Mar 19, 2018
What's the right investment strategy now that we've
moved to the next stage of the property cycle?
When it comes to property
investing, you will often hear two conflicting
Some say you should invest for
capital growth, and others say you should invest for positive cash
Now that we are in a period
where capital growth is going to be lower, more investors are
wondering if they should change their investment strategy and look
for cash flow positive properties.
This is exactly what we discuss
in today’s show.
The first half of the show we
talk about finding the right investment strategy,
and in the second half we talk about finding the right
So whether you’re a beginning
investor or a seasoned pro, there’s something for you.
What’s the Right Property Investment Strategy for This
New Phase of the Cycle:
beginning investors tend to invest in cash flow positive
properties. On the other hand, successful investors - those who’ve
built a substantial asset base grow their portfolio through
leveraging the capital growth of their investments.
cash flow positive properties allow you to get short term income,
they will never allow you to accumulate enough equity and assets to
become financially free.
few extra dollars a week in cash flow that you might receive isn’t
going to make a difference in your lifestyle, but the lack of
capital growth is going to hamper your ability to get the deposit
for your next property. And the lack of rental growth is
going to hamper your ability to service more debts.
interest rates rise, and the will sooner rather than later, a cash
flow positive property can become cash flow negative – an you lose
out because you don’t have the cash flow and you don’t have the
- Investors should focus on building their asset
base. Asset growth first and then cash flow.
should only buy properties with a high land to asset ratio.
first phase is the accumulation
phase. This is where you
build your net worth and asset base. You can speed things up by
manufacturing capital growth through renovations.
next phase is the transition
phase. This is where you
lower your loan-to-value ratio after you have built an asset base.
Then eventually you can.
- Live off the cash
machine of your investment
have to get your investment phases in the right order.
you retire the majority of your assets will be the capital growth
of your property.
the correct loan structures before you buy to cover shortfalls for
two or three years.
need to invest in high quality
The Big Difference Between Winners and
successful investors realize that success is a mindset. People fall
into two groups those who make excuses and those who don’t. Winners
stop themselves from making excuses, and they get the job
The Right Property for This New Phase of the
are now in for a period of lower growth for a number of
is no such thing as the perfect investment.
- Strong means you’ll get capital appreciation at
wealth producing rates of return.
- Stable means your asset won’t fluctuate in
for an investment that is strong
- steady cash flow.
- Liquidity either through selling or borrowing
against the investment.
hedge against inflation.
investment with good tax benefits.
for properties with
take stability in my investments over liquidity.
your money into a “how to” investment such as an established
capital city property.
Links and resources:
Some of our favourite show quotes:
“I tend to see more successful
investors, those who’ve built a substantial asset base, grow their
portfolio through leveraging the capital growth of their
investments.” Michael Yardney
“If you buy in a low capital
growth area, your rents won’t increase as much as properties bought
in a high capital growth area.” Michael Yardney
“The few extra dollars a week in
cash flow that you might receive isn’t going to make a difference
in your lifestyle, but the lack of capital growth is going to
hamper your ability to get the deposit for your next property. The
lack of rental growth is going to hamper your ability to service
more debts.” Michael Yardney
Never miss an episode and keep
up with all the good things going on at the Michael Yardney podcast
by subscribing on
You can also subscribe to
to keep up with the latest
information including bonus material that comes out between the