So Brisbane property investors do you chase growth or yield?
Growth or Yield?
The nuances of property investment are abundant. However, two components of investing in property tend to feature more frequently than others – capital growth and rental return (yield).
These two components generally divide Brisbane property investors. It’s not uncommon to be standing around at BBQ and hear a hearty debate of the superior benefits of either or. Some people sit firmly in camp “growth” and others in camp “yield”.
Growth investors champion the returns that an increase in property value brings. Whereas the yield investors prefer a continuous income stream that covers the costs associated with owning the property.
So is one better than the other?
Although yield and growth generally divide people it’s important to point out that they aren’t mutually exclusive. It is possible to achieve both from a property. The trick is to find a property that can achieve both.
Investing is property is generally a medium to long term investment strategy. This means it’s important to review the performance of the property as it ages. For example, a Brisbane property investor may buy a house in trendy New Farm that is performing very well for years 1 – 5 as it’s attracting a high rental return. However, in year 6 the tenant moves out and the market drops. This makes it hard to find a new tenant and results in a lower rental return. In this instance it may be wise for the owner to evaluate the investment strategy. A strategy can help determine what action to take in moments of uncertainty. For example, it can show whether to offload the property (if the sales market is hot) or to hold onto it and wait out the slow market.
Determining what to do is never easy and it can be helpful to seek financial advice to help make a decision.
The Money Smart website is a great place to start when looking at a property investment strategy. It has lots of information including a helpful pros and cons table. Visit their website here.
Deciding which component of investing to prioritise isn’t simple and it’s always worth trying to find an investment property that may give you both capital growth and high yield. Blocksidge & Ferguson can assist you in this pursuit no matter what stage you’re at. We can provide appraisals on property values, rental rate estimations and property valuations. If you’re a Brisbane property investor give us a call to see how we can help.