It's that age-old question!
Smart Property Investment sheds some light on which one is superior. It turns out to be low rental returns. This is because almost always, lower rental returns go hand-in-hand with higher capital growth, and capital growth trumps rental return.
For example, if the rental return is 8%, but the value of the property goes down by 10%, the holder of that property is down 2%. Whereas a similar property may have only a 3% rental return, but a 6% capital growth, and this equates to a return of 9%.
The issue with capital growth is that it is all theoretical until the property sells, whereas rental returns are known week-in, week-out, and everyone likes to come away better off each week, even if it only by $30. It's important tor recognise that the property that takes money from your hand each week, is far more likely to reward you handsomely if / when you sell. But of course, if you can afford to - never sell. In time, all properties are positively geared because as the mortgage is paid down to nil, that property will begin return a profit for you ... as well as capital growth!
Melissa Maimann is a licensed Real Estate Agent and Buyer's Agent in Sydney. She assists home owners and investors alike with an affordable service that empowers you to make smart purchase decisions. Melissa's service is fast, efficient and accurate. If you need a hand with your next purchase, don't hesitate to make contact.