Capital Gain or Yield

We are often asked the question

“Isn’t it better to buy an existing house and land as an investment rather than a Unit or apartment?”

The answer lies in a study of the most powerful investment tools – COMPOUNDING.

This example shows Property 1 a house and land which was purchased because it had a high rental yield of 6% pa and offered the Investor an attractive cash flow return. This property will probably be in an area that offers a poor capital growth. We have used 6% in the example.  Property 2 was purchased with a focus on buying a quality asset in a high capital growth area 9%. We have used 5% as a rental yield in this example.

The table shows how whilst the higher yield is attractive initially. In the long term this short term gain comes at a huge cost.

After 10 years Property 2 with the growth focus out performs by approx. $1.5 million. The differential will increase over time. The quality of the location and the probability of capital gain is the focus of all property investments recommended by Calnan Flack.

yeild vs growth

IMPORTANT NOTICE
Disclaimer: The information transmitted is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you received this email in error, please contact the sender and delete your copy of this message. Any opinions or recommendations expressed in this email do not purport to Financial Advice but rather should be considered General Advice and does not take into account your personal needs and objectives or your financial circumstances. You should therefore consider these matters yourself before deciding whether the advice is appropriate to you and whether you should act upon it. Should Financial Advice be sought, we suggest you seek such advice from an appropriately qualified advisor. Any yields, rental income, tax rates, interest rates, deprecation rates, inflation rates Dividends per Share (DPS) and Earning Per Share (EPS) etc shown are estimates only and should not be used as a guide to future performance. Past performance is not necessarily a guide to future performance and should not be relied upon for this purpose. No representation is made  that this email or any attachment is free of viruses or other defects. Authorised Representative of PGW Financial Services Pty Ltd – AFSL 384713.