Capital Growth or better rental return?

E

elizabeta.a

Hi guys,

I am new to this so please bare with me. Im 25 years old and bought my first IP in sydney at the end of last yr. I bought my property for just on 500k but my rental return weekly is 400. I would like to purchase my next IP within the next year. I need advise on which state to purchase in next and also is it better to buy a property with more rental return or more capital growth? Any feedback will be extremely appreciated. Cheers
 
Depends on your strategy and situation. I have a few low yield high CG properties with a few low CG high yield to keep me afloat. How much you can borrow, how much you make all plays into it.
 
Forgive me for what may seem like silly questions.... Do you work outside of realestate? Or is your focus on your properties? Do you make enough to solely invest and keep investing off your IPs.
 
elizabeta.a said:
Forgive me for what may seem like silly questions.... Do you work outside of realestate? Or is your focus on your properties? Do you make enough to solely invest and keep investing off your IPs.
Click to expand...

If you made all the right moves 8 years could be enough, I'm sure others on this forum have gone from zero to retire in that timeframe (I'm talking young newbies, not people who have made it and lost everything and started again but with more experience behind them, or who started with lots of capital after a long career in a regular job). But I haven't. I've made many mistakes along the way which has set me back many years but I'm getting there. Lots to learn. But better to fail fast and learn fast than to sit on the sidelines terrified of giving it a go.
 
Last edited:
It would depend on your situation. In the end, the total return on property = rental yield + capital growth. If you can afford to cover the shortfall and can make good use of negative gearing deductions + 50% discount on capital gains, go for more growth.
 
Atm I cant afford the repayments of multiple properties. So thats leading me into looking for cheaper properties to purchase with higher rntal return.
 
elizabeta.a said:
Hi guys,

I am new to this so please bare with me. Im 25 years old and bought my first IP in sydney at the end of last yr. I bought my property for just on 500k but my rental return weekly is 400. I would like to purchase my next IP within the next year. I need advise on which state to purchase in next and also is it better to buy a property with more rental return or more capital growth? Any feedback will be extremely appreciated. Cheers
Click to expand...

There are lots of threads on this forum whether to invest for CG or for CF, as there are books!
I prefer CG. You need to educate yourself and read on this topic a bit more....
You need to select a strategy and stick to it, why are you buying in the first place?
 
Cf vs Cg really depends on your income. Your first one is neg geared and low rent so if you have earnings under 100k I would suggest next property should be more rental focused or at least neutral if possible. If you earn 300k then it doesn't really matter does it? most young investing people hit the serviceability wall after 2-3 investment properties if buying neg geared.

If you do your research then there is no reason you can't get some Cg along side a good cashflow property. I say have your cake and eat it too.
 
I always prefer higher rental return in the beginning because the property strategy for me is to get long term growth gains from my portfolio.

Therfore the more income i can make from the properties, the longer i will be able to hold them in my portfolio and (**hopefully**) the more growth I will be able to get over the long term.


_____________________________________________________________

Jim

Investment Property Leads - Lead generation for investment property sales.
 
Rixter said:
CG is where the real wealth is generated.
Click to expand...

CG is great, but you don't get it unless you have the cashflow to hold the properties. Most people can only afford to hold onto a couple of $500k properties renting for $400pw, but you can hold onto unlimited $500k properties renting for $1000pw.

I prefer a balanced mix of some City properties and some regional. The Regional stuff still gets some CG, but certainly not as much as the City stuff. It has a much higher cashflow though.
 
Capital growth (comes from passive waiting around, or actively doing stuff) is greatest bit about property, as that's what allows you to buy more properties and/or achieve wealth.

The rental return is what allows you to hold onto them though.
If you earn $5K per month, and have properties costing $500 per month, how many can you hold onto? Conversely if you have properties putting $100 a month into your pocket, how many of those can you afford to hold onto?

So, in my opinion, the ratio you have of one to the other depends on your goals, acceptable results timeframe, resources available to you, etc.

It also depends a bit on your risk appetite and skill level, eg if you can find areas that are offering lots of both, then by all means go ahead ;) :cool:
 
LeadGenGuy said:
I always prefer higher rental return in the beginning because the property strategy for me is to get long term growth gains from my portfolio.

Therfore the more income i can make from the properties, the longer i will be able to hold them in my portfolio and (**hopefully**) the more growth I will be able to get over the long term.
Click to expand...

But in the mean time of holding, you are getting taxed because you are accummulating the profit from the CF+ investment Property ?
 
knightm said:
Cf vs Cg really depends on your income. Your first one is neg geared and low rent so if you have earnings under 100k I would suggest next property should be more rental focused or at least neutral if possible. If you earn 300k then it doesn't really matter does it? most young investing people hit the serviceability wall after 2-3 investment properties if buying neg geared.

If you do your research then there is no reason you can't get some Cg along side a good cashflow property. I say have your cake and eat it too.
Click to expand...

So in this case rental focus or CF+ example is buying Off The Plan apartment unit in the city and then use Quantity Surveyor to do Depreciation Report to claim the tax loss, is that correct ?
 
You must log in or register to reply here.

Similar threads

F
Buy now in Sydney or Queensland for the long term?
2 3
Replies
43
Views
7K
jerrybee
J
T
Mansfield
Replies
3
Views
1K
INVSTOR
I
T
Capital Growth of apartments in these suburbs
Replies
6
Views
2K
Jake Milne
Jake Milne
K
Budget $330k Western suburbs Melbourne
2
Replies
22
Views
12K
Jake Milne
Jake Milne
C
Adelaide southern suburbs... Is it worth buying? Suggestion?
2 3
Replies
46
Views
8K
hugh72
H
Back
Top