Capital Gains vs. Rental Yield: Which is Better? 

It’s the age-old question when it comes to property investing: should I opt for capital growth or rental yield? While the former provides you increasing value over an extended period of time, the latter gives you cash in hand straightaway. Both have their advantages, but deciding which option is best for you ultimately comes down to your individual circumstances. To help you with your property investment journey, we’ve broken down some of the key differences between the two and weighed up the advantages and disadvantages they offer… 

Property Investing

Long-term Gains: Capital Growth 

If you are financially secure and prepared to wait to reap your reward, then purchasing a property in an area where the demand surpasses the supply could be the option for you. Given that properties with good capital growth are situated in areas close to work opportunities, with good amenities, infrastructure and access to public transport, they can often be quite costly to purchase. While your expenses may initially be higher, as time progresses, and demand continues to exceed supply, the value of your property will only increase – as will the growth on your capital investment! It’s important to remember however, that rental yields may not, in the beginning, offset the expenses of owning and maintaining the property. In such circumstances, you may be required to invest additional funds to cover, for example, interest rate increases, which can inflate mortgage costs.

Cash in Hand: Investing for Rental Yield 

On the other hand, if you’re seeking to count your dollars straight away, then investing for rental yield could be the more suitable option for you. A property with a good rental yield is positively geared, which means the rental income exceeds the expenses of owning and maintaining the property. Due to their ‘less in-demand’ location, such properties are usually not as expensive to purchase, and the associated costs, such as taxes and mortgage payments, are consequently lower. Properties with good rental yield are normally in regional areas where new developments are underway. Fresh services or amenities, such as upgraded transport or new shopping centres, often generate a high demand for rentals with only limited existing properties available. Areas known for mining and manufacturing are similar, given the populations of such locations are typically more transient.

property investing

What should I choose?

As with any decision concerning property investing, your individual circumstances are the deciding factor. First-time buyers are more likely to consider a rental yield strategy as a quick way to get a foothold on the property ladder, given the up-front costs are often lower, and a positively geared property makes it easier to deal with expenses. For those seeking a property with greater long-term stability however, purchasing in an area with good capital growth may be more profitable. There are other expenses to factor into your decision, of course, including property maintenance and repairs. It’s imperative to account for such costs when determining your possible rental yield. Your property investing decision ultimately comes down to whether you are chasing instant cash flow or an investment for the future.

With a range of exclusive full turnkey House and Land packages available from a large panel of qualified builders, iBuildNew can help find the ideal investment for you. Give us a call on 1800 184 284 or book a call online to get the process started!

Kaylah Chesson

Kaylah is completing her final year of a Bachelor of Arts / Bachelor of Laws degree at Deakin University. Her particular areas of interest include property and land law, home design and the creative arts.


iBuildNew is the market leading aggregator dedicated to residential home construction and land development. As an independent platform, iBuildNew helps Australians identify and compare new home designs, house and land packages and land estates. It’s the smart way home buyers, who are considering a new build, can find the ideal options to match their individual needs. Home building is a big decision, we make sure you get it right.

You may also like

Aug 08, 2019

Looking For Long-Term Property Investment Success? H...

Whether you're buying property to invest, or buying a new home, having successful retur...
Read More
Jul 12, 2019

The Benefits Of Building An Investment Property

Although it may not seem like the most obvious choice and be very stressful, building a...
Read More
Jul 24, 2019

Guide To Building Up Your Investment Property Portfolio

It’s vital to have a solid foundation and strategic plan when it comes to securely inve...
Read More
Jun 24, 2019

5 Tips To Help Improve Your Investments

If you are already on the way to creating an investment portfolio, then chances are you...
Read More
Jul 04, 2019

Capital Gains vs. Rental Yield: Which is Better? 

It’s the age-old question when it comes to property investing: should I opt for capital...
Read More
Jul 16, 2019

8 Essential Skills of a Strong Property Management T...

Sourcing a good property manager can be a daunting task for even the most experienced l...
Read More
Jul 12, 2019

It Pays To Keep An Open Mind: Investing In Regional ...

It is so common for us to hear about capital growth rates and rental yields for propert...
Read More

Get more from

Browse Investment Properties