Which One Do You Go For: Rental Growth Or Capital Growth?

house-with-for-rent-sign-posted-in-yardThere are basically two types of property investors on the market today, those who purchase property to sell it, and those who purchase to lease. So, how hard can it be?

Rental properties in the right growth areas provide you with a steady cash flow, and the ability to pay off mortgage at the same time. There are several key factors that have to be considered before a property is called a “good investment”. Among these, you should be able to identify what suits your goals the most, and whether you should go after rental yield, or capital growth.

Often, it is difficult to find both in the same area, as high rental yield properties are often in the outer ring of the CBD. These properties are cheaper than their capital city counterparts, thereby providing you with the most out of the rent. On the other hand, capital growth properties are usually in the inner ring of the CBD and they cost more, but the property value provides the best growth in time. So which one do you go for?

Capital growth properties take advantage of the property value at a lower rental yield. These properties take advantage of the area as it grows in value. Capital growth can take a long time to catch up and the level of competition is higher, as people are willing to invest in the inner ring of the CBD as it is accessible to nearby amenities.

However, rental yield properties provide you with less competition and high rental yields in the mid – to outer ring of the CBD. These properties are ideal for those who want to shy away from more expensive properties near the CBD, but want to take advantage of the growth area. The property values increase in the area as more developments and amenities are constructed.

Once you’ve determined the best property for you, it is best to talk to a licensed financial planner about your goals. This will allow you to choose not only the best property, but the best areas of growth that will match your current financial standing.

Author: Dorian Traill

Dorian Traill is the current Director of Grand Capital Finance Group and Fountain Property Group. He specialize in home loans for people as well as helping them build wealth through quality investment properties that ultimately lead to long term financial freedom.

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