HOME > BLOG > Investing > Capital Gain vs. Rental Yield: Which is Better?

Investing in property is a popular option for those who want to secure their financial position for when they retire. It is a great way to create passive income so you can support yourself later on in life.

 Investing in property is a popular option for those who want to secure their financial position for when they retire. It is a great way to create passive income so you can support yourself later on in life.

However, before purchasing an investment property, you will need to decide what kind of income you would like to earn from your property. There are two main options: capital gain and rental yield. Take a look at the pros and cons below to help you decide which option would be more suitable.

Capital Gain
Capital gain is considered a long term investment option as it may be a number of years before you reap the rewards from your property. The idea is that you purchase a property and then in the future you sell it for a better price.

This option requires a lot of research and seeking professional advice. It is extremely hard to predict how the property market is going to change in the future, so the more research you do, the better. Researching the predicted market trends, sales history in the area as well as the up and coming hotspots could give you a better insight into where the market is heading. However, it is important to remember that the tips and information given by industry experts is often generalised and doesn’t take your own circumstances into account.

Rental Yield
Renting out an investment property to tenants is the other popular option for investors. However, it does require more ongoing attention in order to keep the property tenanted. If the property is empty, you are not receiving any income, which is why it is important to find a property that will have a high demand for tenants.

Before purchasing a property, have a clear idea of what type of tenant you want to appeal to. For example, if you want to attract families, you will need to make sure that certain necessities such as schools, shops, public transport and parks are nearby.

Also, if you are planning to rent the property out, you will need to ensure that it is well maintained and kept tidy in order to attract quality tenants. Simple things like garden and lawn maintenance could affect your vacancy rate.

In the end, property investing is not a ‘get rich quick’ scheme. It should be considered a long term investment that requires time, money and a lot of research to be successful. When done right, it can be extremely rewarding and help you reach financial freedom sooner.