Capital gain is generally seen to be a good measurement of the success of any property investment. Gaining equity in your property investment means that you can go back to the bank and borrow on that equity to buy another property that you think is in an increasing market.
The problem that arises with a capital gain focussed strategy is that it does not take into account that you have to pay for the mortgage, rates and maintain the property. It is no use having a multi-million dollar portfolio if it does not earn you any money and you struggle to put food on the table. Most people in this situation end up having to sell a property to pay the bills, then what do you live off in your retirement?
A good rental yield will give you a decent income to pay off your mortgage quickly using our strategies.
Once you have paid off your mortgage (some people can do this in as little as 8 years or less) why sell your property? The banks pay very little interest on your savings and investing in the stock market can be like betting on the horses.
If you want to sell your property because you have doubled your money or even tripled it, the interest earned on the profit would not be enough to live off and all you will do is watch your bank balance decrease every month. Don’t forget that there will be capital gains tax to pay on the sale too.
Passive income from your property investments can be for life and will only increase each year as rents increase. That is truly earning money while you sleep.
The added benefit is that once you leave this mortal realm the properties can be handed down to the children.
Capital gain along with a high rental yield and a good repayment strategy will generate income that you can use to reinvest and grow your property portfolio. The more property you have paid off, the more you earn in your sleep on retirement, or, if you are very savvy you will have enough property to retire early!
All sounds easy? When I first started to buy investment property, I made some mistakes and learnt very quickly. There is no quick fix, it is a long-term strategy. You need to plan how the property, the finance, the structure of ownership and future purchases can all work together to give you exceptional results.