Wednesday 23rd of February 2005

It is the land increasing in value that generates capital growth, so IPR recommends focusing on finding the right land options.

How you structure and fund your property portfolio is another critical part of the mix. Whether a property is positively or negatively geared can be critical to lower income earners but of lesser importance to those on a higher income. For them it is the total return - a combination of rental income and capital growth - that is important and building their net worth in a tax-free environment will be far more powerful than a high cashflow property that adds to their tax burden.

Property investors who have been able to increase their portfolios over the past few years need to ask themselves, has it been the extra $100 a week generated from a cashflow-positive property that has allowed them to go out and buy another property, or was it due to the $50,000-plus capital growth that all reasonable properties have increased in value just lately? It is the powerful gearing or leverage that only property gives that opens meaningful levels of investment to many people and allows you to multiply your gains many times over, but leverage only works if you have growth. You wouldn't want to multiply your losses.

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