“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.
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