Most Australians are familiar with the phrase “You can have cash flow or capital growth, but not both.” I get the gist of the argument, but I’m not sure I’m on board. You don’t have to choose between profit and growth when it comes to investing. Let me explain why it’s not cash flow vs. capital growth instead cash flow and capital growth.

What are cash flow and capital growth? What does the popular belief say?

Let’s start with the basics first.

Rental income and the value of the property are two ways in which landlords benefit from property investments.

Your property’s rental income is referred to as “cash flow.” The “yield” of a rental property is the annual rental income you receive as a percentage of the purchase price or value of the property. If you invested $600,000 in a property and the tenant paid you $2000 as rent each month (i.e. $24,000 annually), then the rental yield would be 4%.

Capital gain is the increase in the value of your property. If your investment of $600,000 ends up becoming $660,000, then your capital gain will be 10%.

The idea is that the more potential your property has for capital gains, the lower its gross yield will be.



Fundamentals that drive capital growth, such as a prime location in a capital city or on the water’s edge, aren’t necessarily the best for generating above-average cash flow, according to this logic. Homebuyers will prioritise capital growth drivers, and they will pay a premium for them.

Cashflow-generating properties, on the other hand, are those that have a high level of tenant interest. They may be in areas where local industry is experiencing a boom. Or could be arranged in a way that maximises the number of people who can rent rooms in the home at any given time. Or could be in the vicinity of student apartments. However, they’re all great ways to raise your rent, but they’re not necessarily the factors appealing to owner-occupiers willing to pay a little bit more.

This is what conventional wisdom says or what many people still believe to be true. From here comes the cash flow vs capital growth argument. Buyers frequently make trade-offs between these two factors, but I don’t think you need to for several reasons.

How to ensure both of them simultaneously?

• Choosing the right assets is essential

Looking to invest in real estate? Find the property that provides a good mix of current income and future capital growth.

It’s all going to depend on how much money you have available. As a general rule, the rental income generated by your investment property must be sufficient to pay your loan and most of its operating costs.

Capital gains also account for the majority of your net worth.

I believe it’s possible to find a middle ground in the market. Buying a high-end, blue-chip property because of the enormous upside value potential is a waste of time and money if you can’t afford the loan repayments and have to sell the property at a loss.

A buyer’s agent is an industry expert who can help you with the best property in line with your needs. And at the same time, ensure that the real estate generates a significant cash flow. I highly recommend you also check out our blog tips to remember before buying an investment property.

• Invest your money wisely

“You make your money when you buy, not when you sell,” is another property investment truism.

It means that if you pay a fair price upfront, the benefits you receive will be fair as well.

You’ll lose money on both fronts if you overpay for the property. A property always tries to outpace the money that went into it. In addition, a high buy-in figure results in a low gross yield because the rental return is calculated over the purchase price.

Overpaying for a service or product is a surefire way to sabotage your wealth-building efforts.

A skilled negotiator, like a buyer’s agent, comes into play in this situation. There are many ways we can help make sure that your investment begins working for you as soon as you take possession. Let me help you find the ideal property investment with my free consultation!

• Wait for the long haul

Long-term ownership of your investments is the best strategy for ensuring both high capital gains & rental yields. Remember this fundamental if you wish to get rid of the cash flow vs capital growth conundrum.

On both fronts, time in the market pays dividends. Rents are likely to rise over time if you’ve got a good asset in a good location.

Firstly, homes with growth fundamentals are historically proven to rise in value over seven to ten-year price cycles. Secondly,

In a matter of a few years, you’ll find it easier and easier to pay back your loans as rent rises. Compound growth, on the other hand, raises the value steadily, allowing you to accumulate wealth for your next purchase.



Buying wisely, in the beginning, is essential.

• Look for properties that have promise

A second method for increasing both rental income and capital gains quickly is to look for properties that have the potential to grow.

If you are buying a new property in an established suburb, make sure that the price you are paying does not exceed the average price of a similar product currently on the market. For example, if you are buying an off-the-plan 2-bed unit for $700K and the current 2 bed unit in that suburb is $700K. It means that you are paying the market price now and by the time the property is ready, you should be able to see some growth. 

Owners who are willing to wait for long-term growth can reap significant rewards in the form of increased equity in their properties. Depending on the property’s zoning or dimensions, you may be able to subdivide or reconfigure it in the future.

Your buyer’s agent or property strategist will be able to point out these long-term advantages.

Isn’t it better to use one return to compensate for another? You should talk to a buyer’s agent to find out what all can be accomplished and what will be the framework to achieve it. In fact, the best investments don’t necessitate giving up anything, but rather combine the best of both worlds.

I’ll help you get the finest properties at the best possible rates. Set up a free appointment now to dispel all those real estate blues and find the perfect property for you!