Property strategies

When it comes to property investment you’ll often hear two somewhat conflicting philosophies being bandied around. A common question beginning investors ask is – which is better?

Firstly there are the “Cash flow” followers; they suggest you should invest in property that has the capacity to generate high rental returns in an attempt to achieve positive cash flow. In other words, you want rental returns that are higher than your outgoings (including mortgage payments), leaving money in your pocket each month.

Then there’s the “Capital Growth “crew. Their favoured strategy is to invest for capital growth over cashflow. In other words, you need to buy property that produces above average increases in value over the long term.

In Australia, properties with higher capital growth usually have lower rental returns. In many regional centres and secondary locations you could achieve a high rental return on your investment property but, in general, you would get poor long-term capital growth.

Clearly if both exist there is a place for both so to answer the question of which suits you best, you really need to know what you want to achieve.

You see…property investment should be part of a wealth creation strategy, not just a purchase in isolation.