers on focusing only on cash flow you can get caught out.”

Rich Harvey, one of the country’s top buyer’s agents, said it was a good time to buy property for investors who “cared about cash flow”, but not all locations with high rental yields were good investments.

The area around WA’s Port Hedland offers high rental returns for property investors. Picture: Pilbara Ports Authority

The Property Buyer founder said mining towns with high yields were often volatile markets.

Were rents to continue soaring, resources companies would set up temporary camps to satisfy demand, Mr Harvey said.

“The rent increases need to be sustainable,” he said, adding that larger towns tended to have more diverse economies to prop up the property sector.

“It’s a great time to capitalise on the rental boom if you’re buying in an area with a healthy economy,” he said.

Investor Nathan Birch, who owns more than 200 properties, said rising rents had encouraged him to recently snap up more properties in Cairns and other parts of northern Queensland.

“The dumbest thing you could do as an investor at the moment is buy a heavily negatively geared property because interest rates are rising,” he said. “Cash flow is very important.”