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Investment Property: Capital Gains Versus Rental Yields

By Lisa Kalucy

Ensuring that you’re financially secure for the future is one of the main reasons people put money towards their retirement. After all, you want to be able to reap the rewards of all your hard work by spending your golden years in pure bliss.

While most people will be working for the majority of their lives for this, there are a number of other ways to help secure yourself a decent nest egg for when you retire, and one increasingly popular way to do this is through property investment.

There is a lot of fantastic real estate in Australia that can be invested in and utilised in order to begin building a passive income, while you continue to work and save yourself.

However, one of the most important things to wrap your head around before you go looking into houses for sale for investment purposes is this – what kind of income would you like to earn from your investment?

There are two main ways that investment property can work for you, each one with its own pros and cons.

Capital Gains

As the real estate market continues to change and grow, the general trend is that houses increase in value, and this can be a fantastic way for a smart investor to earn a decent dollar for themselves.

Known as capital gains, the basic premise is that you purchase a property for one price and sell it in the future for another, better price. During the time that you own the property, changes in the market will affect its value.

This is where a bit of research and professional advice can come in handy. Before taking the plunge and purchasing a property, take the time to learn about predicted market trends, historical changes in the area, and any hotspots that are touted as being the next big real estate area.

Of course, this is a long term investment option. Sometimes you will have to wait years before you’re able to make a worthwhile profit from your initial investment – but if you’re keeping the property for the purpose of your retirement, then letting the property accumulate value is a fantastic, slow-burning way to earn a return.

Rental Yields

The second way to earn a return from your investment property is something called rental yields. This is the income earned from renting out your investment property and filling it with tenants.

For this to be a viable income option, it is imperative that you keep you house full at all times. An empty rental property is an unprofitable one, so taking the time out to select a home that will be popular with potential tenants is a must.

Look into local amenities such as a supermarket, public transport hub, and the relative closeness of parks and schools in order to maximise your chances of getting (and keeping) reliable tenants.

Furthermore, you may have to take some time out and get a little DIY done in order to keep the house looking prime and in tiptop shape. Something as simple as ensuring the lawns are mowed, the garden is well kept and the interior is clean, warm and inviting could be enough to entice potential tenants.

You want to make sure that the tenants you choose are reliable and trustworthy – paying their rent on time and in full, while looking after your house, is an essential personality factor to consider when choosing tenants.

Property investment is not a quick way to earn a lot of money, but if you take the time and have the right mindset, it can be incredibly lucrative and financially beneficial for you in the long run.

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