Cashflow vs Capital Gains

Some people argue that it is just the land value that increases in value. So why do I advocate buying units, townhouses and villas?

The reason I choose to invest in these types of properties is that I have found the rental returns per dollar invested to be greater than for many other types of properties.

Units, town houses and villas typically take up less land area than houses and yes it is the land component that goes up in value, because of the shortage of land closest to the CBD, transport hubs, the ocean, a river, the mountains or some other factor.

It is also true that buildings often depreciate and deteriorate over time whereas land becomes more expensive.

Nevertheless, units still increase in value in line with the general escalation in property values.

Capital gains occur in spurts rather than consistently over time. They occur in cycles.

If you rely mostly on the capital gain component, it’s great when it comes and it may come in large amounts, but it may be also be ‘a long time between drinks’.

You need to remember, that it is a windfall and no-one can predict with certainty when and by how much your property values will increase. (I’ve found that the experts usually appear after the event.)

Cash flow on the other hand is far more predictable and stable. Cash flow is what services your debt on a month-to-month basis.

It’s the cash flow that can help you to sleep well at night and keep your loan provider happy.

Your loan provider will not be interested in the capital gain you’ve had on your property if it is not producing a cash flow to service your debt each month.

Your mortgagor wants his interest paid regardless of the value of your property.

In fact, if you don’t keep up your payments, he’ll force you to sell the property and liquidate the loan.

To me, CASH FLOW IS KING and the capital gain is a bonus!

That’s why in my Super Secrets To Real Estate Wealth course I teach EXACTLY that! I show you not only how to buy property SAFELY, but I specialise in how to buy CASH FLOW POSITIVE properties.

And yes, properties, that make you an extra income from the VERY 1st day you buy them do still exist!

You’ll find some examples at:

http://www.RealEstateSecrets.com.au/aboutgrowth

Warm Regards

Hans Jakobi – Your Wealth Coach®
Real Estate Secrets