Focusing on rental income could cost you $1m in lost wealth

Investopoly

English - September 27, 2022 21:00 - 12 minutes - 8.66 MB - ★ - 1 rating
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An investment property’s total investment return will consist of rental income plus capital growth. I have written about the importance of maximising capital growth many times. However, often investors are tempted to focus attention on income (when selecting an investment property) too, as they seek to minimise the cash flow cost of holding the investment property.

I propose that this is a mistake with a high opportunity cost. The reason investors make this mistake could be due to (1) not fully appreciating the consequences of their decision, (2) need to adjust their target property attributes or (3) need to reduce their investment budget.

Focusing on income means you must spend more on the building value

The value of a property consists of two components being the land plus any improvements i.e., the dwelling. Generally, land appreciates in value whereas buildings depreciate over time due to wear and tear, which I have written about

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