YIELD VERSUS CAPITAL GROWTH

Capital growth is fundamental to property investment and is what ultimately increases an investor’s wealth. An investor will increase his or her wealth over time by selecting and purchasing properties that achieve long-term capital growth. Rental yield is basically an end to a means - it helps the investor’s cash flow but does little of itself to increase the investor’s wealth. Wealth comes from the property increasing in value.  When first purchased, a property might be negatively geared, however, over time as the rent increases, it will eventually become neutrally, and then positively geared.  Only occasionally when buying a residential investment property, will the investor be able to achieve a high rental yield whilst also achieving high capital growth, as there is usually a...
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