Capital Growth Or Cashflow, OR Combo??

Cashflow is good and it helps you to borrow more and buy more properties, but the purpose of investing is to get rich, not to get as many properties as possible. Making $40 pw in net cashflow per property will not make you rich, but if you are able to buy high growth property you should be able to make more than $40pw.

We buy cheap (currently under $200k) properties and subdivide them doing up the existing house and building on the back. We’ve followed a deliberate policy of going for cashflow. we get our capital kick from the subdivisions. We started with next to nothing in our 40’s and made a virtue of necessity. In our longer term plan we KNOW that we will have to make the change and go for capital growth. Meantime our cashflow from property allows us to reach that goal. If you can, buy for growth in capital. Eventually the cashflow comes if you buy well. Banks look at both cashflow and equity. They need to be sure of your ability to service and their being able to get their money back in a forced sale if the worst happens.

As my lecturer in my finance for entrepreneurship class always reminded us: CASH IS KING! If you can make $40,000 in the next three months via a buy-reno-sell vs making $4,000 profit a year via buy and hold, then I would suggest taking the option that gets you $40k now, especially after inflation is factored into the process. This cash can then be used to invest in longer term deals, but can also be used for further cash investments, reducing debt, increasing savings, cutting back work hours to maximise time, etc.

At the end of the day though it depends on your investing goals and the individual investment.