Cash Flow vs Capital Growth

In Uncategorized by Jeff OsborneLeave a Comment

Most would agree that property investment often guarantees sustainable income. As we all know, if a property is acquired and is well managed over the years, the rental income will surely increase, making your investments profitable. In this context, cash flow is fundamental. 

A good percentage of Australia investors enjoy a 4% to 5% gross rental income on their investment over a short and long-term period of 5 to 12 years and net income of 2% to 3%. 

Investing in property located in a not so favourable area has the tendency to yield the most, whereas the wealthiest suburbs with the best economic outlook have the tendency to have a poor yield but are more likely to perform better in terms of equity over a longer time.)

Cash flow is the fuel that assists you to hold the asset for the long run. When your portfolio grows substantially, you may sell part of the portfolio to reduce the remaining properties outlays. Needless to say, without cash flow, you would face difficulties to serve your loan and manage your outlays. Depreciation tax claims with newer properties and negative gearing greatly assists with the overall generated cash flow.

Another means of wealth creation and sustaining is through capital growth, which is an appreciation of value over a period of time.

Capital growth will be critical for wealth accumulation over time, and it will assist you further to achieve your long-term and end goals.

It is imperative to know how to identify suitable investments, where to invest, the kind of property to invest in and new infrastructure needed to boost the growth of such investment. Your ability to take the right step will reduce risk and fast-track capital growth. So between cash flow and capital growth, which would be the better option for investors to focus on? 

It truly depends on your financial, investment goals and your risk profile.

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