Investment Property Question from my Real Money Real Estate Book …
Got this question today that I thought was worth answering for everyone to see ..
There is one thing that I really don't understand in the Real Estate Coach.. Why are you saying that a property with a positive cashflow will rarely increase in value over time, whereas a negatively geared property (a property with a negative cashflow) will necessarily increase in value? Can't a property with a positive cash flow increase in value too? Thank you very much for the help! Sebastien
The simple answer is they will both increase in value over time. The main difference is that a positive cashflow property is usually in a mid to lower socio-economic area, further out from the city and thus prone to less capital growth than a property close to the city or water or on a hill with views etc.
Another way to look at real estate is the balance of returns. You get two forms of return, cashflow, being the rental income and capital gain in the value of the property over time growing. The returns have a balance, one with better cashflow will generally get lower growth and vice versa.
Sebastian, when you are looking at portfolio management it's great to keep a balance between high cashfow properties and high growth properties.
All the Best ...Brad Sugars ...
PS. You can order any of my books at www.actioncoach.com/books.php
Great post. Thanks Brad.
Jon O’Malley
It is for this very reason you need to educate yourself on the market and investing techniques before diving in. It is also for this reason that you need to be an accomplished decision maker. If you can’t evaluate the situation and make an educated, fast decision, your risk of failure increases.