{"id":7260,"date":"2016-03-09T01:00:40","date_gmt":"2016-03-08T14:00:40","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=7260"},"modified":"2016-03-09T01:00:40","modified_gmt":"2016-03-08T14:00:40","slug":"you-cant-get-good-cash-flow-and-capital-growth-at-the-same-time","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/you-cant-get-good-cash-flow-and-capital-growth-at-the-same-time\/","title":{"rendered":"Myths: You can't get good cash flow and capital growth at the same time – Josh Masters"},"content":{"rendered":"

 
\nRecently we heard in the show that investing in property is not all about cash flow. Rather we should be looking at it as a high growth low yield investment strategy. But is it possible to get both cash flow and capital growth in one property.\u00a0Josh Masters<\/strong>,\u00a0from the website buyside.com.au,\u00a0says yes and he tells us how today.
\n <\/p>\n

Transcript:<\/strong><\/h4>\n

Kevin:<\/b>\u00a0 Dispelling another one of the myths, and that is that you can\u2019t get good cash flow and good capital growth at the same time. Let\u2019s find out if that\u2019s true. Josh Masters joins me. Josh, of course, is from the website buyside.com.au.
\nGood day, Josh. Good to have you on the show again. Nice to be talking to you.
\nJosh:<\/b>\u00a0 Thanks, Kevin. Good to be here as always.
\nKevin<\/b>:\u00a0 Is it possible to get good cash flow and capital growth at the same time?
\nJosh<\/b>:\u00a0 I think it is. It\u2019s definitely possible; there\u2019s no question about it. There have been a lot of properties in history that have done that. Some of the properties that just came off the top of my head were some of the mining towns where we saw exponential capital growth happening because of the strong demand in mining. The captured <\/b>market really made a renter\u2019s paradise, as well.
\nIt\u2019s almost the quintessential investment \u2013 isn\u2019t it? \u2013 something that gets yield and growth, but it\u2019s very rare. I think the question is probably more around do you want to risk something for the yield and the growth together, because it is a high-risk investment?
\nKevin<\/b>:\u00a0 It is very high risk. You mentioned mining towns. We\u2019ve had a good look back on that. That was all about the timing, wasn\u2019t it? It was possible to get both, but there were places like Moranbah where unless you actually pulled out at the right time, you were in for a fairly major capital loss.
\nJosh<\/b>:\u00a0 Yes, that\u2019s right. Exactly. That\u2019s where the risk comes in. You can never try and time the market. It\u2019s one of those things that you just don\u2019t know when it\u2019s going to happen. It\u2019s great for the period of time that it does and everyone is making a fortune, but over time, everyone piles into it. Karratha was another one. Moranbah, of course. Port Hedland. All these were stellar performance for the time that they were there, and for those people who got in early, they did really well.
\nThere are exceptions in the market. I have found there are some high-yielding properties. For example, let\u2019s take Western Sydney. If you had invested five years ago, you would have gotten almost positive capital growth there. You could have probably picked up 6.5% on your yield. Now, that would have been great in a low interest rate environment, but as the market progresses, people throw more money into it, prices rise. Those price rises suddenly, bring on the capital growth, but the rents don\u2019t keep pace. It\u2019s not a captured market like you would find in a mining town, so what you\u2019ll find is the yields drop.
\nNow, if you go out to Western Sydney today, they\u2019ve had great capital growth, but now the yields are sitting around 4.5%, which is actually pretty good for Sydney right now, but it\u2019s still in a negative-gearing situation for most people.
\nKevin<\/b>:\u00a0 What do you prefer in your own investments, Josh? Do you look for cash flow or do you look for capital growth?
\nJosh<\/b>:\u00a0 Personally, I\u2019m all about capital growth. Many of the clients who come to me are looking to build wealth for the future. They\u2019re looking to do it in a reasonably low-risk environment, and they want a safe investment, but they want to build their wealth over time, and they can afford to put a little bit of money aside for the negative gearing allowance. That tax benefit also helps them.
\nIn my opinion, if you really want to grow a portfolio and you want to grow your wealth \u2013 which everybody is in it for, generally \u2013 it has to have capital growth. If your property sits there for ten years and it doesn\u2019t grow in value, if you\u2019re making $5000 a year in your hand over each of those ten years, it doesn\u2019t count for much if that property hasn\u2019t made significant gains on it price.
\nI\u2019d rather invest in something, for example, in Sydney, where ten years ago, the price might have been $500,000, and now it\u2019s $1 million. Suddenly I have $500,000 in equity, half a million dollars in equity. It makes that paltry $5000 a year in positive income almost insignificant after taxes are taken out.
\nKevin<\/b>:\u00a0 Josh, great talking to you as always, and thanks for your time.
\nJosh<\/b>:\u00a0 My pleasure, Kevin. Thanks for having me.<\/p>\n","protected":false},"excerpt":{"rendered":"

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