This is a complete misconception that many property investors buy into and it simply isn’t true!

There are basically two ways to make money in property.

One is through capital gains and the other is through cash flow from rental returns.

Some of the capital gains enjoyed by property investors have been very substantial and create the impression that this is the major reason for holding property.

While I enjoy the capital gains of property investing, I think it is a safer strategy for the future to focus on positive cash flow rental returns.

The cash flows from your properties offer you a greater degree of certainty and security than the speculative opportunity of a capital gain.

For long periods of time, real estate appears to do nothing. Then all of a sudden it may increase dramatically and before you know it, the value of your properties seems to skyrocket as buyers scramble to buy up everything they can get their hands on.

Rents on the other hand, tend to be far more stable and predictable. During property booms, rents will have trouble keeping up with the escalation in property values, however they tend to climb steadily in small increments as the rental demand continues.

If you are investing in average properties, in average areas, you will generally find a tenant and the worst case scenario may be that you have to drop the rent by £10 a week. This is hardly a major risk!

This entry was posted on Monday, October 29th, 2007 at 8:15 pm and is filed under Frequently Asked Questions. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.