Assets vs Liabilities (And Why You Should go for a Positive Cash Flow)

Let’s talk about assets and liabilities for a moment.

But not the way everyday investors think of them, or the public does. 

We’re going to talk about it the way BANKS evaluate them when they’re working out how much to lend you. 

At Dashdot, as you know, we believe that positive cash flow is a super important part of any investment strategy.

As a result, negative gearing (and all the talk that goes with it) doesn’t come into the equation for us.

That strategy comes down to the assets and liabilities issue.

Let’s say you have a negatively geared asset...

...It sounds negative right from the start…

But what that really means is that... 

...you have an asset that you’re going to have to spend money on every year.

You’re doing that at the most basic level... 

...and likely doing it for several years in a row.

That makes the property a liability.

Other examples of liabilities might be your car or the home that you live in right now... ...It’s something that’s taking money out of your pocket.

Sure, you might put it in a list of ‘assets’...

...but really, it’s the “monthly repayments” that the bank looks at when they’re working out what you can afford.

We think that any asset you buy should make money right away.

Obviously, you have good liabilities and bad liabilities. 

As we all know, there’s good debt and bad debt.

But when it comes to investing, a liability can put you in a dangerous position - unnecessarily!

If you’ve got an asset that’s putting money in your pocket week-on-week...

  • it’s not difficult to maintain the asset,
  • keep reaping the cash from it,
  • and keep the banks happy.

Plus, you’re improving your overall financial position.

That’s going to prove really important if you’re interested in buying multiple properties.

Lenders consider all of your assets and liabilities when determining your serviceability. 

A positively geared property is an asset that makes money...

...Thus, it’s going to improve your chances of getting financing for the next property.

That’s why we think you should always go for positive cash flow. 

The goal is to get a high-performance property from day one.

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