The Holy Grail of Property Investment: Capital Growth and High Yield
It is generally accepted that there are two strategies for building wealth via property. One strategy favours property that will grow in value – capital growth. The other focuses on properties that produce more income than they cost to own. These properties are positively cash flowed or geared.
“The holy grail of property investment is a property that increases in capital value AND provides a predictable positive cash flow.”
Capital Growth – The Power of Compound Interest
The success in long term investment strategies lies in the power of compound interest. As properties continue to grow in value, the debt remains the same or reduces, which in turn skyrockets the net value of the assets. The key to this strategy is to buy as early as possible and allow inflation and capital growth to drive the value of your assets over time.
“It is not so much your timing of the market but your time in the market that matters”
Properties bought over a 10-year period and allowed to grow naturally in value will be worth more in 20 years than perhaps twice as many properties bought over a shorter time frame close to the end of the 20 years.
High Yield – Cash is King
A rental yield strategy is very different to a Capital Growth strategy.
This strategy is based on purchasing properties that have predictable and positive cash flows. The rent or income received from high yield properties more than covers the interest, maintenance and other costs associated with holding or owning the investment property. These funds can be redirected into reducing home loan debt or funding further investment.
“The Holy Grail” … Combining Capital Growth with Positive Cash Flow Investment Strategies
An investment strategy that combines capital growth and cashflow offers the best of both worlds to investors. Given enough time, it can set you free. That said, you should try to avoid financial burdens that sacrifice your current standard of living for a comfortable lifestyle down the road.
The answer for some, and the most exciting investment opportunity I have seen in more than 20 years, is the government-backed National Disability Insurance Scheme (NDIS), Specialist Disability Accommodation (SDA) program.
The objective of the NDIS SDA program is to house disabled Australians. The SDA program offers investors capital growth and positive cash flows.
- The NDIS SDA scheme is Government-funded for 20 years via an increase in the Medicare levy, so from the perspective of capital growth, people investing with SDA do so on a Government-secured long-term basis. This allows investors to take advantage of a low risk approach to capital gains over the long term.
- Depending on the investment property configuration, investors can enjoy a predictable and government-backed rental yield of 12% to 18%.
This powerful combination of capital growth and positive cashflow, supported by the Federal Government for the next 20 years, well and truly sets a new standard for the “The Holy Grail of Property Investment".