Capital Growth vs Cash Flow

When investors are researching for a property you must compare capital growth or a cash flow strategy when planning your financial goals.

A capital growth strategy is when an investor often foregoes cash flow (this means the property on a revenue account loses money and the investor has to supplement the investment) for future capital growth. The capital strategy might include, purchasing or building investment property in a high growth area, where future infrastructure and population growth will support the demand for that investment property.

A cash flow strategy is when an investor receives a positive cash flow yield from their investment, with the understanding of minimal future capital growth on the property. Having a positive cash flow investment property can allow the owner to pay down other debt or save the cash flow for a future investment property purchase.

Investors obviously seek a property that provides strong capital growth and positive cash flow, though these properties can be very hard to acquire and usually the investor has to pick one strategy or the other.

Managing your cash flow with your investment property is important to investing success

Managing your investment cash flow

Cash is king and this applies when investing in property. It is important to sit down with a hfinance mortgage broker to ensure you can afford the cash flow obligations on the proposed investment property.

Working out principle and interest repayments vs interest-only repayments and how that impacts your cash flow and tax obligations. Fixed or variable repayments are also something to consider when budgeting your cash flow.

Australian Expats and foreign investors, you will also need to consider foreign currency (FX) movements and how that will impact your AUD mortgage repayments.

Having the correct legal and tax structure

When planning to purchase or build an investment property, it is important to get the correct legal and ownership structure. This will assist with tax and asset protection planning for now and into the future.

We work with related professionals to ensure you have the right team around you to set this up correctly. Real estate agents, buyers agents, accountants, financial planners, and lawyers. If you need an introduction we are more than happy to assist