Australian Property Investment Blog by Micah Keall-Grant

This article follows on from my previous article: Should You Invest for Positive Cashflow or Capital Growth? Question from a reader: Playing devils advocate here what are your thoughts if both properties were sold at the 20 year mark and capital gains taxes applied? Also one advantage of the positive cashflow property is that the extra revenue it generates can be re-invested - if this is figured into the analysis then perhaps the overall difference between the two strategies is closer? Thoughts? Good question. The initial example was relatively simple however these calculations can get very complicated, very quickly! Answer: I believe you still come out significantly ahead with the capital growth strategy. Let's make some further assumptions and do some additional calculations, while also taking re-investment into account: Let’s call the positive cashflow “Strategy A” and capital growth “Strategy B”. -    Assume a more realistic scenario of a $200k deposit and an ...

This is a question that many property investors ask themselves when considering their investment strategy. Countless articles and books have been written on the subject, each with a slightly different perspective. There are a couple of factors to consider but first let’s take a look at the differences between the two approaches: Positive Cashflow Strategy: A lot of people don’t realise that there are significant costs associated with purchasing and maintaining an investment property; mortgage payments, building and landlord insurance, repairs and maintenance, leasing and advertising fees, property management fees, utility charges, council rates, additional tax return fees and sometimes you also have company/trust fees and land taxes. In most cases, especially in the initial stages of ownership, the vast majority (if not all!) of your rental income will go towards covering these costs. The main goal of a positive cashflow strategy is to ensure that the income from your p...