If your goal is to create lasting wealth it is essential to have assets with capital growth potential in your investment portfolio.
You need to buy with a goal of creating capital growth. Focusing on cash flow and a positive cash return is a short-term play. Without growth, you’re not going to be able to create lasting wealth for the long-term.
You need to focus on the drivers of capital price appreciation.
- Location – This is the main driver of capital growth. There are many things you can change about a property, including its layout, condition, colour scheme, even the number of bedrooms it offers. The one thing that you can never change is your property’s location. A quality location is important. It ensures long-term demand from a rental perspective, and ensures you have a robust buying market if you decide to sell.
- Infrastructure – Infrastructure is a major consideration. Infrastructure means any kind of infrastructure – whether it be transport, industry or commerce – that will benefit local residents. This could be anything from a new train line or expanded freeway, to commercial construction that adds employment opportunities to the region.
- Condition – When deciding which property to invest in, you can buy a brand new property or an established property. You may decide to renovate to add value and build equity, or you could buy a new property to access the depreciation and tax benefits. Either strategy can offer price appreciation potential.
- Balance – Try and strike a balance between yield and capital growth. Make your wealth creation strategy as passive as possible. This leans towards buying new properties that are low maintenance and produce high depreciation benefits. These assets have the added benefit of positively impacting your cash flow.
- Point of difference – Ensure your investment property stands out from the rest. Offering a point of difference to potential renters (and eventually, buyers) can let your property achieve stronger growth. Find out what the local rental market really wants and then deliver it to them.
There are a number of strategies you can use to create wealth and they all have their benefits and drawbacks, but whichever option you choose, it’s essential that you have a strategy and a plan in place to help you achieve your goals. Investing for capital growth is the ideal way to invest as it puts you on a meaningful path towards financial success.