Investing for Income or Capital Gain?

The quandry for many investors is devising a strategy for property investment and sticking to it. Do you invest for positive cash flow and what is positive cash flow? For the purists positive cash flow does not mean taking into account depreciation and income tax benefits.

Almost a given is both positive and negative gearing primarily require a long-term commitment in order to maximise gains. However, they don’t really go hand in hand.

Michael Yardney of Metropole Properties says, “Properties that tend to have positive cash flow have poorer capital growth, whereas properties that have good capital growth in general have poorer cash flow."

Bronwyn Davis writing for realestate.com.au gives a thorough insight on the subject of buying for income or buying for capital gain; positive cash flow or negative gearing.

However for most early investors, their choices will be limited by what they can afford to commit. Their affordability limit will be dictated by two factors: how much equity they have in the properties they own and what is their disposable income that can be committed to the new investment.

And for the majority of the population, such constraints puts the $1M property in Brighton beyond their reach. Happy searching.