Investing in real estate requires goals to be set. There is no magic formula to guarantee a strong return, but placing clear and strategic markings can help you achieve the best possible outcomes.
Whatever your investment end goal, it is recommended that you always compare the cash flow of the property to that of the expected capital growth.
What is Cash Flow?
Cash flow is often the option first time investors consider when thinking about purchasing an investment property. Purchasing a property with a high rental yield tends to lead to high immediate returns of cash in the form of rent. Ideally, cash flow investments would use the property’s income to cover the property’s expenses, such as the mortgage, associated interest, maintenance and more.
The Benefits of Cash Flow
Cash flow offers instant gratification. By receiving returns from your investment earlier you have the potential to receive more capital. You will find you’re more likely to pay off your property with this method and have immediate additional income, which can be a great incentive for those planning for retirement as an added income.
What is Capital Growth?
Capital growth depends on the strategy of finding well-priced properties in suburbs that look as though they will experience growth, leading to higher property prices in the future.
The Benefits of Capital Growth
Capital growth may not have immediate income benefits, but the benefit of this type of investment lies in the future profit when sold. Tax benefits are also something to consider when opting for high growth properties, particularly if you are a higher income earner.
Investment experts recommend investing in both cash flow positive properties and properties set for measurable capital growth to result in the greatest wealth.
It’s important that you research your potential investment areas thoroughly. Local public transport, local schools and nearby shopping and recreational areas are all things to consider and can significantly affect the desirability of an investment property.
Are you ready to invest in property? Don’t forget to download our FREE investment decision checklist https://www.rentalresults.com.au/landlords-guide/