When it comes to investing in property, I firmly believe that cash flow shouldn’t be your primary goal, even if you have a positively geared property. The cash flow might not be as reliable as you think. Just think back to everyone who had a positively geared property a few years ago when interest rates were at 2%. How many investors are still positively geared with rates at 6%?
These changes are out of your control, and that’s why focusing on cash flow in property investment can be misleading. This is where working with a buyers agency or buyers advocate can be beneficial, as they provide valuable buyers advocacy to help navigate these complexities.
What makes property powerful is the compounding effect of capital growth over time. The real value of property investment lies in its ability to generate long-term wealth through appreciation. Let’s break it down: If you put $100,000 of your own cash into a $1 million property and it appreciates by 10%, you’ve made $100,000 in capital growth. That’s a 100% return on your initial cash from a gross standpoint. It’s almost like doubling your money.
Now, if you were to try and achieve that same return in the stock market, you’d have to invest $100,000 in a company like Netflix and hope it doubles overnight, which is extremely rare and hard to predict. With real estate, you get that kind of return more predictably over time, especially in markets that have a history of stable growth. This is the remarkable thing about real estate—it offers an accessible way to build wealth that’s more reliable than many other investment options.
This principle has been fundamental not only in my own financial journey but also in helping my clients achieve substantial wealth in a relatively short period of time. By focusing on capital growth rather than short-term cash flow, we’ve been able to leverage the power of property to create long-lasting wealth.
I tell clients that if you want to build real wealth through property, think long-term. Don’t get caught up in whether or not the property is generating positive cash flow today because interest rates fluctuate, and cash flow can change drastically. What stays more consistent over time is the growth of your property.
Real estate is also unique in that it allows you to leverage your money in a way that few other assets do. With a relatively small amount of cash, you can control a large asset. That’s why even a modest 5-10% growth in the value of a property can translate to significant returns on your initial investment. And the longer you hold onto that property, the more those gains compound.
The beauty of real estate is that it’s a long game. The capital growth you achieve year after year compounds, and before you know it, your initial investment has grown far beyond what you might have expected. It’s this effect that has allowed many of our clients, and myself, to build significant wealth through property. And the best part is, you don’t need to get lucky with the timing or make risky decisions. You just need to understand the fundamentals, invest wisely, and be patient.
Buy well, be patient, and you can get there. It really is that simple.
Engaging a trusted buyers advocate through Henderson’s buyers advocacy service is your best chance at navigating the competitive real estate market.
