Investing In Property
When it comes to Investing In Property, there are only two ways to make money:
- The first is through capital gain or capital appreciation when the value of your property increases over time;
- The second is through the regular cashflow you receive from the rents collected from your investment property.
Investing In Property – Cashflow vs Capital Growth
“When I’m Investing In Property, Is It Better To Look For Capital Growth, Or Cashflow?”
The truth is there is no clear-cut answer to this question when it comes to Investing In Property.
Depending on your purpose for investing, there are strengths and weaknesses to both investing for capital gains and investing for cashflow, and the right choice for you will depend on your own personal circumstances.
Many people, choose to invest for Capital Growth because they believe that is the best way to make money in investment property.
Investing In Property for Capital Growth
On the one hand, people who invest in property for capital growth often do so because in many respects it’s an easier and more obvious way to make money.
The fundamentals of Investing In Property for capital growth are fairly simple…
- Step 1. You find a property which you believe has growth potential;
- Step 2. You buy the property and hold it while its value increases;
- Step 3. You sell the property for a profit!
The overall trend in Australia is that property rises in value. So generally someone Investing In Property will be able to make money by simply buying a property and holding onto it while the value of the property grows.
Of course there are strategies you can use to speed up the process and actively add value to the property rather than passively waiting for it to go up in value (renovations, subdivisions, developments etc). These strategies require additional skills and an investment of time, therefore they aren’t as common as the traditional “Buy-and-hold” technique.
The down-side of Capital Growth strategies is that they are generally ‘cashflow negative’ – that means it costs you money on a week-by-week basis to own the property.
This means you lose money on the property until you sell – and you’re ‘betting’ that you’ll make more in capital growth than you will lose in cashflow in the long term.
Investing In Property for Positive Cashflow
Investing In Property for a positive cashflow on the other hand puts money in your pocket.
That means you’re not reliant on the property going up in value to make money – any capital growth you receive is just a bonus!
The way it works is every week you make a little profit as the rents you receive more than cover your holding costs such as interest, rates and minor repairs (with a little bit extra left over that you get to keep).
Investing In Property for a positive cashflow is a popular strategy for people who invest for passive income to fund their lifestyle and/or retirement. This is because (with enough properties) they are able to replace the income they receive from their job with a steady income from their property portfolio.
The downside to Investing In Property for positive cashflow is that most investors don’t know how and where to find positive cashflow properties (especially if you don’t know where to look for them!).
It Is Possible To Get The Best Of Both Worlds…
It is possible to achieve both a positive cashflow from a property while maximizing the capital growth potential. In fact, this is one of the ways highly successful real estate investors maximize their returns in order to massively grow their wealth.
Unfortunately, strategies for Investing In Property which achieves both of these goals aren’t very well known.
Would You Like To Learn More About Investing In Property?
I hope this article has provided you with some eye-opening property investing insights.
If you’d like to learn more about Investment Property, and making money from real estate, then I encourage you to register for my 10-Part Mini-Course on making massive profits on real estate.
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