Chapter 1: What is the main topic discussed in this episode?
It's The Real Estate Podcast, brought to you by Ray White, the largest real estate and property group in Australasia.
And welcome to another episode of The Real Estate Podcast, available on iHeartRadio and also Spotify and Apple Podcasts or wherever you get your podcast from. Yes, it's a Friday, June the 3rd for 2022 coming up in just a moment. The all familiar voice on a Friday of Rich Harvey and a great talking point today is capital growth versus cash flow and why you don't have to choose between them.
But first, let's have a look at your weather around Australia.
It's the main centre forecast with propertybuyer.com.au.
And first we go to Sydney, expecting a late shower or two. Sorry, I can't be more specific. From the Met Service, very ambiguous this morning. Expect it to turn up at some stage, 17 degrees. Melbourne, it was cold last night in Melbourne. Also expecting one or two late showers. It's going to be cold during the day, just 13 is your high.
Brisbane also expecting some showers becoming more frequent, a high of 22. And Perth is the place to be today, cloudy but dry and a high of 19 degrees.
It's your real estate podcast for breakfast.
And looking back on this day in the history books for June the 3rd, it was on this day back in 1989, the beginning of the Tiananmen Square Massacre, as Chinese troops opened fire on pro-democracy supporters in Beijing.
I got to go to China in 2018 and one of the places I did want to go to was Tiananmen Square and it was a very somber, strange affair standing in the middle of Tiananmen Square remembering Tank Man back on that day standing up to those tanks. Of course he was never seen again. Somebody celebrating their birthday is tennis player Rafael Nadal. He's turning 36.
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Chapter 2: What is the difference between capital growth and cash flow?
Let's Talk Property, a podcast series with Rich Harvey.
And it's a good one we're having a look at today, capital growth versus cash flow. Why do you have to choose? There are some very well-versed truisms that apply to property investing, and arguably one of the best known ones is location, location, location. Another that's often quoted is you can either have cash flow or capital growth, but not both. But is that really the case? Is that true?
Does there need to be a trade-off between yield and capital growth? Well, to help me explore this topic, as always, we have Rich Harvey, CEO and founder of propertybuyer.com.au joining us. Good morning, Rich. Here we are once again at the end of another week and a brand new month.
Yeah, good morning, Craig. Great to be with you again. Yeah, it's always been a pleasure to join you on the show. And we've got, you know, the government seems to have formed a majority. Hopefully, it's going to be business as usual.
And it seemed like a long two weeks, didn't it, to form this Albanese government?
Well, the voting always takes so long. It seems ridiculous that they don't have a faster voting system. But apparently, like almost one third of people voted before the election this time. There was a huge number of postal and absentee votes that they had to count to get a result.
All right, well, let's kick into today's subject. First off, perhaps a really good starting point is to explain to the audience the definitions of both capital growth and cash flow as it relates to property investing.
Yeah, sure. Well, look, let's cover off the fundamentals first, Craig. So property investment generally returns a return for the landlords two ways. One is through rental return, that's your yield, and the other is through capital growth. So the yield or the cash flow, that refers to the income that your property is generating.
And it's normally expressed as yield, which is a percentage of the rental income you earn for every dollar of the property's value that you purchase. So I'll give you an example. Let's say you buy a property for $600,000. and the tenant pays you $500 a week. That equates to $26,000 a year in rent. So what that means is that'll equate to an annual gross yield of 4.3%.
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