Is it cash flow or capital growth you are after?

Much the same as the share market, the property market moves through cycles.

Capital Gains Dice
  • 30 November, 2017
  • PROPERTY MANAGEMENT, RESIDENTIAL
  • cash flow, capital gain, property, Investment

But before diving in to the property market it’s important to consider your strategy and long term objectives, as this may influence what and where you buy.

There are two chief goals for investors – capital gain and cash flow. While it’s quite realistic to achieve both, the two should at least be considered separately and prioritised before making your move.

Capital gain

Capital gain refers to the growth in value of the investment and the subsequent return to the investor once the property is sold. Australian property has historically doubled in value every seven to 12 years, which may not be as dynamic as some other investments but it is generally considered one of the safest.

Cash flow

Alternatively, rather than liquidating your investment after a set period you may choose to generate ongoing rental income. While you may need to dip into your own cash reserves in the early stages to repay the mortgage on the property there are tax benefits associated with this.

However, as rentals continue to rise there may be a point where your property may become cash positive – delivering a steadily increasing monthly reserve. These extra funds can be channeled back into the property to drive down the principal debt or spent on other purposes.

 

LJ Hooker NZ

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