Capital Growth Vs Rental Yield
The age old debate about which is better, capital growth or rental yield for your investment property?
Hello, I’m John Cross, a Yellow Brick Road Wealth Manager at Mona Vale and I’m here to discuss with you, Capital Growth and Rental Yield.
The Upside - Capital Growth
Those who favour capital growth say it is the most direct way to build a nest egg because their net worth grows hand in hand with the increasing property values and the Australian tax system helps pay for their investment through negative gearing concessions.
The Downside - Captial Growth
But, properties focused on strong capital growth usually need considerable amounts of their owners' cash to maintain them because the loan repayments are often far more than the rental income
The Upside - Rental Yield
Investors who prefer rental returns say their properties pay them more than the properties cost to own, ensuring positive cash flow from day one.
The Downside - Rental Yield
The disadvantage with cashflow positive, high yielding properties is that their owners must pay tax on the income whereas negatively geared properties give tax benefits, especially for high income earners.
Many investors favour a blend of properties in their portfolio – some with strong capital growth to generate equity to buy more properties and some with high yield to provide the cashflow to cover the costs.
This balances the advantages and disadvantages of both strategies and means investors avoid putting all their eggs in one basket.
Smart investors can also achieve the best of both worlds with one property – if they know what to look for and can think outside the square.
Together we can find the a good balance which will tick every box, contact us for a free initial interview.
John Cross
Yellow Brick Road Wealth Management
Mona Vale
Contact John Cross
Email: john.cross@ybr.com.au
Ph: 02 8411 2456
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