Growth or Yield?
There are two distinct camps of people who invest in property: those who do it for return and those who do it for capital appreciation. So which is the best?
In the days when positive cash flow investing was being promoted as the way to get into buying multiple property portfolios, the notion of yield versus gain was less a case of growth versus yield than a case of more is better. That is, if you could use the cash flow of an investment property to buy more property then eventually long term gains would be achieved. These days, however, the equation is far less certain.
Yields (despite increasing rents) simply are not high enough to entice investors back in wholesale numbers. Meanwhile increasing yields for investors already with a property portfolio is welcomed.
The real point is of course that it is total investment return that counts and an above-average rate of capital growth is what counts in the long run. Whichever way you choose to invest in property, it is extremely difficult to speculate on and achieve good results. Some people prefer the passive income approach and some the equity/wealth creation strategy.
You need yield to service loans but after 10, 15 or 20 years it is the power of compound returns that produces the goods. When done sensibly, good performing property provides a safe vehicle for wealth creation.
Filed Under: Investment Strategies • Property Investment
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