Buying for capital or yield ?

2 Replies

Hi all just a quick question ... if you were looking at buying 2 properties and at let’s say £100k each 

one is cash flowing £300 per month but in 2 yrs time has around £30k equity and  the other property is 
cash flowing £600 per month and will have none to very little appreciation in 2 yrs time as it’s just a good rental but no equity etc 

Which would you choose ? 

@Jack S. I would personally choose the house that has both positive cashflow and appreciation that is building equity at the same time. In scenario A after 2 years the property will have increased my equity (cash flow + appreciation) by $37500 whereas in scenario B I have only increased my equity by $14400.  These are very simplistic numbers, be gets the point across. 

If you are asking what you should do, it depends on what your ultimate goals are.  If you just want steady and stable cash flow for income replacement, you might put a little more weight on option B.  However, if you are building a portfolio or looking to risk mitigate a little more, you might want to consider the equity build up that appreciation potential offers you so long as the property is positively cash flowing along the way. 

@Scott Passman yeah the goal is £20k per month cash flow which is around 30 doors for the different types of property I currently own . Just going forward I’m trying to see what would work best as some of the deals that have abit of cash flow and abit of appreciation aren’t good enough to make the most out of it . It seems to be a flip or brrrr or a solid rental here in the uk 

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