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From: RM .
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Fellow colleagues, learned friends and mental giants. I have a question that I would like an answer to.
Assume I purchase a property in Dogsville and it returns a rental yield of 12% but only 2% Capital Growth. Most would say this is good cashflow but hardly enough to provide you, the purchaser, a ticket to leisureville.
I now take 6% of that cashflow (from the Dogsville property) and invest in a better (2nd) property in Greatville (assume equal purchasing value) that returns a 4% rental return but say 10% capital growth.
Would not the combination of Sloth (Dogsville) and Sin (Greatville)combine to give me an average rental yield of 8% and an average capital growth of 6%?
I understand that this is all hypothetical, but doesn't this fictitious scenario show that the combination of a poor performing (low capital growth/high rental yield) and a reasonably performing (low rental yield/high capital growth) mix of properties provide as good a return as some inner suburb properties in this heated real estate market?
I am keen to be shown the error of my ways.
Thanks RM
Message Text:
Fellow colleagues, learned friends and mental giants. I have a question that I would like an answer to.
Assume I purchase a property in Dogsville and it returns a rental yield of 12% but only 2% Capital Growth. Most would say this is good cashflow but hardly enough to provide you, the purchaser, a ticket to leisureville.
I now take 6% of that cashflow (from the Dogsville property) and invest in a better (2nd) property in Greatville (assume equal purchasing value) that returns a 4% rental return but say 10% capital growth.
Would not the combination of Sloth (Dogsville) and Sin (Greatville)combine to give me an average rental yield of 8% and an average capital growth of 6%?
I understand that this is all hypothetical, but doesn't this fictitious scenario show that the combination of a poor performing (low capital growth/high rental yield) and a reasonably performing (low rental yield/high capital growth) mix of properties provide as good a return as some inner suburb properties in this heated real estate market?
I am keen to be shown the error of my ways.
Thanks RM
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