What About Capital Growth?
There is a common misconception that positive cash flow properties don't enjoy capital growth. This nonsense is often spread about by negative gearing salespeople in order to get you to buy their loss making properties. In most cases, it's absolute rubbish! (Sometimes however, growth can be very slow in small country towns and that's why I DON'T advocate buying in small country towns.)
Here's what Mike Creed, one of my students from Melbourne said:
“Thanks To Your Information
I’ve Gone From Having
|
 Listen to Mike |
As an astute property investor, your objective should be to achieve BOTH a positive cash flow return AND solid captal growth.
The cash flows from your properties offer you a greater degree of certainty and security than the specualtive opportunity of a capital gain. No one can tell you the possible capital gain you will enjoy and the timing of that gain.
For long periods of time, real estate appears to do nothing. Then all of a sudden it may increase dramatically and before you know it, the value of your properties seems to skyrocket as buyers scramble to buy up everything they can get their hands on.
Rents on the other hand, tend to be far more stable and predictable. During property booms, rents will have trouble keeping up with the escalation in property values and the yields will decline, however they tend to climb steadily in small increments as the rental demand continues.
Often there may be a timing difference between when inner city properties enjoy massive growth and when this filters out to the outer areas. In my Super Secrets® To Real Estate Wealth course I explain this phenomenon with the 'Pebble In The Pond' theory. For astute investors this represents a buying signal.
I and my students can demonstrate that we enjoy BOTH positive cash flow AND capital growth. Here's another example:
“I have made $363,667
in capital growth
|
 Listen to Graham |
